Caroline Papadatos is Senior Vice President of LoyaltyOne Global Solutions, which specializes in consumer loyalty and customer experience design and management. She also leads LoyaltyOne Corporate Marketing and Thought Leadership and has a proven track record across B2B and B2C industries in designing and managing loyalty coalitions and delivering innovative customer loyalty and retention strategies. Committed to her community, Caroline is an Adweek Board Member, Executive Sponsor of the LoyaltyOne Women’s Leadership Initiative and an active fundraiser for Covenant House.  Based in Toronto, Caroline works with companies across North America and abroad.

Challenges of Building Customer Loyalty

“What our clients usually lack, and where we help them, is in defining a customer strategy that will shape shopper behavior and build a roadmap to execute seamlessly across channels.”

Alexa Ross: What are some of the biggest challenges facing companies that want to build customer loyalty? What’s your approach when it comes to overcoming these issues?

Caroline Papadatos: Companies spend most of their time and attention on developing technology, digital tools and data to build customer intimacy, and as a result, most of them have the assets they need to deliver a personalized and highly rewarding experience to their customers. They have customer data – in fact, they’re usually swimming in customer information – they can identify their most profitable customers, they run offline and online promotions and deliver targeted campaigns, they have a reward system that is usually tied to point-of-sale and digital channels, and they have employees who can be deployed to fix customer issues and deliver differentiating experiences.

But what our clients usually lack, and where we help them, is in defining a customer strategy that will shape shopper behavior and build a roadmap to execute seamlessly across channels. They have a very loose grasp on customer financial performance, and often, they are investing in multiple loyalty programs with no idea as to what’s working. At LoyaltyOne, what distinguishes us is our unwavering focus on measurement and our belief that the ultimate measure of loyalty success is sustainable growth in shopper performance. When people think of loyalty management they love to focus on surprising experiences and remarkable rewards.  But the unsexy parts of loyalty – points value, issuance projections, time-to-reward and accumulated liability – can make or break program success. If the base mechanics are well designed with the customer at their centre, the loyalty experience can be built around them.

The Impact of Blockchain

“Blockchain is being applied successfully on the B2B side in managing a distributed ledger between two or more stakeholders in a loyalty proposition.”

AR: The report and subsequent webinar, titled The Future of Loyalty, discusses the role of blockchain technology and cryptocurrency in building loyalty. Can you discuss some of the ways that these developments are impacting loyalty?

CP: There is a lot of Blockchain hype, and there’s no doubt that the impact of disintermediation to payments, currency transfers, supply chain and other sectors will be massive. In loyalty circles, there’s much talk of a blockchain revolution but for now, it’s effect has been muted.

Blockchain is being applied successfully on the B2B side in managing a distributed ledger between two or more stakeholders in a loyalty proposition. When applied to loyalty, DLT allows for a better, faster, more secure and efficient points accounting system between points issuing or reward partners. In most cases DLT allows multiple partners to record a customer transaction in real-time and removes the need for more complex and resource heavy financial reconciliation processes between parties. We haven’t seen it scale fully, nor is Blockchain making inroads in customer-level data management, so that outcome is still a “wait and see”.

But for loyalty practitioners, the attention-grabbing headlines are in consumer-facing applications of Blockchain, specifically in crypto-currency rewards and trading. The opportunity to engage younger, more technically savvy customers with a digital currency is exciting and new. Several companies have already started issuing their own tokens that can be exchanged or traded in digital wallets, but those are not to be confused with ICO’s (initial coin offerings) that are really fundraising mechanisms and have little to do with customer loyalty. While the infrastructure and governance processes for crypto-currency rewards are still in their infancy, the initial consumer uptake has been high, especially in China and Asian markets. More traditional loyalty programs are also experimenting, mostly by offering the ability for customers to trade their points (or redeem) for crypto-currency, thereby protecting themselves from the ups and downs of currency valuation.  Crypto-rewards is an innovation space where there’s tons of experimentation and early signs of customer engagement are positive.

Personalization and Customer Loyalty

“Surprisingly, very few companies have a strategy for customer or member lifecycle management and they struggle to execute lifecycle strategies on an individualized basis…”

AR: When it comes to building customer loyalty, how much comes down to personalization? For larger companies that rely more on automation, how can they reach out to customers in a way that makes them feel appreciated as individuals?

CP: There are three steps to personalization. The first is drawing insights from the customer information that can be predictive of a customer’s likely next purchase. This usually means organizing the data to get a 360 view of the customer, identifying which segment(s) they fall into, and identifying their present or potential value. That’s not always easy, but if a company has a loyalty program by which they can link individual customers to transactions, there are proven technologies and analytic providers who can build highly effective analytic models that target the right customers. Then, it’s a question of whether the company can execute a targeted strategy effectively. Difficult, but not impossible.

