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The Agile Brand with Greg Kihlström®: Expert Mode Marketing Technology, AI, & CX
#812: Capillary Technolgies' Jim Sturm on customer loyalty as enterprise strategy
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The agile brand.
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Welcome to Season eight of the Agile Brand Podcast. This season we're going all in on Expert Mode, MarTech, AI and Customer Experience, talking with the people and platforms behind the brands you know and love. I'm Greg Kilstrom, your host and I help Fortune 1000 companies make sense of martech, AI and marketing ops. Hit subscribe or Follow to make sure.
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You always get the latest episodes and.
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Leave us a rating so others can find us as well. This episode is brought to you by Capillary Technologies, a global leader in AI powered loyalty and customer engagement. Trusted by 400 brands, including 19 Fortune 500 companies, Capillary helps retailers and consumer brands drive customer retention and repeat purchases through personalized loyalty programs and experience. Learn more at www.capillarytech.com In a world without third party cookies, is your customer loyalty program your most valuable asset or your biggest missed opportunity? Agility requires a fundamental shift from viewing loyalty as a transactional rewards program to embracing it as a dynamic, data driven engine for the entire customer experience. It demands that brands are able to listen, to, predict and adapt to customers in real time. Today we're going to talk about the evolution of customer loyalty from a simple marketing tactic to a core enterprise strategy. With the erosion of traditional data sources and the rise of AI, the way brands build lasting relationships is undergoing a radical transformation and we're going to explore what it takes to win in this new landscape. To help me discuss this topic, I'd like to welcome Jim Sturm, President of North America at Capillary Technologies. Jim, welcome to the show.
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Thank you Greg. Great to be here.
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Yeah. Looking forward to talking about this with you.
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Before we dive in though, why don't you give a little background on yourself and your role at Capillary Technologies.
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Sounds great. So I have been in the loyalty industry for quite a long time. I find it a fantastic industry to be in because we all think we're experts in the space. We all understand loyalty initiatives and loyalty programs, we all have opinions on all these programs. So I've been in the space for quite a while, joined Capillary six years ago as Capillary is predominantly a very powerful technology platform, but wanted to expand into the North America market. Being here in Dallas, I was fortunate and a bit serendipitous to meet the leaders of Capillary and we have embarked on a journey to grow significantly in North America.
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Wonderful. Well, yeah, let's dive in here and want to start with the strategic aspect of this and just looking at what loyalty looks like, what modern Loyalty looks like, and certainly there's been, you know, there's been tons of changes in, in many different ways. But you know, one of the changes has been just the, the move from third party data and such a reliance on third party data, third party cookies to first party data. And, and that has forced a pretty major rethink of marketing. How does a shift like this elevate the role of a loyalty platform from a tactic to a core enterprise strategy for gathering and activating first party data?
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So the loyalty industry is not new. It's been in place for many, many, many years. In fact, you know, I think about when I was young and my mother would go to the market and the experience was made better when the individual at the cashier, at the checkout or the guy behind the counter knew, knew my mother's name, addressed her accordingly, knew information about her. And loyalty initiatives began at that time also with things like snh, Green Stamps and you know, what's happened with third party cookies and more predominantly regulations, laws, consumer privacy and litigious society that we live in. There's a move completely away from speculation or from third party data to first party data. And that's what loyalty initiatives and strategies are all about. Because when you join a loyalty program, you opt in, you consent to having information kept about you because you know, and you expect that you will have a better than relationship where the brand will understand you a bit more, they may make better offers to you and, and frankly we all want to be rewarded for our loyalty. So when I shop at a certain brand a lot, I expect them to know me, I expect them to treat me better. So loyalty has become a strategic weapon. One, because it works and two, because laws and regulations and consumer privacy is now stating that you can no longer track me if I don't consent to it. So loyalty initiatives are very strategic of nature.
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Yeah, yeah. And certainly, you know, with all those changes, brands are certainly there's probably new.
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Expectations from, from brands that there weren't.
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You know, several years ago. I know that capillary has, has grown significantly as, as you mentioned, you know, growing in North America with some acquisitions. What is consolidation in the loyalty space signal about the market and you know, what are brands expecting that they weren't a few years ago?
