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Loyalty – it is not what you think

Great insights by Michael Leander

Are conversations on customer loyalty taking a wrong turn?

Recently in Shanghai and Mumbai I overheard conversations about loyalty. These conversations focused on data and other technical inside-out stuff. Not so much about the core of customer loyalty.

I’ve had the privilege of being a speaker and an expert panelist at leading loyalty events on four continents. And that’s been great. Over the years different “loyalty trends” have been the topic of conversation.

Lately I’ve noticed a shift in the focus of conversations about loyalty. Intense conversations taking place between accomplished professionals. All of who represents major global brands. Read the following as nothing more than some random thoughts. 

These conversations now mostly focus on data, data, data. Big data (not small data), data analytics, mining data, acquiring data and so on. Not on the emotional connect with consumers or business buyers. And very little on winning and keeping customer share of heart. At the Loyalty Summit in Mumbai, for example, one speaker after another presented the case for data. But offered no solutions as to how to make data actionable.

And I think that is a mistake. Because data, analytics and such can do little for loyalty, if the emotional connect isn’t established to some degree. And even less if data and insight isn’t used to improve the communication with each individual customer. Because relevant offers delivered in a timely fashion helps create or retain loyalty. Irrelevant offers are nothing but an irritation to consumers or business buyers.

Before we continue, don’t get me wrong. I too am a lover of data. But I believe data must be actionable. Any data you collect should enable you to improve the conversation with any given customer. Preferably 1-to-1.

The emotional connect creates sustainable and genuine loyalty

Intense loyalty conversation at the Think Tank for Retailers in Shanghai. Organized by Ignite – a division of Frankfurt Messe
You might agree with me that the concept of loyalty is a bit of an oddity. Because what exactly is it that makes someone loyal? What is it that makes someone choose you and then, perhaps out of loyalty, choose you again – almost on autopilot?

The memory of the last experience is where loyalty is found

I’ll tell you what it is in most cases. It is the memory of the last experience they had with your brand or service. If that memory was bad or disappointing, even the most loyal customer will think twice before making a new purchase with you. Let alone recommend you to someone.
(Solutions such as B2C satisfaction measurement system Litmus and B2B satisfaction measurement solution Relationwise are currently experiencing growth. Exactly because brands wish to measure the quality of the experience in real-time.) 

Genuine emotions eats rewards for breakfast

For years retail, automotive, travel and hospitality brands have been playing the “rewards and recognition“ game. This play creates stickiness to a large degree, but is hardly a major force able to create real, genuine loyalty. Unless, of course, the product or service is outstanding.
The memory of a great experience will almost always trump the benefit of points. So given the choice, I think, most consumers would choose experience over rewards.

Data collection to no avail

Conversations between data scientists and customer communication experts is the need of the hour. (from Think Tank, Shanghai)

Consumer brands traditionally have used loyalty schemes as a (smart) way of collecting large sums of data. But historically data collected has not been utilized properly to service customers better – bar a handful of exceptions we all love to praise. Pioneer retailer Tesco being one of them. Amazon being another.
I’d say that the inability to use data to improve the relationship with customers is a big part of the problem. Brands are sitting on all of this data, yet seem incapable of using the data to create better experiences for their customers; more relevant communication, smarter triggers etc.

When I look at the loyalty programs I’ve joined, the sad news is that not one of them have communicated to me according to my preferences and past behavior. Airlines and hotels take first prize for irrelevant communication.

Perhaps that is why brands talk so much about data. They’ve spotted the real Achilles heel and are desperately looking for solutions?

Of course some brands have improved the online experience through customization and/or personalization in recent years – for example with technology from market leader Sitecore. But the exact same brands are not able to deliver a unified experience in all customer touch points.
Loyalty is found somewhere in the sum of all parts

Hansa Cequity revealed study uncovering the impact of loyalty programs on the Indian consumer

What causes someone to be loyal to a brand is not one thing or one feature. It is the sum of a number of parts that draws people to your brand. Sure, rewards and recognition programs plays a part. But these mechanics – ‘cause that’s what they are – cannot stand-alone.
True loyalty is created as a result of the CORE of your product and/or service. With the added value of whichever system you’ve created for making customers your first priority. When many expert practitioners talk about the loyalty DNA – or the brand DNA – there is a good reason for that.
Whatever it is, it has to initially create an emotional connect. And then through your delivery and service system manage to retain and grow that initial emotional connect.

What can be done to earn genuine loyalty?
Now, that’s a big question. And the answer depends.
To me it is simple, albeit difficult to implement. But so is anything worth doing in this day and age. Earning and keeping someone’s loyalty is hard work. It is in people relationships, but even harder in relationships between brands and their customers.
But you must start by understanding what exactly it is that makes each individual customer loyal. You might find part of that answer in the data. But more likely you’ll find more and better answer by asking your customers.

Customer loyalty questions for you and your team
1.  What makes a customer choose you over the competition? If you don’t know the answer, then ask your customers!
2.  What makes a customer repeat purchase? Was it out of convenience or simply because the customer was incredibly satisfied with the first purchase?
3. Could “Share of Heart” be a better measurement than, say, “Share of Wallet”? I think both are relevant with the former a bit harder to measure. But an objective to win a bigger Share of Heart will automatically give you a bigger Share of Wallet. Not so the other way around. 
4. Is likeliness or willingness to recommend – as in NPS – really an indicator of true loyalty, or merely an indicator of satisfaction? I think that NPS gives a good indication. But is it enough?
5. Will a deeper understanding of what makes each individual customer tick, enable your business to design better experiences, which in turn might improve loyalty? The answer here should be a resounding yes! So the right question might be: how do we capture customer preferences (etc) in a structured way that allows us to design customized experiences across all touch points
In summary, loyalty is obviously important. But don’t make it all about the data. Find ways to use data to enhance the relationship with your customers.
About the Author: Michael Leander

Michael Leander is an award winning international speaker, trainer, consultant and board member. He speaks about topics related to marketing automation, email marketing, social media marketing, digital marketing, direct marketing, CRM and loyalty marketing.A consistently highly rated keynote speaker, marketing workshop trainer and panelist, he has shared his knowledge in more than 40 countries.Practicing what he preaches, Michael Leander also shares his knowledge and ideas on his blog and in all of the most popular social channels. Michael Leander hails from Denmark 

Posted on May 14, 2016

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