Loyalty Stories 42: Emotional Loyalty in the Luxury Market – Steve Borges

Michelle

Hi and welcome to Loyalty Stories, Antavo’s podcast on customer loyalty and loyalty programs. I’m Michelle Ellicott-Taylor, I head up the global partnership team at Antavo. And at Antavo, we are a vendor that powers loyalty programs all over the world. We help various great businesses, including fashion companies, retailers, food and beverage, all sorts of different brands working with us.

In this podcast, Loyalty Stories, we dive into the trends around customer loyalty and we get to speak to some experts in this field to pick their brains and learn what’s next in the digital world with  Loyalty programs. 

Today’s guest is Steve, who is co-founder at Biglight, a digital agency, helping brands to grow by creating digital experiences that their customers will love. So Steve, welcome to the program!

Steve

Thank you very much. Nice to virtually meet you, Michelle.

Michelle

Yeah, it’s great to meet you too and it’d be brilliant if you could just give our listeners and watchers a little bit of a background on yourself and your company.

Steve

Yes, so as you said, we work with them. We help brands grow by creating digital experiences that meet the needs and expectations of their customers. We’ve been doing this for quite a while now, actually. Our first client, our claim to fame, if you like, was we helped Burberry create their first direct-to-consumer channels back in Europe, anyway, back in 2006. So we’ve been involved in premium brands, luxury brands ever since.

So in the early stages, it was helping brands get up and running, of course, with direct to consumer channels. But as time has gone on, it’s about constantly understanding the ever-changing needs of customers who themselves change to understand, to make sure that the experiences that brands provide meet those needs to drive revenue growth. And so loyalty is obviously a part of that.

Michelle

That’s great to get that insight and obviously you’re working with some really exciting brands across the years so it’d be good to hear some more about those later on. Just from a wider spectrum, not necessarily a brand that you’ve worked on, but what’s an example of a brand that you see doing it really well in regards to their Loyalty program?

Steve

Well, I’m going to talk in a bit about adidas, actually, which is one of our clients that we’ve been involved in a moment. But also, I think another brand that is going to talk about our brands, but they’re not necessarily things that we’ve been directly involved with. But I find it very interesting when brands the whole the whole point of brands going direct to consumer.

In the first place back in 2006 and beyond was kind of three, three motivations. There was a desire to get closer to their customers. There was a desire to control the end to end customer experience. And there was, of course, a desire to have the margin that was otherwise go to wholesale partners. So in a sense, we’ve always been involved in loyalty from the very beginning because we’re trying to attract customers and retain them.

What I think has been interesting, the programs that I admire are the programs that go beyond the traditional mechanisms of e-commerce, which is encouraging customers to create an account, encouraging them then to subscribe to email to that next level of loyalty membership. 

So there are lots of good examples out there. Most of our clients have a really great scheme of some description. So Rapha do, Hobbycraft have one and the North Face. And we’ve been particularly involved in the creation of the adidas one. So it’s all around this, not just trying to encourage this anonymous customer back and trying to convert them, but trying to then understand who the customer is, understand their behaviors and respond to them.

Michelle

Excellent. Okay, so are you able to share a little bit more about one of those programs that you’ve worked on?

Steve

Yeah, so I mean the one that we’ve been the most proud to work on has been adiClub actually, which is, I would put it down as one of the best, most inclusive, broadest loyalty, the three levels really, you’ve got loyalty, you’ve got membership and then you’ve got community. In a sense, the programme was always conceived as a community first, a proposition with membership and loyalty embedded.

Michelle

Okay.

Steve

Within it and what I think was interesting and that we’re very proud of, certainly can’t say too much about what went on because obviously for confidentiality reasons. But what I can say is that one of the really important things to the brand and the talented people there was to make sure that whatever proposition was created actually met the needs and expectations of customers. 

And understood how customers thought and responded to each of the elements. And I think it’s a sign where something like loyalty, which is almost considered to be a very logical thing, is actually fundamentally a very emotional thing. 

So there are lots of practical considerations, but that the thing that makes a loyalty or membership or community scheme succeed or fail is an alignment with the emotional needs of customers. And so throughout that process of creating that program, every step of the way, what it should be called and why it existed and therefore why you should engage with it.

The different aspects of what is a level and what you get for different levels, how points are acquired and how rewards are organized. Every single step of the way was iterated and validated to make sure it made sense to people and emotional as well as a practical level. And so what you end up with is something that’s really quite well-rounded and achieves that difficult balance, if you like, between the fact that people engage with brands.

Because they have values that share, they perceive that the values are shared, so that’s from the point of view of a customer, but from a brand point of view, the brand obviously wants to reward behaviors that maximize its performance. So it’s that balance between those two things, and I think in that program, it’s been achieved very well.

