We iterate toward solutions. A new technology surfaces and often we need time to appreciate its uses and to discover why we need it. Other times, we discover a problem first and spend many days sorting out off the shelf solutions that might work only to discover nothing does and we need a crafted solution. It’s been like this is the customer loyalty space, a problem seeking a solution.
For a long time, customer loyalty has been an elusive goal with numerous intermediate points that never quite jelled. Even before there was technology there were loyalty programs. The simplest programs gave script to purchasers (today they’re points) so that over time loyalty could be rewarded with something of value. A classic example is the frequent flyer program in which airlines try to build repeat business through awards for future free travel. Many other loyalty programs base themselves on the same transactional format.
But that has been the state of the art; transactional give-and-get points systems that generate the appearance of customer loyalty but it was only an appearance. Research shows that when you take away the points and the loyalty disappears. So, we’ve spent a lot of time and resources automating the points based loyalty program paradigm until it became a business in its own right. New systems make it possible to manipulate points and customers in various ways and to extract information from the mounds of customer data churned up in typical activity.
However, all of this automation has been at variance with customer loyalty research. If your dream is getting customers to come to you because they like or trust your brand you know the importance of building an emotional connection with them, of engaging them in ways that make them loyal to the brand regardless of incentives. This kind of loyalty inspires customers to do and say nice things about the brand when they don’t have to.
For instance, a customer might demonstrate loyalty when helping another customer in a community or by providing feedback about products, policies, promotions, and services. Conventional loyalty programs fall down here because they often don’t track these truly loyal behaviors and so they don’t reward them. That’s too bad.
On the other hand, many customers seek nothing more than transactional loyalty programs and who could blame them? Transactional loyalty has enabled airlines to cut service to the bone without worry over losing customers to competitors with better policies. They all have the same sad service, more or less, and customers have to be contented with their miles.
But now with the advent of chat bots, machine learning, notifications, and messaging we may have another chance to get loyalty right. Even in situations where customers are fine with transactional encounters, bots and algorithms can improve the experience and perhaps even engage customers so that they can be involved in meaningful transactions served for all sides. Capturing customer data during a transaction and using it in conjunction with other data, either historic or from a representative group and then analyzing it has given vendors many more levers for dealing appropriately with customers in an effort to promote their loyalty.
Perhaps the greatest contribution today comes from notifications. Its one thing to be able to analyze customer behavior and suggest actions but having the ability to notify a customer in real time and in a contextually relevant way is gold. A vendor that can be contextually relevant is a step ahead of the one that asks a perfunctory question—do you want fries?
Moreover, a notification that’s contextually relevant is not seen as a nuisance but as adding value. These and many other subtle changes are placing us on the cusp of a new vendor-customer relationship and making it possible to imagine much better engagement in the not too distant future. It’s a good time for CRM and its users.
I’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.
Artificial Intelligence and Machine Learning (AI and ML) have taken the industry by storm with some saying they will usher in a new age of better business processes and customer orientation while others fret that automation will kill jobs. Both might be true.
There will definitely be jobs that no longer make sense for humans to do thanks to automation. Generally they’re entry level and not much fun but this begs the question of what, then, becomes an entry-level job. I took a briefing last week with, Conversica, a company that uses AI to do general-purpose triage for early stage sales leads. I am not affiliated with Conversica and I am simply reporting, but the technology seems pretty cool.
Conversica is essentially a bot that responds to things like email with appropriate information and then follows up. When a customer indicates a need to interact with a human, the bot makes the transfer. The bot is tireless and can work 24/7 so there’s a lot to like. This is a good example of automation replacing a human but I am told the bot simply makes it possible to redeploy the human to another job that requires real human thinking. I am sure it can.
Often when I see something like this it’s a new technology applied to an old problem and truth be told, that’s generally how new technology gets disseminated. For example, it has taken a long time for social media to establish a niche different from being a cheaper email platform. Some people haven’t made the leap in understanding but generally we’re there. So I fully understand employing modern AI technology to support the sales effort; sales is one of the first stops for new technologies.
But I’d like to divert your attention for a moment to some business processes that are nearly neglected where AI and ML could make real contributions. They would likely not replace anyone because a job isn’t being done in many cases. Customer loyalty is an area that could use some help, even the help of bots. Loyalty has always been a passive thing in which customers are expected to do something that demonstrates loyalty in the moment, rather than an active thing that businesses pursue.
We expect customers to do something loyal, usually making another purchase, for which we then give out rewards. That’s okay but it misses the point. Rewards are by their nature backward looking and loyalty ought to be something of the present and future. Say I advocate on behalf of a favorite product that may drive future business for the company. Often that’s not part of a business’ idea of loyalty and so it goes unrewarded even though it is a good loyalty indicator. Too bad.
Now imagine if you tuned some of your AI muscles toward loyalty. What if you had a bot that caught customers doing good things for which you rewarded that behavior? The reward, not associated with a purchase, might inspire more loyal conduct and all this could be done without human intervention. So this little exercise just 1) invented a job for a bot, 2) replaced no humans, but it did 3) improve business performance.
My point is that there are lots of incremental improvements like this example waiting to be discovered as we contemplate using AI. Many of AI’s early deployments will be like this, not very sexy but useful. That’s what happens on the far side of the hype cycle, after everyone’s tried applying the hot new technology to the oldest of problems. It’s maybe even after a lot of people have become mildly disenchanted with the failed promises that the new category couldn’t deliver.
I’ve seen this hype cycle movie before and I am wondering if we might be able to speed up the process. It’s really nothing more than imagining new processes rather than being happy pursuing a well-worn path.