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So our strategy of growing in North America has been as you're referring to, consolidation. So we could have just simply formed a sales team and expected somehow to grow in a market in North America where there's completely different expectations than there is across the rest of the globe. And there's a tremendous presence of others in the industry that provide similar capabilities. So we've made four acquisitions. We made those acquisitions to establish our brand, to establish our presence, and also to have more individuals on the team who can be trusted advisors who know how to make these programs work, who know the tricks and the trades and the secrets of these programs. But as this is occurring and as the loyalty industry is expanding, the expectations of brands is growing also. They expect a company not just to provide a fantastic technology, to also be advisors on how to launch these programs, how to design these programs. And they expect the ability to have significant data storage capabilities because data is the foundation to all of these programs. We've mentioned first party data. In a program that's really well done, a brand expects not only first party data, but what Forster coined is the term of zero party data. Other data consumers may share, whether it's through surveys or filling out a profile, or filling out a preference center. And then use of that data is what brands expect. So as brands are looking to a provider like Capillary, they expect us to use data to really personalize the relationship between that brand and the individual consumer. They also expect a technology that's going to be able to predict consumer behaviors so that they can get in front of the conversation. And they expect even a platform that's going to prescribe next best communications, next best strategies to be in the program. So the expectation of a brand is continually evolving every year to be heavy in advanced technology. AI, the buzzword that it is, is expected to be in the platform, yet the ability to lead that brand to be successful using a loyalty strategy.
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C
Yeah, well, and, and to follow on that, certainly there's, there's, there's a lot of talk about that hyper personalized experience. And you know, I think a lot of, a lot of brands, a lot of are, are chasing next best action, offer experience, you know, whatever, next best, whatever the thing, the thing is, right? Can you give maybe a concrete example of how's that working today and how are you able to do that in a meaningful way?
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So Kepler has been doing that for about six years because we've had predictive analytics and predictive modeling and AI in the platform for quite a while. But the way that you do this is I really equate this back to the four phases of data analytics. So whenever you have a set of data and information about a consumer, you need to be able to describe what's happening, to diagnose why it has happened and then to predict future behavior and even prescribe solutions for that. So this evolution and these expectations and this use of data is now heavily dependent on not just the data, but advanced capabilities within the platform which are now being made even more powerful through the use of AI.
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Yeah, yeah. Capillary also recently announced a partnership with Adobe. And you know, for the marketing leaders listening out there who, you know, aren't we all struggling with a fragmented tech stack these days? And you know, there's the, the, the larger the enterprise probably the more, there's more of, of each of, of everything, right? What does good integration look like and what does it practically enable? You know, how, like, how does it help a brand create a more seamless omnichannel experience?
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So Adobe is just a powerhouse of a company. They are everywhere. They're global. They're a world class personalization, orchestration and creative company. So we are their top loyalty partner. We've integrated our platforms together because this expands our reach, our capability across the globe. Again, consumer brands expect data, real time data available to be used to personalize this relationship with their brands. And so by having this always on integration with Adobe, we've expanded our reach. We've already had a global presence and we already serve many, many brands across the globe. But this just simply expands that capability and, and puts the power of the Adobe platform combined with the Capillary platform, or better yet, the data that Adobe has always had around consumers combined with now loyalty data, first party data and now a brand has a very powerful data engine to do all this personalization that we've spoken to, all these predictive models that we've spoken to.
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As we talk about navigating the complexities of the enterprise marketing landscape, there's one topic that often gets pushed to the back burner until it's too late. Data privacy. As a marketing leader, you know your personal data and your team's data is out there. Data brokers are constantly collecting, siloing and selling your information, leading to increased spam, heightened security risks and frankly a lot of noise. We just don't need. That's why I want to talk about Incogni. Incogni is a personal data removal service that acts as your proxy. They reach out to hundreds of data brokers on your behalf to request the deletion of your personal information. Instead of you spending hundreds of hours navigating confusing opt out forms, Incogni automates the entire process. They don't just do it once, they continuously monitor these sites to make sure your data stays off the market. Personally, I recommend the unlimited plan which includes custom removals. If you find your sensitive information on a specific site, such as a news portal or health app, you simply send Incogni the link and their privacy experts will handle the manual takedown for you. It's essentially white glove security for your digital footprint. For my fellow enterprise professionals looking to reclaim your digital privacy and reduce your risk profile, this is a no brainer. Protect your identity so you can focus on leading your brand. Take control of your data today go to incogni.comagile that's incogni.comagile and use code agile to get 60% off an annual plan. That's incogni.comagive. you know that moment when marketing wants a landing page, design mocks it up and engineering says, yeah, we'll get to it. Thousands of businesses, from early stage startups to Fortune 500s are choosing to build their websites in Framer, where changes take minutes instead of days. Framer is a website builder that works like your team's favorite design tool. With real time collaboration, a robust cms, with everything you need for great SEO and and advanced analytics that include integrated AB testing, your designers and marketers are empowered to build and maximize your dot com. From day one, changes to your Framer site go live to the web in seconds with one click without help from engineering. Framer is also an enterprise solution, giving brands like Perplexity, Miro and Mixpanel the confidence they need to build their websites in Framer. Learn how you can get more out of your.com from a framer specialist or get started building for free today@framer.com agile for for 30% off a Framer Pro annual plan. That's framer.com agile for 30% off framer.com agile rules and restrictions may apply.
