Customer loyalty in a digital world: A new approach

Jeff Alford, SAS Insights Editor

Consider this: Has your family been loyal to something for generations?

Maybe it’s a handed-down recipe, cars from a certain manufacturer or even a brand of toothpaste. If you think about it, you can probably come up with several examples. Everyone can. When we find something good, useful or tasty, we tend to stick with it and share it with others. That’s true loyalty.

But customer loyalty has had a rough time of late. While it’s making a strong comeback, in many ways loyalty has suffered in our digital age. The challenge is to respond in new ways to encourage customers’ loyalty.

The loyalty experts at COLLOQUY conducted research this year that revealed US loyalty program memberships grew an astounding 25.5 percent from 2012 to 2014. The average US household is enrolled in 29 loyalty programs, but is active in just 12.

Yet almost 60 percent of customers aren’t even engaging in these memberships. That’s a good news/bad news message. The good news is that there’s exciting work to be done that can lead to some impressive rewards. The bad, or rather the challenging, news is that you’ll need to uncover new ways to attract and keep customers.

Why is loyalty so slippery these days?

The reasons are numerous – increased competition, concerns with data privacy, homogenous offerings just to name a few. To survive, customer loyalty must be like breathing; something that is not just automatic but autonomic.

This means organizations must rewire how customers think about their brand. You can do this by melding data analytics with emotional brand experiences to provide nuanced interactions that strengthen brand advocacy and loyalty.

In a recent webcase, SAS Global Director of Customer Intelligence Wilson Raj discussed the crucial strategies and techniques to become a loyalty-infused company, not a company with a loyalty program.

A three-pronged approach to customer loyalty

Raj outlines three imperatives that he believes organizations must adopt to garner the sort of brand advocacy that incites rabid loyalty.

Imperative 1: Shift brand management to brand and customer experience platforms

Deliver a memorable experience. Your digital marketing campaigns must be engaging to capture consumer’s attention during their usually brief online encounter with your organization. You have to provide them with recognizable moments that mean something to them. With the right analytics tools, you can track customer behavior across every engagement and tailor your offering – whether it’s sales, service or support – according to customers’ wants and needs.

There are a few quick ways to make improvements. One is by unifying product, pricing and inventory information. The big guys have done this, but it’s surprising how many organizations have skipped this step. Another way is to reduce friction between your efforts and customer engagement.

Use predictive analytics marketing. For example, if you know based on analytics that your customer has a toddler in diapers, then using a predictive analytics solution you could automatically provide that customer with an offer for the next larger size when the time is right.

Finally, consider ways you can merge the physical and digital worlds. Retailers are developing inventive ways to engage customers (and increase sales) when they’re at a store. By understanding a customer’s clothing preferences, a retailer can make accessory suggestions based on what that customer and other customers with similar profiles have purchased in the past.

Imperative 2: Shift from offering a loyalty program to becoming a loyalty company

Don’t just create a loyalty rewards program and proclaim “mission accomplished.” Loyalty is best cultivated in non-transactional ways. Consider how to integrate customer loyalty efforts in every part of the organization.

People are motivated by non-transaction rewards; in a recent survey, people said they would pay more for products or services that save them time or are more convenient. The other kicker? These same people are less likely to join your loyalty rewards program.

What does this mean? Customers value the experience more than the transaction. A rewards program might help you win a sprint, but to win the marathon, you need to focus on the entire customer experience.

Imperative 3: Align customer experience and analytics

It’s time to rethink the customer decision journey. Customers are more likely to buy a product or service based on social media recommendations. They’re more likely to use their smart devices while in your store to comparison shop or get reviews by other customers (which they’ll trust as much as recommendations from their friends).

The new journey goes something like this:

• Discover (comparison shop). The analytics for this phase include segmentation, lead scoring and acquisition modeling.
• Explore (research reviews). Offer optimization, marketing mix modeling and some form of A/B or multivariate testing.
• Buy (purchase). Propensity modeling, valuation modeling and next-best-action modeling.
• Engage (write a review). Identify cross-sell and up-sell opportunities, create churn models and lifetime value models.

“Boosting loyalty is ultimately a game of inches,” according to Raj. “To become a loyalty company, companies must view data, analytics and operational excellence as a unified digital business capability. They must go beyond rewards to recognize and engage customers in all stages of their brand experience.”