The loyalty marketing landscape is changing – quickly and dramatically. Social Loyalty is a new concept to be understood and embraced.

Millennial marketing is a focus of Social Loyalty and I occasionally see posts about whether Generation Y (Millennials) can or will give their loyalty over a sustainable time period to any brand. Based on our study of Millennial behavior and backed up by recently published  research from Aimia on US and UK Millennials, we know that loyalty can be won, but not through traditional tactics.

One of the talked about tools to drive loyalty among Millennials is “Gamification”. The question is, how does game theory relate to loyalty marketing and how can it be applied in practice to get results, not just with Millennials, group but across the broader population segment known as Consumer 2.0?

I’m proud to be presenting “The New Face of Customer Loyalty: How to Engage and Motivate Customers in the Social Era” with a leader in the social loyalty space, Badgeville. The webinar will take place Tuesday December 6, 10am PST / 1pm EST and I urge you to register here to become part of the discussion.

Badgeville was recently selected to be part of Forrester’s annual list of social platforms for enterprise technology marketing in its report “Market Overview: 2011 Social Media Platforms For B2B Tech Marketing.” You can read more about that honor here.

There is a tremendous opportunity for leadership in this new world of loyalty marketing and I’m proud to be presenting tomorrow with Havy Nguyen from the Badgeville team to explore some of the possibilities.

Register here for this webinar and bring your tough questions about the future of Loyalty Marketing and Gamification to the event tomorrow.

The population group born between 1977 and 1996 known as Generation Y or “Millennials” is roughly 80 Million strong and represents almost 25% of the US population. Nearly equal in size to the Boomers, the segment is 50% larger than Generation X and is the most ethnically and racially diverse generation in US history.

Understanding Millennials results from study of their perceptions of Career, Technology, Communications, and the Future. Millennials stand to become more prosperous than their elders more quickly, but may be challenged in exceeding their parent’s lifestyle in an increasingly complex and global economy. They are fully immersed in their technology and live in an “always on” world communicating with friends and colleagues. Their future outlook is influenced by a well documented dose of narcissism and Morley Safer may have captured the essence when he stated “they want to rock their iPods, set their own flexible work schedule, and still be CEO by Friday”.

The dilemma for consumer facing companies is whether to pay attention to this group as a new breed of consumer, or dismiss current observations as characteristics of another maturing generation that will “grow out of it”.  Chief Marketing Officers are concerned as over 75% polled in one survey believe that the Millennial generation will have a major impact on their businesses in the next 3 years, while over 54% admit they do not have a strategy for engaging the group.

Marketers ignore the opportunities with Generation Y at great risk. Over 62% of global teens are apathetic to traditional advertising messages and 42% make purchase decisions based on the recommendations of their friends. Traditional methods to engage and retain best customers may not work with Generation Y. The Loyalty Marketing industry is just 28 years old and was launched in 1981, meaning only the oldest in the Millennial group are conversant with traditional models.

The good news for any company wishing to build brand loyalty is that the drivers of loyalty are not materially different across generations. Just about all human beings respond to a blend of tangible reward and personal recognition. The difference will be in how companies communicate their message, enable feedback, and the types of value propositions they construct.

Hanifin Loyalty has invested significant time and resource to create a methodology to develop strategic marketing plans to engage, retain, and increase business with members of Generation Y. Integral to the inventory of work is understanding the elements of a value proposition compelling to this group and their preferred methods of communication including their preferences for the growing portfolio of social media tools and networks available.

Possibly the highest priority task is to establish where marketers should set expectations for developing brand loyalty across Generation Y. Hanifin Loyalty has categorized the formula to match up with Millennials in 4 areas including Lifehacks, Community, Personalization, and Transparency. More work needs to be done documenting the “Voice of the Generation” to validate expectations of consumer marketing companies and establish whether they should set enduring brand loyalty as a key business and financial objective.

Working with our growing research panel, we hope to establish primary research from Millennials which will help to answer these additional questions and benefit leading consumer facing companies throughout the North American market.

“While not every business needs a loyalty or rewards program, every business does need a thoughtfully created and well executed Customer Strategy.” This snippet of dogma clipped from the Hanifin Loyalty LLC site is backed up by many examples in the marketplace. It emphasizes the importance of forming marketing strategy with your customer’s best interests at heart, and only then creating tactics for execution.

For years, Walmart has drawn the attention of every loyalty marketing business development executive who can fog a mirror, each pledging to “be the one” to convince the retailing behemoth that giving away points will drive customer loyalty. To date, Walmart has perfected the art of playing hard-to-get better than any prom queen in history.

You see, Walmart already has a loyalty program in place – it’s called the business model. Beginning with “Always Low Prices” and evolving to “Save money. Live better”, Walmart is all about optimizing its supply chain and delivering the benefits of low prices to its customers. The company website (www.walmart.com) even has a counter to show the “amount of money Wal-Mart saved American families since Jan. 1, 2008.” The graphic below was taken May 18, 2008 at 12:15pm ET. Check it again when you read this article and see how much the number has grown! Note: it is small, please click on it to enlarge it!

Tapping an example from the local retail market, every cyclist and triathlete depends heavily on their LBS, otherwise known as the Local Bike Shop. I don’t know the origins of the LBS descriptor and I’ve never heard of a Global, National, or Regional bike shop. Just take it to mean that LBS equates to your good old neighborhood bike shop where you place your trust for all your cycling needs.

For years, I frequented a shop that had a lot going for it. A convenient location, wide selection of product, and word of mouth recommendation from friends made it a no-brainer to be my LBS. Too bad that nearly every time I walked through the door I was greeted by “Need a new bike?” I am sure the owner treated this as a throw-away line of little consequence, but it just wore me down. Most people keep their bikes for years, not months, at a time and depend on the LBS for parts, service, and clothing in the meantime. In weak moments when I responded to the standard question by asking “what’s new?” the owner would point me toward the latest bike he had in stock. According to him, nearly everything in his inventory was perfect for me.

Numbed by the continual barrage of sales pitches, I visited a few competitors. My search landed me in a shop that didn’t even carry finished bikes. In fact they won’t sell you a bike without first measuring you on a test machine and then recommending a short list of frames that are compatible with your anatomical dimensions. I had suits tailored to fit before, but never a bike. The business model at the Racer’s Edge (www.theracersedge.net/) is optimal for any serious cyclist. Not only did I get the message that my interests came first, but the process of being fit to the right bike created a level of trust and respect for the staff that could not be replaced with a points program, no matter how good the offer.

It should be clear by now that winning and retaining customers can result from adoption of a unique business model that emphasizes price, service, quality as well as other factors. The finer distinction to make is that regardless of whether your business adopts a traditional loyalty program to reward customers, there is always value in collecting and leveraging customer data in order to improve the in-store experience and the economics of marketing spend.

In both of the examples cited here, there is room for improvement.

• With Walmart’s dedication to a low price strategy, it might be difficult to craft the mechanism to begin the collection of individual customer data and match it to transactions. It’s tough to pull off without creating some type of “club” and Walmart is likely to stick to its one-to-many philosophy.
• For high service, high touch businesses such as my favorite LBS, collecting customer data and preferences is much easier to embrace and the investment in such efforts is guaranteed to pay off handsomely.

Building a Customer Strategy for long term success is inextricably linked to your business model, brand, and objectives. Determining a strategy before applying tactics is the key to victory. To quote the military strategist, Sun Tzu, Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat”.

… Bill Hanifin