Why Building Customer Loyalty Starts from the Top

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Loyalty is no longer a symptom of convenience, but a conscious consumer choice.

With this, expectations around customer loyalty schemes have also changed. Customers want more than points and discounts. They’re increasingly choosing to spend more with businesses they have an emotional connection to.

However, customer loyalty still has a significant impact on retailers and brands’ bottom lines — increasing customer retention rates by 5 percent and increasing profits by 25 to 95 percent, according to research by Frederick Reichheld of Bain & Company.

Because loyalty today is based on emotional connection and trust, businesses need to actively make loyalty an organization-wide priority rather than an initiative or program. This is what’s called loyalty-driven commerce. It’s an approach and mindset that will make customer loyalty a top priority for the entire C-suite and a way to future-proof an organization’s commerce business.

Why Customer Loyalty Is a C-Level Priority

Does your company want to become more customer-centric? If so, you’re going to have to shift your company thinking. In many businesses, the CMO is the classic ‘owner’ of customer loyalty. But actually, every member of the C-suite should care about, and commit to, a loyalty-driven approach.

After all, customer loyalty drives company finances which is the core focus of the CFO. Supply chain issues are one of the fastest ways to drive customers to your competitors – and supply chain is the COO’s realm.

Staff recruitment and training, notably for customer facing roles such as store staff and customer service, has a huge effect on the customer experience and loyalty, which is another part of the COO’s remit.

The data-driven insights from loyalty schemes don’t just boost customer lifetime value, they inform and futureproof business strategy. This means the CIO has a critical interest in loyalty. Any loyalty scheme worth its salt will also utilize great tech and connect channels.

In fact, arguably, without customer loyalty, the CEO isn’t meeting their objectives.

Loyalty schemes gather omnichannel data and insight that’s almost impossible to get any other way. This data and insight can be used to inform every strategic decision the company makes – from what to make, to where to sell it, to when and how to market it. Every part of the business will benefit from these insights; therefore, every part of the business should work to improve customer loyalty.

It’s a virtuous circle – the more customers shop with you, the more data you get, and the more you can improve so more customers shop with you.

The Three Levels of Customer Loyalty

I discussed up above why customer loyalty should be c-level priority, but it is important to understand what “loyalty” actually means because it can be different for different companies and the definition has for sure evolved over time.

Typically, we talk about three levels of loyalty – traditional, membership, and natural loyalty. Each approach has been proven to work and deliver significant ROI. Your business needs to decide what is right for it, based on its situation and appetite for change.

Let’s dig a little deeper at each level –

Traditional Loyalty: A traditional loyalty scheme is a cost-effective way for companies to understand customer behavior, collect data and personalize the shopping experience. It gives you real data about how customers are shopping with you, which is particularly valuable now that many shoppers are moving between channels in their shopping journeys.

Owning your own customer data is also crucial now that third-party cookie data is scarce. Google has said it will stop supporting third-party cookies from 2023, which means brands need new data sources.

A major benefit of traditional loyalty schemes delivered via digital is that they keep customers engaged with brand apps. Statista says app retention rates hover at about 38 percent. Anything brands can do to boost app engagement will help the company overall.

Membership Loyalty: While traditional loyalty programs are great, customers are becoming more discerning all the time, and an enhanced membership scheme could help bring customers closer to your brand.

There are many different customer actions that benefit your brand beyond buying – for example, leaving a review, sharing a selfie, following your brand on social media, exploring more of your store, attending an event and lots more.

Membership-based schemes can reward all of this. Typically, rewards translate into perks – enhanced, exclusive or VIP brand experiences – rather than simple discounts. Membership-based schemes don’t just bring customers closer to your brand, they keep them interested, too.

These rewards are often free for the brand to deliver, such as first access to the sale or invites to special focus groups, but hold value for the customer. This means that customers are encouraged to spend more time with the brand at every turn, both in earning and redeeming rewards, building a more authentic and informed relationship that will ultimately translate into better advocacy and sales.

Membership-based schemes don’t just bring customers closer to your brand, they keep them interested, too. But to stay interesting in the eyes of your customers you need to make sure you keep up to date with customer needs so that you offer relevant rewards and services at all times. In fact, the most common reasons for customers to leave loyalty programs are outdated rewards and wrongly used member data in communication.

Natural Loyalty: Natural loyalty is possibly the easiest thing for a brand to commit to – who doesn’t want to be a great brand? Of course, it’s also the hardest thing to execute, as it’s an all-encompassing, never-ending journey.

However, it does lead to the best results. It’s not uncommon for brands to lower their operating costs whilst improving their overall customer experience.

Ultimately, natural loyalty is about meeting and exceeding customer expectations. Again, this has become harder since the pandemic hit, as customer behavior has changed so rapidly. But it is also more important than ever. In fact, some even argue that “loyalty is the new brand” meaning that all the efforts you put into the customer promise, offering and delivery to build that customer loyalty is the foundation for a solid and strong brand.

Natural loyalty may be the most desirable, but it’s easier to obtain if you have traditional or membership-based schemes that gather data. This can generate insights to help you understand what customers really want so that you can stay relevant in communication and offerings, which will help you build natural loyalty.

Building a Customer Loyalty Business Mindset

It’s clear there are many ways to boost customer loyalty, and also to structure your loyalty or membership scheme. One size no longer fits all. It’s not about doing what others are doing. Your business needs to decide what is right for it – its audience, business, budget, and most importantly – its customers’ expectations.

It all comes down to that organization-wide customer experience first mindset. Once you’ve placed customer loyalty at the forefront, you will be able to prioritize activities that remove friction in the buying journey as well as create opportunities for dialogues with the customer. In both cases, the end goal is to build solid relationships.

In today’s modern commerce world of fierce competition and consumer volatility, customer loyalty can’t be treated as a project or initiative; it must be part of your business DNA and a key driver of all business decisions.

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