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Effective Loyalty Programs Require Zero-Party Data

Chances are good that at least half of your recent purchases have involved an invitation to sign up for a loyalty program/card or system. From gas to groceries, you can earn points for purchases or visits at nearly any business these days. 

And the reason is obvious – loyalty programs work!  Forrester’s 2021 data indicates 68% of US online adults who belong to a customer loyalty program say they regularly participate in the programs they join by purchasing products and redeeming rewards and coupons. 

At the same time, the expectation for personalization is making customer data more precious while demands for privacy are making the same data harder to get. As the incoming privacy changes shut off old data sources, brands need to earn customer data authentically. According to Forrester, customers want to feel special: 50% of US online adults who belong to loyalty program(s) agree that getting messages, offers, or promotions that are more relevant for them is a   they join loyalty programs.

What this tells us is that there is an enormous opportunity to create new value by combining loyalty and personalization together.

Loyalty vs Loyalty Programs

Loyalty is the emotional connection between you and a brand. It's the likelihood that a customer chooses you over your competitors. It’s about connecting with customers on an emotional level and creating experiences that win their hearts (and wallets).

Loyalty programs award points for different customer behaviors - mostly purchasing - that can be used to access rewards, discounts, or free stuff. 

Tapping into the innate human desire to earn points and free stuff allows brands to “hack” customer behavior in a pretty transparent way. Loyalty programs work because they provide a win-win. Customers like it because they get free stuff. Brands like it because it costs them almost nothing to run a loyalty program. 

The problem is that most loyalty programs suck all the emotion out of loyalty and make it a game of numbers.

But what if loyalty programs could incentivize behavior AND actual loyalty?

We think it is possible.

Zero-party data and the future of loyalty programs

Types of data

Zero-party data is data that customers willingly give you for the purpose of being used to personalize interactions in ways that customers prefer. It has tangible value as personalized experiences drive 40% more revenue according to McKinsey. More importantly, personalization also creates an emotional connection (loyalty) between you and your customers. Zero-party data builds trust because it respects user privacy, puts them in control of the relationship with a brand, and, if done right, creates value for both the brand and customer at every interaction. In other words, zero-party data is the MOST valuable data you can get. The thing about zero-party data is that it must be earned

This is where the loyalty program comes in. It makes perfect sense to use a loyalty program to incentivize sharing of data. This data is then used to personalize interactions  - thereby creating an emotional connection - AKA loyalty. This increases the likelihood that more data will be shared. This virtuous cycle is amazing for a few reasons. 

Creating value for everyone, every time

Sometimes the benefits from using an app or website aren’t clear at first. The incentives from a loyalty program can make the value of engaging with a brand really obvious - especially if it means filling out a form and giving yet another company access to your inbox. 

Brands need to acknowledge that data has inherent value and deliver equivalent value in exchange. People are more likely to share if they understand what’s happening and why—and if there is a benefit, like earning rewards or points towards special offers or discounts on future purchases.

Typically, Wyng works with brands to provide value and earn data by using coupons, personalized content or product recommendations, or the chance to win free stuff. Using loyalty points as incentives for data gives a brand more ways to provide value - increasing the flexibility and power of their marketing and customer experience teams. 

Build trust while saving money - transparently

A loyalty program is a transparent way to engage and reward your customers. Clearly setting and meeting expectations consistently builds trust. Adding data to the mix increases the ways the program can evolve - without costing your brand anything.

Focusing on earning zero-party data adds another dimension to this transaction, but that doesn’t make it any less transparent. You have to let customers know how their data will be used before they sign up—and every other time they give it to you. You should explain why you need specific data and what benefits you will give in exchange for that info.

You also have to give customers control of the data. They should be able to opt out, change data, or limit communication at any time. A good way to do this is with a unified Preference Center.

Not only does this get you better data and build extremely valuable trust, but having better data saves you money that you don't have to spend analyzing customer behaviors, searching for intent, or using AI.  Finally, you avoid the risks inherent in bad data that can cause faulty assumptions and result in negative customer experiences and churn. 

 

Loyalty, privacy, and innovation

One of the good things about loyalty programs is that it puts the customer in charge. They learn how the program works and then decide at what level they want to participate. This mirrors zero-party data. In both situations, customers get value equivalent to what they put in.

If brands manage this correctly, they can create a flywheel of growth by earning data, personalizing, and driving purchases. As users get better offers they feel more confident sharing their personal information in exchange for benefits; while we also get to leverage their valuable insights into customer behavior in order to create even better offers and products—creating an endless loop where both parties win over time!

In fact, many brands have levels in their loyalty programs that include exclusive access, membership to customer advisory councils, and participation in product testing and feedback. This is hugely valuable for brands and creates strong emotional connections.

Personalization + Incentives = True Loyalty 

We hope this article has given you some insight into how zero-party data and loyalty programs can combine to provide tremendous results. We are working with a few customers now on this and will be excited to share results soon. The data and loyalty flywheel

If you want to learn more, let us know and we can talk.

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