Michelle

Yeah, I think actually they’ve been referenced a couple of times in our research, so it’s a big impact with adidas and adiClub.

Steve

Yeah, so that’s been great. And I think we’ve all learned a lot from it. And so when we look at other schemes, you know, we evolve our thinking on.

Michelle

Yeah, okay. You mentioned a couple of interesting things there, like the emotional side of things and communities, and I wanted to ask you, what do you see as key changes that have happened over the last 12 to 18 months in regard to the loyalty industry?

Steve

Oh, well, interestingly, I think if we were talking about loyalties, I’m not going to make it a pandemic thing, but you know, a few years ago, it’s not necessarily a pandemic thing. From a consumer perspective, from a customer perspective, it meant discounts pretty much, largely. And so you have this dilemma. 

Michelle

Yeah.

Steve

On one hand, you have brands that operate loyalty schemes with very large assortments and very high visit frequency, which means it’s like a supermarket or your ASOS or whatever, where people are coming often and having their needs satisfied by the brands. And therefore, the loyalty scheme was a way of just rewarding that purchase behavior and typically by providing discounts or lower prices. 

I think what’s changed is on two levels, one is a proliferation of the sort of benefits that a loyalty scheme can provide. So things like premium access to content or access to a specific product or experiences and those sorts of things. At the same time, a change in perception of customers that they are valuable things to achieve. 

So in a way, it means that a brand that has infrequent interaction with its customer. So I’ve got the North Face jumper on now by coincidence. It’s every now and again that the brand is engaging, that the customers are engaging with the brand. Typically it’s seasonal. 

But the provision of this shift in the sorts of benefits that are interesting to customers means that it’s genuinely acceptable to have an ongoing relationship with the brand, whereas in before it would be seasonal, you’d pop it in, and that comes back to an alignment again, an alignment of what people are into and the sort of thing that the brand supports. So for me it’s that shift from just about discounts to it’s actually about engagement with the brand and in particular brands that people are passionate about.

Michelle

Yeah, exactly. I think that’s been one of the key topics actually looking at. It’s moving, not to say it’s moving away from earn&burn, you know, and point systems, but it’s, that still works very well for a lot of brands. But it’s, what’s this other, you know, emotional link in the value, you know, exchange between the customer and the brand and how has that linked to other things out and emotional loyalty outside of the pure point system.

Steve

Exactly, yes.

Michelle

Yeah okay so then bearing that in mind what do you see as some trends that are coming again maybe in the next year or yeah 24 months is there something like one or two things that you see as key trends in the loyalty industry moving forward?

Steve

Yes, I think there definitely the one the one that we are working on a lot at the moment is unlocking the potential of loyalty membership within the luxury sector. And it’s a strange thing in a way. And I’m not talking about your Net-a-Portes or your Matches, because they obviously do all those things well. 

But going back to my earlier point, that’s because of the visit frequency and the fact that they have a large assortment. But from a luxury brand that’s gone direct to consumer with low frequency of purchase, low conversion rates, all that sort of thing, some things, there are some trends in the way that their clients, customers, clients, their clients interact with them, which means that there’s been a gradual, gradual rise in the use of Google Shopping. 

And that’s accelerated to some extent post-pandemic. Whether it’s related to the pandemic, I don’t know, but since then it has. So more use of Google Shopping, more investment in Google Shopping, which means that the brand experience is relegated to Google Shopping onto a product details page through guest checkout supported by typically Apple Pay. 

So we have this scenario where luxury clients, customers, really value personalized premium experiences, but are behaving in ways that make them almost impossible for brands to deliver because they don’t leave any digital footprint if you like. They do it, obviously they do it payment and shipping, but they’re not known to the brand during that experience. 

So there are a few answers to that. Some are harder to imagine working, apps is one. The luxury customer is very time poor, always in a hurry. The idea of them downloading an app. We’ve all got to use an app we haven’t used for a while and it says, oh, you’ve got to update it. Oh, this is, it’s just sort of, everyone’s got to have an app. 

Or one of the other solutions is actually re-imagining membership and loyalty. We don’t call it membership, loyalty or community. Client privilege, the idea that they can provide exclusive access to the brand that allows them to unlock that visibility that brands need to be able to provide those personalized experiences, differentiated services based on client behavior, omni-channel experiences, whatever. 

So I absolutely think over the next six months or a year or so we’ll be doing a lot of work in that area. And that reimagining requires a change in language, but also a change when you think about things like how points. So you mentioned that phrase, earn and burn, that’s like a million miles away from what we’re talking about here. 

But that point that people engage with brands for a reason and therefore giving people that access to the brands rather than Google shopping and balance, whatever. So that’s the first trend. And the second one is community actually. And if you like, to my mind, there’s three levels, there’s loyalty, membership, and community. 

