The Blog

  • July 18, 2016
  • Four attributes of customer loyalty

    This is the first of four posts on modern approaches to customer loyalty aimed at improving it through customer engagement. A fuller discussion is available in my new book, You Can’t Buy Customer Loyalty, But You Can Earn It.

     

    YouCantBuyCustomerLoyalty_BOOKCOVER_smallAs I see it there are four basic capabilities or attributes to building better customer loyalty that I learned about in an article from two McKinsey researchers David C. Edelman and Marc Singer in a 2015 Article in Harvard Business Review, Competing on Customer Journeys. Edelman and Singer say (and I agree) that they are,

    1. Automation
    2. Proactive personalization
    3. Contextual interaction, and
    4. Journey Mapping

    What strikes me immediately is that only two of these attributes are purely or largely technological (1 and 4) while the others are decidedly organized as human mediated processes . This strongly suggests that we can’t simply throw technology at the problem to make it go away. Moreover, the human mediated parts require a good deal of high-level thought to pull off. But this is getting too far ahead. The first item is automation and it deserves full examination.

    Automation

    Most thought leaders on customer loyalty will acknowledge the importance of automation but few get us to the point of understanding that even here, each business’ automation will be vastly different from any other’s. Why? Because circumstances such as products, business models, employees, and many other attributes form unique offers that have to be handled as one of a kind ideas.

    The purpose of automation has always been to reduce labor input to derive greater throughput from business processes, maximizing the utility of the resources we invest. On the employer side, this is usually called productivity but automation can have the same impact on the customer side. Simply because a customer isn’t on the payroll doesn’t negate the importance of respecting a customer’s time and effort; thus, automation is a great way to take some friction out of a business process on behalf of a customer—and it works.

    Often (but far from always) automation comes down to mobile apps so they’re a good place to start. In my book I look at two very different mobile apps, the Starbucks mobile app and the Hilton Honors (HHonors) app and, as I mentioned, they couldn’t be more different.

    Starbucks

    The Starbucks mobile app encompasses the company’s revamped loyalty program. It was so successful that it left executives with the happy problem of having to explain a huge revenue bump in an earnings call last year. With the app in place, year-over-year revenues for the company jumped by 17.8%, an unheard of amount. The new automation carved a good deal of friction out of the customer experience for its users by letting them order and pay with their mobile devices rather than waiting in lines. They showed their appreciation with more business.

    Of course there was a strong dose of the other three attributes in these results. For instance, the app incorporated the customer journey to a high degree affording the ability to proactively personalize the Starbucks experience and we’ll explore these ideas more in a future post. For now, it’s exciting to see such powerful results from the app’s deployment.

    Hilton

    About the only thing that Starbucks and Hilton apps have in common is that they run on iOS and Android. But more importantly, each does a great job of anticipating customer needs, too. For Hilton this means that the app helps people reserve rooms and also lets them check in without standing in line at the front desk. Not only that but with the app customers can select a room on the property, order room service or a morning paper, and the app even enables the phone to function as a room key.

    What’s powerful about both apps, and what’s often overlooked, is that they are additive. For example, turning a smartphone into a room key as Hilton has done is not as complex painting Cubism, but few businesses would go out of their way to build just that functionality. The Hilton app’s hidden benefit is that it acts as a platform on which the company can build all manner of solutions for customer outreach. When I wrote the book more than a million people per month were using the Hilton app to check in and that number is likely growing. The same is true for the Starbucks app, which is also functioning as a platform.

    Customer engagement

    We’ll revisit the idea of customer engagement again and again, and it’s worth pointing out that the best automation is designed to make it easy for customers to reach out to vendors. Customer initiated engagement is more valuable than almost anything for developing relationships that lead to customer bonding and loyalty. The secret to developing apps that support customer loyalty is to focus on being present in customers’ moments of truth—the times when they need you most. For Starbucks this meant ordering and payment, remembering favorites, and identifying new locations among other things. For Hilton, it meant reducing friction in the hotel stay.

    If you’re looking for commonality between the apps that’s it—being in customer moments of truth. And if you look at your own business you’ll find unique moments that you can take advantage of in the same way.

    Published: 1 year ago


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