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So I want to talk about measurement a little bit here too. And certainly there's some traditional loyalty KPIs, and I'm sure those don't go out the window when things change. But are there Are there more sophisticated metrics that brands should be tracking to measure the true business impact of loyalty initiatives, especially when we're also trying to tie this to customer lifetime value?
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Yes, there are. In a very simple sense. Loyalty initiatives were put in place to try to drive another purchase, another frequency, another visit, more spend. Incrementality is the word that's always used around loyalty initiatives. And so the first measurement has always been this very transactional incrementality. Did my customer because of a loyalty initiative, whether it's a promotion or the loyalty strategy itself, did they come one More time? Did they visit one more time? Did they spend more money? So that's the basics. The loyalty programs strategically have grown. So now the expectation of measurement is not just around incremental transactions. It's also about emotional loyalty as a second category. Because look, at the end of the day, loyalty programs have to be very complementary to the brand itself. A loyalty program at best may be a discount offer for a brand that I don't typically shop at. But that's not good loyalty. Good loyalty is around. I passionately love a brand because of their product and the experience with that product. So I'm emotionally attached to that brand combined with a great loyalty strategy where they understand me more. So the example I would give is my daughter, she has a favorite coffee shop that if I say we're going to go get a cup of coffee at this shop, she smiles and gets excited. That's emotional loyalty, right? It's not a, oh gosh, I don't find a cup of coffee. No, to her it's, she smiles and she's excited about it and she wants to go. And then add to that, if they know enough about her to know her favorite drink and when she comes in, they know her name and they say hello and they have her drink ready. Now you've created this really emotionally based experiential loyalty program that will generate the traditional measures that I talked about. Then the third category, so I've mentioned three categories, traditional loyalty measures and then emotional brand engagement measures. The third is a competitive set. So a loyalty strategy can help a brand steal share. And this has become critical to brands that we work with because yes, I can get a consumer to come one more time or have a more engaging experience where they love me, but how can I get them to stop shopping with my competitor and spend with me? And there are secrets in the place of these programs for how you do that. So you can we call these people category heavy splitters. These people shop a lot in the category. The best example would be Home Depot and Lowe's. Frankly, for most of us, the difference between whether we go to Home Depot or Lowe's is whether we have to make a left hand turn or a right hand turn as we're driving. However, if a great loyalty program where they understood me, they understood all about me, they knew how good I was in terms of taking care of my home versus how much help is needed, how engaging they can be and how great they can make the experience. A good loyalty program for someone like myself who spends a lot in the category will Absolutely. Make me shift my spend. So now these three categories of loyalty, a great program is focused on all three. And how do I drive incrementality, how do I combine with my product and experience, gain emotional experiences with a consumer and then how do I use the program to steal share from my competitors? Look, it's a street fight every day and loyalty strategies have become critical.
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Yeah, well, and maybe to your earlier point, I mean, just about every brand has a loyalty program, but not all of them are of the same caliber, let's just say. And so you know, to those that are really just giving discounts to people that were already going to buy, let's just say, you know, maybe the, I guess at least they're buying. But anyway, we'll just go with that as a worst case scenario. How do you help brands prove to the C suite when their loyalty program is really valuable? And you know, it's not just a cost center for discounts, but it's a genuine profit driver. You know, some of these C suite folks may have bad experience or a bad taste in their mouth from other, from other brands that are, aren't really doing it. Well, you know, how do you, you know, how do you make that argument that yes, this is really worth investment?
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You have to be able to, it's attribution. There has to be an attribution of these initiatives in place directly tying to whatever report a CFO is looking at. So typically they're looking at a P and L and they, they need, and they're looking at drivers of revenue, which would be these incrementality things that I talk about. But every CFO tends to be a skeptic of loyalty initiatives. In the beginning, every cfo, he or she will say in the beginning, my vest customers are going to come no matter what. Why do I need to spend money on some kind of a loyalty infrastructure to drive this business? Well, as long as the initiatives that you've created can be directly attributed to the bottom line and to the report that a CFO is looking at, they are believers. And so therefore it is critical to be able to tie any campaign, any strategy and be able to attribute it to that piece of incrementality. So measurement is critical, but what we do is make sure the measurement impact shows up on the bottom line of the P and L that a CFO is looking at it.
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Yeah, yeah. And so you mentioned emotional loyalty previously. You know, some, some of the predictions that you've made mention that this is something that's, that's certainly on the Rise. What does emotional loyalty actually look like for something like a CPG brand or a retailer? And how do you begin to foster and measure something that in some ways, you know, emotional, it may, may seem intangible, but, you know, how. How do you measure that?