And lots of the brands I mentioned earlier on that have successful membership and loyalty schemes. So there is an opportunity to go further and develop those into much stronger communities and that’s down to the fact that we have an innate need to belong and we are choosing, people choose brands that they’re passionate about. 

So you know, cyclists love Rapha, crafters love Hobbycraft, skaters love Dickies and Vans and so they all have the potential to harness that kind of passion and draw people in and create something more around the brand than just loyalty and points and membership.

Michelle

Yeah, it’s interesting that you say with loyalty, membership and community, like almost three levels within it, because there’s some views that loyalty is all encompassing this, but actually loyalty is membership. So it’s your membership programmes that are helping to create that loyalty with your customers. And then that membership is part of a community. So it’s all these things linking together under the loyalty umbrella.

So are you talking with brands about, when they’re looking at their strategy and they’re looking at where they want to go to with the next steps, obviously there’s the concept side of that, but there’s the actual fulfillment and thinking about the platforms that the brand or yourselves are gonna be working with. 

And what’s kind of front of mind for you there? Like are people thinking about say how easy it is to integrate, to implement, how customizable it is, has it got gamification? What are the things around the actual platform itself that can help, you know, and that front of mind for loyalty.

Steve

I think most of the things you’ve said, gamification, not yet, I suppose, but certainly the ability to, one of the most appealing things, I think, about, because in a sense, the starting point of any program is to do away with registration and subscription and bundle those up into one thing called membership, you know. 

And by, because traditionally, of course, registration has been a function purchase during the purchase process and then subscription has been an option at the end is sort of reversing that and saying, well, actually, do you want to engage with this brand at membership level? And by doing that, you are subscribing. 

So I think one of the appealing things about loyalty in particular is that the fundamental components are quite, I would say, simple, but they’re easy for people to understand and their technology is fairly proven anything there that’s dramatically new. And also the fact that a lot of our clients will be on something like Salesforce or equivalent platforms where the implementation is a relatively simple cartridge that will be able to be implemented, obviously with some changes to my account and other things like that. 

So at the fundamental level, I think that simplicity and core functionality of those elements, you know, that we’ve mentioned at a level, at tiers, points, rewards. And then, and for me, certainly when we think about, start to think about luxury is also controls. How do we, one of the things that’s really important to clients as customers, and luxury customers is a feeling that they are in control and in particular things like email preferences. 

So I think a technology needs to be easy to implement and handle all of those things well. And I think there’s, it’s a journey, isn’t it? I mean, just creating and design, the magic and certainly the experience from an adidas point of view is sort of taught us that the magic of it isn’t really the underlying technology in that respect at the early stages. 

It’s that understanding of the psychology of why customers want to engage with brands and structuring and designing a program that meets customers’ needs and expectations. So I think, and it’s a journey too. So I’m sure lots and lots of other things will be required, but the fundamentals are that simplicity, that clear structure, and the easy to implement and to then evolve.

Michelle

Yeah, I think there’s some really interesting points you’ve raised there and even like using the word like journey because obviously. You know loyalty isn’t something that you know. It’s not a program you’re going to put in half a three months and that’s it. It’s what are you doing in this12 months and the next 24 and so on and so on and you need the platform to be evolving to support all of those new ideas.

Steve

Exactly. Yeah. I mean, it seems to when you get into things like for doing deals with third party brands to share benefits and all that sort of last way down the track, isn’t it? So there’s a never almost a never ending list of things because apart from anything else, people’s expectations will change. 

Michelle

Yeah, and I think as well something you just said about the partnerships and collaborations, that’s changing. And in that loyalty space, people are looking at that wider group that they can be working with. So it isn’t just about the brand, it’s who else is the brand associated with and how they have their touch points with the end customer.

Steve

Yes, and particularly as the trend is towards experiences and away from just points and prizes or whatever you might call them.

Michelle

Yeah, yeah, it’s definitely a moving in that direction. So with the kind of assignments that you’re working on, is it driven purely from a loyalty team? Are you seeing that it sits within marketing teams? Or is there more I guess buy in now for these types of programs from a wider team at the exec level? What are you seeing there with who hands out these types of assignments?

Steve

Well, I think, well, it’s a wider team, certainly now. And in a way, people aren’t entering into loyalty schemes in order to have a loyalty scheme. It’s more, how do we create the engagement with the customers who are passionate about our brand in a new way that meets their needs, but also allows us to meet their needs at another level. 

So for it, I go back to luxury, you know, unless the brand can sit back and say, well, look, all of the, all of the trends are in the wrong direction. You know, Google shopping is going up, massive levels of bounce from product details page, lots of anonymous interactions. Yet like free, a really good example is we want to provide, really joined up on the channel experiences. 