The second step is more challenging and requires creating individualized offers, promotions, communications and experiences that are mapped to a customer lifecycle. Like any relationship, it helps if you recognize what stage you’re in.  Are you just getting to know the customer, or have they been a long-time supporter? Is this their first transaction, an occasional shopper or someone who only buys on sale?  Surprisingly, very few companies have a strategy for customer or member lifecycle management and they struggle to execute lifecycle strategies on an individualized basis, but that’s where customer expectations are going so they had better learn quick.

Finally, the third step.  When a retailer or another customer-focused company can get merchandising and marketing to cross the great divide to personalized pricing, promotions and product assortment. With the right analytic provider, like LoyaltyOne’s Precima merchandising analytics business, it’s possible to deliver greater cost efficiency and promotional effectiveness while individualizing promotions to the segment or customer-level. In this situation, the loyalty data that is collected and leveraged by the marketing organization makes its way to the merchandising side of the house, where it drives pricing, promotional and product assortment strategies. The capability and analytic models are only half the battle. It demands alignment and synergistic approaches between disparate parts of the retail organization which can only be accomplished with CEO visionary leadership, a coordinated change management plan and a good measure of corporate Jiu-Jitsu!

Are Loyalty Programs Good For Every Business?

“Loyalty programs don’t always make sense for a company…”

AR: Should every business set up formal rewards or loyalty programs to give customers an incentive to keep returning?

CP: Loyalty programs don’t always make sense for a company, and usually our first step in a loyalty conversation is to complete a readiness assessment and financial modeling. The goal is to answer three critical questions.

(1) Can loyalty drive incremental shopper behavior and positive financial performance?

(2) Will loyalty help address a customer’s unmet need?

(3) Is the company loyalty ready, and can they fund, execute and sustain an effective customer loyalty strategy?

Once these questions have been answered to the satisfaction of senior leadership (and most importantly, the CFO), we would proceed with design.

Data and Customer Loyalty

“Loyalty and data are inextricably linked.”

AR: How large of a role do data and analytics play today when it comes to helping clients build customer loyalty? Are there any ways you recommend accumulating and analyzing data for this purpose?

CP: Loyalty and data are inextricably linked, and it would be inconceivable to run a loyalty strategy without access to data. In fact, most companies who launch a loyalty strategy do so for exactly that purpose – to identify customers, link them to their shopper behavior through transactions, and to collect data for analysis and targeting.  While there are other ways to identify customers, especially in a digital world, loyalty is still one of the most effective mechanics to engage customers on a continuing basis. Customers may download a shopping app, but we also know that activation rates drop off quickly and an app can be deleted as soon as six days after the last transaction. Loyalty programs might be considered old school in some respects, but they work because customers understand the mechanics and they’re habit-forming.

AR: Imagine you could put together a dream symposium of speakers to share their greatest wisdom on business and marketing principles. They could be CEOs, authors, or leaders from any field. Can you name three or four people you’d most like to invite?

CP: That’s a hard one! Customers are distracted with too many screens, too many messages and not enough human connections. For businesses to break through and be relevant, we need divergent thinking and I don’t think that’s coming from business books today. I would probably look to some of the technology start-ups that are enriching customer lives and unexpectedly meeting unmet needs.

Look at Waze, which goes beyond geo-location and navigation to create person-2-person experience sharing with other drivers on the same highway. Spotify helps people share an emotional connection through music sharing, YouTube enables people to monetize their fascinating lives, Tinder creates curated experiences and human connections that extend beyond the platform, and Strava is a social network for athletes to share their runs and cycling routes to challenge and motivate total strangers. Those are the experiences that resonate with customers. If we could somehow bottle the intention and intellect of these start-up founders we could change the world!

Raising Money For the Homeless

“We just need to stop talking about the issues and be the change!”

AR: You’ve discussed your experiences sleeping on the streets of Toronto to raise money for Covenant House. Has this given you a wider experience of society and has it changed the way you look at the world?

CP: My experience with Covenant House has been deeply personal. With three kids of my own, it’s impossible not to relate to the fact that on any given night there are 7,000 young people sleeping on the streets. Youth at risk make up 20% of the homeless population, and with the growing issue of human trafficking, they could be in serious physical and emotional danger. It’s easy to think of human trafficking as a ‘foreign’ problem, but it’s right here on our doorstep in Toronto and the kids who disappear belong to my community. I have slept out on the street for 4 years as part of Covenant House’s Executive Sleep Out initiative, and every time I lay my sleeping bag on the cold, hard ground, I think there’s got to be more I can do for them. That said, the experience has not hardened me. If anything, I’m heartened by how quickly our actions can turn things around. Toronto executives are able to raise more than $1 Million for Covenant House in a few short weeks, and LoyaltyOne has committed to a $3 Million youth empowerment program to invest in youth causes and improve the lives of over 100,000 youth by 2020. We just need to stop talking about the issues and be the change!

One thought on “A Conversation with Caroline Papadatos on Building Customer Loyalty

  1. Brilliant interview with an equaly brilliant loyalty leader. The discipline demonstrated in Caroline’s thinking is so inspiring. Know that when followed success can be achieved on a sustainable basis!

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