Will Loyalty Marketing Age Like a Fine Bordeaux or a Cheap Rosé?

Even though the first modern loyalty program, American AAdvantage launched 30 years ago, loyalty marketing is only in its infancy and even after three decades it’s not always practiced in a strategic manner. The paradigm is all too often the same as 30 years ago:points and rewards.

We think Loyalty Marketing is getting much better with age. After years of seeing marketers spend the bulk of their budgets “above the line,” loyalty marketing, and the idea of enterprise customer centricity, is coming of age in terms of more widespread adoption. There’s a confluence of factors driving this and it’s evident across industries ranging from financial services to health care and retail.

The first driver leading to more companies focusing on loyalty is technology. While technology is still a challenge for a lot of companies, tools are getting better and more affordable for both testing and rollout. They have to, as there is incredible demand. Too many companies can’t execute with existing systems, whether database, POS or email platforms.

The second factor is the not so sudden emergence and adoption of mobile and social CRM along with social media in general. As customers become paramount these venues are accelerating the shift in spend from traditional advertising and mass marketing into the digital space. That space now includes much more than websites and email. Mobile, social, games and applications are increasingly becoming integrated into relationship marketing at the expense of traditional activities like advertising and broad sales promotion. This isn’t a death sentence for advertising as much as it is for advertising and not also investing in customer relationships.

The third significant catalyst for loyalty’s broader adoption is economics. While this is a broad descriptor, it mostly pertains to the post-recession consumer and to the post-recession enterprise. Consumers are increasingly fickle, value conscious and connected. Companies are increasingly accountable and profit-driven based on satisfying investors, whether public or private. They’ve all figured out that marketing to customers can be highly profitable, but also entails some risk.

Ultimately marketing is an investment and that investment recognizes customers as assets.While customers are not yet showing up on balance sheets, they are front and center (and the bottom line) on an income statement. And yet marketing budgets including those for much of mobile and social media, are still too focused on customer acquisition.

We have always believed that the focus on existing customers is not just fashionable, but smart business. That’s how we see it, and that’s how we’re investing.