I recently read a user story about how Harlequin—the publisher of romance novels—keeps its customers loyal. I don’t usually give a plug to a company like this but for what it’s worth, Stellar Loyalty provides technology to make loyalty happen. What’s interesting to me is how many of the ideas in my current book (“You Can’t Buy Customer Loyalty…” (I know another plug)) get put to good use by this publisher. The things that I think work really well include emphasizing a consciousness of customer loyalty, keeping things simple, and focusing on personalizing relationships and engagement.
Consciousness is relatively easy, but someone high in the org chart has to be willing to say, “This is important.” Other things might be important to this publisher too, like finding good writers and editors, but that’s in a separate realm. In the customer realm being conscious of working to maintain relationships is about as important as it gets because it becomes the animating principle for everything else.
I had always assumed a consciousness of maintaining customer loyalty and that works for me because it’s already my primary focus, but for lots of people in organizations that’s not true. People have jobs with concrete deliverables and expectations and unfortunately there aren’t typically metrics for individual customer loyalty promotion. It’s something the organization has to do together and as individuals so starting with consciousness is really a pretty smart idea because it leaves less to chance.
Simplicity is another big idea that comes from other research. Customers—you and I—have a lot on our plates and don’t always want or need a vendor’s extravagant display of affection to make us know we’re loved. What we crave is time and that boils down to simple processes and systems that we can get through on the march through the daily bucket list. In Harlequin’s case simplicity means having a mobile app that enables customers to scan receipts to notify the loyalty program of a purchase so that rewards points can be automatically tallied. Giving points for this activity is important to the publisher because it gives them insight into who is buying what and where and if you’re selling books, that’s pretty important. This also provides the data that enables personalization at a meaningful level.
More importantly though, Harlequin places equal emphasis on the ways customers reach out to them. You can’t ask for a better sign of customer loyalty than when a customer engages online such as by writing reviews or engaging on the company’s Facebook page or by answering a survey. This is the engagement that any company would want because more than a business’s outreach to customers (which can be ignored) this identifies things that customers reach out for.
Finally, Harlequin analyzes all of the customer data that it collects which helps it to both identify customer moments of truth and how well it is performing in them. That’s how you build constant improvement into a loyalty program—knowing what customers care about and then ensuring that’s where your people and automation focus.
Consider some of the metrics that the publisher shared in the use story,
- Percent of customers that engage with the loyalty program monthly and the direction of the trend.
- Percent of customers who redeem rewards and percent who have redeemed multiple times.
- Percent of members providing feedback and percentage that’s positive (much more useful than a Net Promoter Score).
- Time in the loyalty program and propensity to repurchase.
This isn’t hard to do and almost any company could benefit from a program like this with a few well-chosen metrics like these. My studies show that companies are increasingly moving in this direction and away from simply awarding points based on purchase transactions. The simple reason for the movement is that it takes much more than points to keep customers in the fold and more than simple transactions to diagnose vendor health.
That’s why loyalty programs are taking on greater prominence but not just any loyalty programs. Modern loyalty is based on customer engagement and understanding moments of truth so that vendors can be there when customers need them. If you’re wondering about your loyalty program, this is an approach to get you thinking different.
This is part of a series of 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.
Lots of CRM vendors talk about personalization but their idea of how to do it leaves a lot to be desired. They do personalization very late using a just in time approach to accessing customer data to support a sales or service encounter in the moment. This certainly is important and it achieves the goal of personalizing the encounter by producing a catalogue of data including the customer’s history, demographics, and other relevant information. With it a customer-facing employee or automated process can make intelligent decisions in the moment and offer, among other things, next best actions or offers. So there’s a lot to like with this form of personalization.
But why wait until you’re in the moment of truth to personalize? This kind of personalization implies, or should imply, another form that’s further upstream from the moment. In my last two books I’ve written a lot about moments of truth. Briefly, they should be predictable and every business ought to know what they are. Typically, customers experience moments of truth, times when they want or need something from a vendor that the vendor should be able to provide.
Moments of truth are driven by reasonable expectations that are based on marketing, brand promises, or the nature of a product or service. For example, there is an expectation of ease of use for most electronics today. That’s a vague idea but its based on the vendor’s responsibility to research customer attitudes and habits, to start with, and to design solutions to the expectations that arise from them.
When a vendor takes on understanding moments of truth and succeeds the results can be powerful. One of my favorite examples is Starbuck’s loyalty program mediated by its mobile app. Starbucks started by trying to figure out how it could enhance its customers’ store experience and discovered that at busy times, customers had to wait in two lines that could be rather long—one line for ordering and another for pickup. Eliminating the wait time became one of the drivers for the mobile app that lets people order from their phones even while en route to the store. Upon arrival it is now a simple matter of picking up the order.
With its app, Starbucks gave customers the ability to customize or personalize their visit, the onus is on the customer and there’s little need to crunch massive amounts of data.
Proactive personalization doesn’t require a mobile app though many businesses have made great use of the smartphone as a platform. Another great example of personalization is Hilton Hotels and its HHonors app. With it, customers can reserve a room, see a map of the property and select a room, order services, and even turn the phone into a room key. Similar to Starbucks, Hilton puts control of many aspects of the experience in the palm of a customer’s hands.
As we’ve seen personalization can mean many things and it’s not always about data or certainly not just data—it implies relationships. For this reason community can have a big impact on how a vendor approaches customers. In most of my research it is hard to come across any situation where a vendor maintained tight control of the information customers could access. In most cases personalization involved giving up that control in favor of giving customers the ability to control their destinies. It involves an amount of trust but I can’t think of a situation where trusting customers wasn’t a good idea.
A case in point is SOL Republic.