The Next Great Loyalty Program Is an Ecosystem

When companies realized data was a resource and not just the by-product of sales, they began to offer customers additional value: free products, savings, money back, even a club-like exclusivity. They often did it, and still do it, with customer loyalty programs, which were frequently expressed in the form of a physical card, such as Starbucks Rewards and MyPanera. But the very biggest companies have changed the loyalty game. 

Instead of a mere loyalty program, these companies have created loyalty ecosystems that extend across product types. Instead of featuring a central product (like coffee) and a few related branded offerings (say, coffee grinders and mugs), the giant companies offer radically different types of products spanning multiple industries, including everything from pork loins to racing slick tires to software. McKinsey says these ecosystems are the next generation of loyalty programs. 

With such programs, the mere size of the company changes the nature and value of the systems and the level of reward. The clear challenge is for companies that lack the size and influence of Amazon and Walmart—which, of course, is almost everyone. How can these organizations compete for customer loyalty, and how can they do it without chasing off an increasingly privacy-skittish customer base? 

The answer is, with data and confederation. 

Canadian Tire may be one of the larger retailers in Canada, but it is still far from a mega-company like Amazon. So what is the company’s answer to competing with loyalty megafauna like Amazon? Data. Canadian Tire uses data to amplify its loyalty reach. It has, in fact, become a data virtuoso. 

Iaro Boutorin, Manager for Merchandise Analytics at Canadian Tire, outlined the way his company uses data to keep up with customer demands—and how 4,500 employees across merchandising, supply chain, and ecommerce answer 75,000 questions each month—at the Snowflake Summit session, How Canadian Tire Put the Data Cloud in the Hands of Every Employee with Consumer-Grade Analytics from ThoughtSpot.

Boutorin described how his company has created an integrated data stack that runs all the way from the back end to the customer layer. Canadian Tire has connected analytics tool ThoughtSpot to Snowflake for querying live data, building Worksheets (a lightweight metadata layer for modeling data for search), and managing its business data model with ThoughtSpot Modeling Language.

“We have rich loyalty information querying 24/7 across multiple offices throughout the world, creating a cohesive data mart,” said Boutorin. If the company had to do this manually, there would be no way it could keep up with all-in-one competitors like Amazon. 

“The cool part is, [with data at the consumer layer] we have the ability to continue surprising and delighting our users and gaining granular insights,” he said. These insights allow Canadian Tire to reach and react to its customers and possible future customers based on needs and wants that resonate. 

There is one common and powerful way a company can increase its influence with customers: by contracting with a loyalty company. Loyalty is of such importance, thanks to the above-mentioned value of data, that there are companies whose sole competency is helping other companies reach their own customers. 

“These days, loyalty companies bring in third-party data to enrich customer information and sell that back to the retailer,” said Rosemary Hua, Snowflake’s Global Head of Retail and CPG GTM. This third-party data enriches the know-how a company has at its disposal. But there’s another reason why unified loyalty ecosystems are becoming more popular, and that’s the value it brings not to the company, but to the customer. 

“People just don’t want to have more and more accounts these days,” said Hua. “You have a loyalty account for one retailer and then another in a grocery store, another in a fashion retailer. But customers want to shop seamlessly and not have to enter in a phone number here and a different password there, or have to enter loyalty information every time they buy.” 

An example of this is the North American company LoyaltyOne, a service that brings together various airline miles and gas station loyalty programs. This allows loyalty information to be shared among companies and benefits to be shared out to customers. 

Hua notes that many companies require customers to log in to access their order history and tracking details: “That almost becomes a new way for brands and retailers to track the loyalty of their customers, so you don’t necessarily need an additional loyalty program on top of what you are already doing.” 

Hua describes privacy and data ethics as “hot topic number one.” Consumers may want value, but not at the expense of exposure. The answer companies like Facebook and Google give to this concern is to “opt out.” 

“But can you really not opt in?” Hua asks. “There’s not really a choice to be had. If you don’t sign in and give your personal information, like your email and password, then you won’t know when your package is arriving. Or if you want to try and get a refund because you don’t like the item, you can’t do so without providing that private information, which can then be used to track you and your purchases.” 

So, there isn’t a single easy recipe every company can follow to create customer loyalty. Are there other companies—in the same industry or across other industries—that a company can partner with to establish a useful ecosystem? Is the main thing a loyalty program offers customers simply a sense of fun, or does it offer them specific utility in exchange for their data?

Each organization will have to consider the data it has on hand, the value it can offer in return for more data, and what’s necessary to build trust with its customers—as well as how both confederation and regulation might affect these answers.