Getting loyalty right
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.