Is Your Customer Loyalty Program Wasting Its Best Data?

Some brands hold their loyalty programs in high regard, seeing them as a key to their success. Others are more skeptical, questioning whether their programs actually foster loyalty or just needlessly give away margin.

A new survey of 310 loyalty and marketing professionals by Forrester Research, commissioned by Zeta Global (editor's note: the author's company), confirms this skepticism, finding that 30% of brands rate their loyalty programs as only somewhat effective, at best. It also reveals where much of that skepticism likely stems: the collection and use of loyalty data—or rather the lack thereof.

According to The Underutilized Superpower Hidden in Loyalty Data report, 27% of brands don’t use their loyalty programs to collect first-party data and a whopping 38% don’t use it to collect zero-party data. That’s a huge missed opportunity for brands to get to know their best customers better, and then use that knowledge to serve those high-value customers better.

That begs the question: Why aren’t 100% of brands collecting zero- and first-party data via their loyalty programs? What’s holding them back?

Why Loyalty Data Isn't Reaching the CDP

One clear hurdle is the issue of getting a customer’s loyalty data out of the loyalty platform and into a customer data platform or another centralized database. This would allow brands to combine their zero- and first-party loyalty data with zero- and first-party data collected via other channels, as well as any third-party data gained through data enrichment.

Forrester found that 23% of brands have minimal or no integration of their loyalty data with their other customer data sources, with the remaining brands having partially or fully integrated theirs. That certainly explains a large portion of the brands who aren’t collecting loyalty data.

However, that’s not the No. 1 thing holding loyalty programs back.

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What Matters Here: How Much Loyalty Data Goes Uncollected?

Forrester found 27% of brands don't collect first-party loyalty data and 38% don't collect zero-party data, while 23% have minimal or no integration between loyalty platforms and other customer data systems.

What's Blocking Loyalty Data Activation?

Challenges around activating loyalty data are even more rampant. Understandably, if you can’t activate loyalty data, then there’s no point in collecting it.

In fact, you may actually do harm to your program by collecting data you don’t use, as asking for information sets an expectation with your loyalty members that the information will be used for their benefit. When you don’t follow through, that creates disappointment, not only harming future data collection efforts but causing program dissatisfaction.

Spanning everything from technological and operational, the top barriers cited were data quality, poor integration, organizational silos, and limited internal expertise or resources.

In fact, barriers were so pervasive that every single survey respondent said they faced at least one barrier to leveraging their loyalty data effectively.

Thankfully, the need to address these impediments was also pervasive. Within the next 12 months, 92% of brands expect to invest in new technology or processes to better leverage loyalty data. Top investment priorities include customer data centralization, advanced analytics, AI-driven personalization, and omnichannel activation.

However, while those barriers are absolutely impactful, they are not the No. 1 thing holding loyalty programs back.

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What Matters Here: How Confident Are Brands in Their Loyalty Insights?

Only 37% of respondents said they were more than somewhat confident in extracting actionable insights from loyalty data, a gap the survey ties directly to underused first- and zero-party collection.

How to Extract Actionable Insights From Loyalty Data

At the most fundamental level, many brands are struggling to identify actionable insights from their loyalty data. It doesn’t matter if you can integrate your loyalty data with your other customer data or if you can activate that data using AI-driven personalization across channels if you’re not sure how to act on that data.

Among respondents, 37% said they were somewhat confident, at best, in their ability to extract actionable insights from loyalty data. That figure closely aligns with the 27% and 38% not using their loyalty programs to collect first- and zero-party data, respectively.

There are multiple paths to identifying more actionable insights in your loyalty data.

For first-party data, smarter analytics can absolutely identify behaviors and other patterns that you can address through your marketing efforts. Today, great analytics can automatically identify a wide range of behaviors, such as affinities for certain products or product categories, or a bias for or against discounts.

Two Buckets for Zero-Party Data Collection

For zero-party data, your efforts should fall into two buckets:

1. Collecting long-term preferences that are generally actionable for a few years, such as a favorite sports team, hobby, brand, or book genre. Zero-party data for long-term preferences is particularly powerful at the beginning of a relationship and after a period of disengagement. However, recognize that what consumers do eventually trumps what they say. Put another way: Zero-party data is powerful until first-party data clearly contradicts it.

2. Collecting short-term preferences that are generally actionable for a few months, such as the fall movie they’re most excited to see, the winter vacation destination they’re most interested in, their home improvement plans for the summer, or the kind of holiday gift they’re most interested in buying. You can ask those kinds of intent-based questions over and over and get different answers.

How to Frame Zero-Party Data Questions

Regardless of whether you’re collecting this information via a preference center, poll, or quiz, for both long- and short-term preferences, you want to start with the end goal and work backward to the most appropriate data you need to collect to achieve that goal. Be direct with your questions and avoid having to interpret answers, as your bias can lead you astray.

For example, if you want to be able to personalize your loyalty messages with menswear or womenswear, ask the member if they’re interested in one or both of those. Don’t ask them their gender, because they might be buying for a partner or find the gendering of clothing to be an outdated notion, as many young people do.

I always think of zero-party data, especially for short-term preferences, to be the easiest data to activate, so I’d recommend starting there, if you’re among those not already doing that. Expect response rates to be low at first, but they’ll improve over time as you prove to your loyalty members that you’ll use responses to improve their experiences.

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Why Integrated Loyalty Data Is a Force Multiplier

It all starts with collecting loyalty data you can actually use effectively to improve your loyalty program. But as Forrester points out in this study, the path of maximizing the value of this data is to combine it with your other customer data and then use it across channels in a coherent and cohesive way.

For the better part of the past decade, consumers have told us that this is what they expect. They’ve told us repeatedly that they’re frustrated when their actions in one channel aren’t reflected in the messaging they get in another. It’s abundantly clear that consumers have never thought in terms of channels; they only think in terms of brands. So, now that brands finally have the technological means to break down their marketing silos, they can’t afford not to.

Interestingly, while the desiloing of marketing channels has been a major topic of conversation for the past several years, I never hear loyalty programs mentioned as part of these efforts. As a vital marketing channel for many brands, they should be.

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