Well, how can you do that if the customer walks into store and you have no clue who they are or what they’ve been doing. So in a way, it’s not just about loyalty, it’s actually about customer engagement at a fundamental level. But that also means that, I mean, if you take those sorts of brands, it’s not something you can enter into lightly either, that the scheme has to be really well designed and it has an impact in almost every area of the business. 

I mean, at a simple level, brands typically already have a VIC program, you know, a VIP program. So they’re already doing this, but it’s based on a little, you know, black book and it’s a very small proportion of their clients who get it. And they also have a well-established CRM program in most cases. 

So it’s about filling in the pyramid in between those two things, but it has an impact on retail operations. It has an impact on brand. It has an impact all right across the business. So any loyalty or membership scheme that doesn’t take into account all those areas of the business is unlikely to be that successful.

Michelle

Yeah, and I guess some of the brands you’ve mentioned already are now linking that with different areas of the business. What’s your experience like with understanding how, say your location or your region can dictate the types of loyalty programs that work? 

Like, you know, just because something is working for adiClub in the US, is that the same response in APAC or do they look differently? So do you see commonalities across regions or is it more that there’s changes in what makes people respond to an auto program?

Steve

Most of our work is in US and across EMEA. So I don’t know about Asia and whatever. I imagine it’s different. It sounds different. But from our perspective, not talking specifically about adiClub, but kind of referencing it. Actually, I would say for all, most of the brands we work with, we are looking, the proposition is universal. 

So what we, pretty much everything that we do, we are looking at the response in Europe and the response in the US. And over the years, actually, we’ve done a lot of work looking at customer response to a whole bunch of things, the web, the fundamental site and, you know, redesign changes and everything. And we don’t really see much of a difference between the different, the different areas. 

You do say in Germany, there’s a much more, much more of a focus on returns, for example, between the UK and the US, not really. There’s more commonality really between people in any of those regions with the same need state or specifically in this situation than there is between people from different countries, if you know what I mean. 

So the challenge is more in designing these sorts of programs, making sure that they are universally understood. Because if you look at something like luxury, it is just global by default. You know, and customers are naturally international by default. So there’s really no opportunity to silo the scheme at all.

Michelle

Yeah, that makes sense. And obviously then that’s that particular vertical luxury as a vertical versus, you know, there would be a difference maybe in something that is CPG related.

Steve

Yes, definitely. But in a sense, premium brands, if I would classify adidas or the North Face equally, the proposition is typically universal.

Michelle

Yeah, okay, great. Well, thank you so much for sharing so much. It’s been really exciting talking with you. I’ve got one last question before we have to wrap up. So is there something that, yeah, in the loyalty spaces surprised you? And yeah, that could be surprise and delight or surprise that you didn’t expect that to be necessarily associated to Loyalty or something that would work.

Steve

Well, I mean, I thought about this question. I thought you might ask it. And actually, what has surprised me is not what has been done, but more what hasn’t been done, if you know what I mean. I’m more, I’m surprised brands aren’t pushing harder to create the sort of,  to move from loyalty through to community. 

And I don’t know if it’s driven by the fact that it does require such a big, such an engagement from all around the business. But I see it, I kind of we started this year thinking, particularly in premium and luxury, there’s so much opportunity in loyalty, yet the pace of movement is quite, has been up until now, quite, quite slow and that some of the metrics are quite scary when you look at them. 

You know, if I go back to the point I made, you know, where brands went direct to consumer way back in the day of Burberry, you know, 2006, what we were talking about is those three things, you know, getting close as the customer to understand the customer is the first. Secondly, controlling that end to end customer experience and thirdly, benefiting from the retail margin. 

What’s, what’s happened over the last two or three years is those two first elements, getting to know your customer and controlling the end-to-end experience have gradually been eroded so that all you’re left with is, oh, we’re making a bit more money, but we’re still retailing. So if you look on some brands, they’re still pushing as hard on Google Shopping as their wholesale customers. 

And so that magic link, that thing, fundamental reason that people engage with brands in the first place, if we don’t recognize that by creating, as we said, loyalty membership communities around those brands, then we’re missing something. So I think that’s the thing that I would say.

Michelle

Okay. Oh, that’s really interesting. So thank you very much for sharing that. And thanks so much again for joining us today on Loyalty Stories. And we really appreciate your time.

Steve

It’s a pleasure. All right, it’s a pleasure. Thank you. Thanks, Michelle.

Michelle

Thank you and thanks everyone. That’s a wrap. Thank you very much for joining our session and either listening or watching this and wherever you’re doing that, please give us a like if you can and come and visit us at antavo.com to hear more about how we can support your normality programs. Thanks very much!