2024 is the Year of Loyalty and Rewards

Email marketing is dying, CAC is rising, and yes, cookies are crumbling. Loyalty is the new leverage.

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At Crosshatch, we're betting big on 2024 as the Year of Loyalty & Rewards.

For too long, Loyalty & Rewards has taken a backseat to Customer Acquisition. Budgets often skew heavily toward Customer Acquisition. Dollars flow into new customer marketing that could have been spent on retaining already existing customers.

Hey, don't get us wrong, we love Customer Acquisition. In fact, what you are reading right now, this very blog post, is a Customer Acquisition strategy! It's true! We hope that you will read this blog post, digest it, and then click on our Call-to-Action at the bottom and come say hello.

Nevertheless, here are the market factors that show a lean toward Loyalty & Rewards.

First, email marketing as Customer Acquisition is about to fall off a cliff.

In the past few years, many companies have begun using various "gray area" strategies of taking website anonymous visitors and using various network graph vendors to match these to email addresses, emailing people who have not necessarily explicitly consented to be contacted by the brand.

We think this is terrible.

Google is also updating their policies, with changes going into effect in February, 2024. Going forward, bulk senders (those sending 5,000+ emails a day to Google addresses) will be required to keep spam rates below 0.3%. While many of the top brands already aim for this level, a lot of "email experimentation" around buying lists or softwares that match browsing activity to email addresses will fail to be effective. Email will have to shift toward being retention focused, as bulk senders will not risk deliverability issues for using email en masse as a Customer Acquisition channel.

Second, CAC is rising.

Isn’t CAC always rising? Perhaps. According to this recent report from CommerceNext, most retailers say CAC has risen since the introduction of iOS 14.

Third, the cookie is out.

Google will bid farewell to the era of cookies at the end of 2024, marking a seismic shift in 30 years of the digital marketing landscape. We've read the many thought pieces produced in the last few weeks. Many digital marketers will have you believe this is the apocalypse. The end is near. All hope is lost. We all know the Seven Horsemen of the Apocalypse, but until Google finally announced the end of the cookie we did not know there was actually an Eighth Horseman of the Apocalypse.

Loyalty & Rewards has a Personalization Problem Right Now

If you agree with us so far, you can see the customer acquisition headwinds. If you're like most brands, you already have plenty of levers to pull with your strongest customers, your Loyalty & Rewards customers.

What will have to change for L&R teams?

Right now, personalization is very nascent.

The personalization method for a Loyalty & Rewards marketer today is

  • create segments based on purchase history
  • choose activations for each segment
  • deliver these activations via a Loyalty & Rewards product, often an app or a special email segment

Segments have made sense for Loyalty & Rewards because

  • businesses have limited data and there just aren't that many available dimensions, or ways to slice and dice customers
  • each unique user journey adds complexity to make and track

Gee, that sounds very similar to a Customer Acquisition marketer flow.

A Customer Acquisition flow today is

  • create segments based on clicks and actions, possible enriched by third-part data bought from brokers
  • choose activations for each segment
  • deliver these activations, often an incentive to join an app or a special email segment

Segments have made sense for Customer Acquisition because

  • businesses have limited data and there just aren't that many available dimensions, or ways to slice and dice customers
  • each unique user journey adds complexity to make and track

Segments aren't personalization. In fact, segments are the anti-personalization.

At the end of the day, segments are just smaller groups of people than the entire customer base.

At Crosshatch, we want businesses to move beyond segments and feed all relevant data into AI with a prompt to create hyper-personalized experiences.

For example, let’s say you’re a small but formidable chain of coffee and bagel shops. You value your Loyalty + Rewards customers, but the program hasn’t really gotten off the ground in the year you’ve been running it.

Currently, you take all customers who have purchased 3x or more in the last 90 days, you sort them into "beverage consumers" or "bagel consumers" depending on what SKUs they primarily purchase, and then the "beverage consumers" get a 25% off coupon for their next order and the "bagel consumers" get buy 2 bagels, get 1 bagel free coupon. This is all done in SQL by a data engineer or within a CDP you bought, or perhaps both.

You brand this internally as a "personalization" experience, and it’s true, segmenting out people who buy beverages vs. people who buy bagels and customizing an offer is a good first step. It’s better than nothing, and you have more people signing up for the app, so that seems great.

At Crosshatch, our workflows are a bit different, and hyper-personalized:

The beauty of hyper-personalization is that each customer is treated as –– a unique individual. Some customers will need a big discount on a coffee, and other customers will simply want an early bird special, where if they arrive before 8 AM they will get the discount.

Some customers will view their relationship with your brand as purely transactional, you are just the nice coffee and bagel shop across from their office. Other customers will want a gamification experience, where for each 5 coffees they buy, they get a 6th for free, and on their birthday they get a free bagel.

Going beyond the segment is the future, especially for your existing, top customers. Your relationship with these top customers is your company’s most valuable asset.

We’re holding a number of conversations with Loyalty & Rewards professionals across travel, retail, real estate, and a number of other industries.

We’d love to connect and meet with you and show you what we are all about, and to hear your plans for 2024. Click here to get something scheduled.

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