What do we mean by cutting edge customer loyalty and how do we do it? For a question which has long been a preoccupation of many enterprises, surprisingly few really get it right. In fact, all too many companies pay little more than lip-service to loyalty - running outdated, unimaginative programs that fall far short of surprising and delighting their customers.
So, how do you best address loyalty, how best can you improve returns and reduce churn, how do you identify winning use-cases?
A good starting point in answering those questions is defining what loyalty is. We’d propose this working definition: “Loyalty is when customers choose a particular brand more often than competitors’, based on their belief that the chosen brand will be a better choice both rationally and emotionally.”
If we accept this then we can see that loyalty has two aspects:
So, if we’re looking to identify the components of an effective loyalty program, then the key question is “what drives behaviour and positive attitude towards a brand?”
The correct answer, beyond the transactional, might be that loyalty is founded on something that’s hard to measure (which, perhaps, is also why a detailed definition is less straightforward than it appears). We believe that loyalty can only be truly developed as an effective strategy if the basis of an offer (driven by price & service) is consistent in its appeal but we would also suggest that, instead of creating an entire marketing strategy around what prices and services you want the customer to prioritize, you would do better to prioritize instead a strategy driven by how we want the customer to feel. In short, emotions and returns are not mutually exclusive.
Separating what we’ll call our humanity from your immediate marketing goals is important because real, lasting brand satisfaction is achieved through the application of different strategic parts, not just the obvious ones. And in our years of experience as loyalty marketing experts, emotion lies at the heart of true loyalty more than anything else. Emotion is the glue that binds together all the other elements (service, price, trust, reliability, empathy, rewards etc.) that contribute to satisfaction and creates a compelling, desirable offer.
In simple terms, what really counts is how we make customers feel about the component parts of the offer we’re presenting them with, how we wrap and position everything and how/when/why we communicate our offer and brand. These are the steps that will really define the kind or relationship and associated emotions we try to build to represent our brand. Accept this as true, and we believe it is, then only brands that build more positive emotional relationships with their consumers will enjoy a higher rate of long-term profitable revenue growth.
So, accepting that brands which build this (more positive emotional relationships) with consumers enjoy a higher rate of returns over time, then we need to understand the drivers of Brand Loyalty in some depth in order to build these lasting relationships.
To do this, you have to take a structured, data driven approach built on the following elements:
In the age of Internet retail, where the retailer is remote from the customer making it harder to establish traditional relationships, it’s more critical than ever that loyalty works. The ease and variety of commercial alternatives offered by purchasing through the ether makes it easier than ever to walk away from a company whose service we’re not happy with, to price-shop, and to feel no emotional bond with business or brand. Those that ignore ensuring their loyalty programs are effective do so at their peril. The cost of second-best is high.
This means loyalty marketers looking to optimize their programs need to take action now. Follow the steps above as a starting point and the results can be pretty significant. One of our clients who took this path now has more than 50% customer engagement rate - engagement defined as customers redeeming benefits in the last 12 months – far exceeding the industry average. Typically, traditional points-based loyalty programs achieve around a 20-30% engagement. The same customer’s Net Promoter Score, another of its KPIs, has moved from 3rd to 1st place in its market in both prepaid and postpaid segments. Harnessing emotion means surprising and delighting your customers. In the Digital Age, that’s a good idea.
Xabier Miqueo is Senior Marketing Consultant and Keith Brody is VP Marketing, at Evolving Systems