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Yeah, so the first way I measured it was the example in the story I told about my daughter, is that when they come in, is there a smile on their face and are they happy to be there? You know, and oftentimes surveys are done and we use a smiley face as the top of the survey and a frown as the bottom. But what it looks like is repeat visits, repeat transactions, repeat visits, not driven by a discount. Discount is a dirty word in the loyalty space. It is a drug that we don't want people hooked on. We want to. And this gets back to the CFO question. We will immediately try to take discounting, remove it from programs, and evolve to strategic weapons. And so what emotional loyalty looks like is excitement and happiness around a brand. And that's through three things. The experience with a brand, when I come in, do you know me? Do you know who I am? Do you know my preferences? Do you know my profile? And it gets down to product. None of us can be emotionally engaged unless you can't avoid product. You know, I don't know what the saying is. You know, good marketing cannot overcome bad product. However, good product can overcome bad marketing. So this experience combined with product, combined with personalization is what creates an emotional attachment to a brand. If the brand knows me, they know my name, they know my preferences, I love their product. It's all going to work. You know, my favorite loyalty program is, is a, is a brand that doesn't even have a program, but they have an experience. It's the corner pub. I go in the corner pub, they know me, they know what I like, they know what I might additionally like. And so that's a form of a loyalty program. Apple, the greatest passionate, emotionally attached humans are to a brand like Apple. And they don't have a structured program program. They have a great product. So this is emotional loyalty does not come from discounts or from transactions. It comes from the things I mentioned.
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Yeah, yeah.
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Love it.
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Well, Jim, thanks so much for joining today. Got two last questions for you as we wrap up here. First one, if we were having this interview one year from today, what is one thing that we would definitely be talking about?
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It's interesting. One year from today. So the, the industry itself, due to all the things we've talked about, is growing at, at 24% year over year growth rate. So today it's about a $7 billion industry and in 2035 it's going to be a 70, 70 billion dollar industry. This is significant growth. So the things we're going to be talking about next year and forever are. First of all, most people would answer this question by talking about AI. Well, AI to me is table stakes. Okay? It is a platform that is enabled through intelligence, experiential intelligence. So a year from now we'll all say this AI stuff is cool, but it's table stakes. Emotional loyalty is where it's all at. And again, emotional loyalty is this personalization and experiences. But it's going to be this evolution from a program to a platform to what I'll call an enterprise infrastructure. Enterprise infrastructure is something that's always on. It cuts across everything within a brand. It's accountable to the bottom line and it's prescriptive of nature. So we'll be talking about a year from now how this enterprise infrastructure that I have is prescribing the next best things to do, whether it's a promotion, to campaign, a new tier, a churn campaign. So we're going to be talking a lot about that in the next year and through 2035. It's a great industry to be in because of this growth, the rapid growth.
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Love it. Well, last question for you. What do you do to stay agile in your role and how do you find a way to do it consistently?
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I try to stay close to the, very close to the industry. In other words, I travel a lot. But whenever, wherever I go, I challenge the brand associate, the store associate. I seek to understand how they articulate this program, how they describe it. Additionally, we do a lot of consumer research, so there's a lot of consumer research to stay on top of expectations. These programs are in place to make consumers, us, individuals, human beings happy. We want to smile on people's faces. And in order to stay close to that, you have to do a lot of consumer research. Staying close to the consumer. You know, the other thing I haven't mentioned is the need for speed and adaptability. These programs we are going to see that this enterprise infrastructure I talk about and through the constantly staying in touch with the pulse of a consumer have to be very adaptable. I have a couple of great quotes. One would be, I think Mike Tyson once said, everybody's have a plan, everybody has a plan until you get punched in the mouth. And that's what's happening to brands every single day. A brand is getting punched in the mouth with a new competitor, with a new consumer expectation, and the need to be fast and stay adaptable is critical. There's a bit of a speed to, you know, if you feel like. If you feel like you're moving fast but it's not causing you pain and constraint, then you're not moving fast enough and you need to go faster.
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Yeah.
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Yeah. Love it. Well, again, I'd like to thank Jim Sturm, President of North America at Capillary Technologies, for joining the show. You can learn more about gym and Capillary Technologies by following the links in the show notes. And thanks again to our sponsor, Capillary Technologies. A global leader in AI powered loyalty and customer engagement. Trusted by 400 plus brands, including 19 Fortune 500 companies, Capillary helps retailers and consumer brands drive customer retention and repeat purchases through personalized loyalty programs and experiences. Learn more at www.capillarytech.com and thanks again for listening to the Agile Brand podcast. If you like the episode, hit, subscribe and drop a rating so others can find the show too. And if you're interested in consulting, advisory work, or if you need a speaker for your next event, feel free to reach out. Just visit GregKillstrom.com that's G-R-E G K-I H L S T R O M.com the Agile brand and is produced by Missing Link, a Latina owned, strategy driven, creatively fueled production co op. From ideation to creation, they craft human connections through intelligent, engaging and informative content. Until next time, stay curious and stay agile.
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The Agile Brand.