The Blog

  • November 11, 2016
  • Engagement and customer loyalty

    YouCantBuyCustomerLoyalty_BOOKCOVER_smallI’ve been writing about customer loyalty a lot and not just to sell my book, though you can buy it any time you want. Seriously though, markets everywhere are cooling. Where they were once ripe with new categories and products, today everybody seems to have the new stuff and growth is falling back to the baseline of organic growth. That’s why loyalty is so important today and it’s also why there are so many questions about how to promote and improve it.

    Loyalty is an up and coming part of the software business. On the established side, there are companies like IBM and SAS offering solutions and there is a healthy community of startups with names like Yotpo, SailPlay Loyalty, and Stellar Loyalty. I’m still learning the market so I don’t know every vendor out there but the thing that got me hooked on studying this area is the great chasm between conventional loyalty ideas, and the software that supports it, and what really works.

    We’re all familiar with loyalty and rewards programs that provide points, miles, and other goodies when we make a purchase. Let me expose my bias here. That’s not how to promote loyalty. The data is conclusive: customers who shop for discounts and rewards are a fickle breed, able to change vendors on a moment’s notice.

    Creating a transaction in which product or value goes one way and a reward follows is simply discounting. There’s nothing wrong with judicious discounting but when you make it a habit you enter a situation where you routinely give up margin and fail to make your profitability metric. The challenge for most vendors, especially retailers, has always been what to do to keep customers coming in if not for rewards. It’s an important question, especially today.

    The answer is engagement, which is hard to do until you conceptualize a more full-bodied relationship model. I’ve listened to a lot of vendors tell me all about speed and accuracy, funky websites, and who knows what else in their efforts to define engagement. But that’s engagement from the vendor’s perspective and too often nobody studies the customer side.

    In a true relationship there’s some amount of emotional bonding between the customer and the vendor. As a practical matter, your customers don’t want to have a beer with you, that’s a different kind of relationship. But they could get a warm feeling when thinking about doing business with you or more likely solving a problem using your solution. Certainly there are brands in your own life that you prefer. You might not care what gas you buy for your car, but you may have a favorite butcher shop or other business you preferentially seek out. I’d say the latter is a business you are engaged with.

    It’s relatively easy to become engaged with a local vendor and much harder to similarly bond with a national brand, but it can be done. In my recent research I stumbled upon companies that have perfected bonding and while I’m obliged to not mention their names right now, they have developed unique ways to attract and develop emotional bonds with their customers.

    For instance, they usually find ways to sponsor community activity between themselves and their customers. Some build community through a rather conventional software solution while others develop real life user interactions. In both cases customers bond with each other and with the brand around using the vendors’ products.

    Another idea that works well is philanthropy. You might be familiar with the philanthropy model of Salesforce or Google in which the company donates one percent of its technology, employee time (on a voluntary basis), and resources. This can take many forms. For instance one company I know sponsors a fundraising arm to help groups sell products and make profits for worthy causes, much like the Girl Scout cookie model. However you do it, you can develop emotional bonds that drive engagement and it works.

    An October article by Adrianne Pasquarelli in Advertising Age raises the idea of cohesive branding as a key element in the success of market heavyweights like Google, Apple, Amazon, and others. Cohesive branding is simply an integrated set of overt and subtle attributes that throughout the customer experience blanket the products, messaging, and customer touchpoints. According to the article, “…what makes brands like Apple valuable is their cohesiveness as a connected business system. Apple communicates with its customers through its hardware, software, and retail stores to deliver one consistent narrative or ecosystem.”

    I’d go further and say that part of cohesion is engagement and by extension community. If messaging is implicit in products, services, and if messaging can lead to cohesion, then certainly things like community and one’s stance on philanthropy can too. The path to improving your loyalty numbers does not, thankfully, run through greater rewards or steeper discounts. It’s about leveraging engagement and for the first time in history we have the tools to do it in modern CRM.

     

    Published: 1 year ago


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