Loyalty. It’s what every business wants, right?
At least, we think so. That’s why we are introducing a new Loyalty Series, here on PostFunnel.
15 years ago, most retailers would have given a percentage of their profits for the value associated with the big loyalty programs of the time. Starved of data, however, they relied on expensive focus groups and instinct to drive their customer strategy.
We now operate in a world filled with data but are we any closer to engendering loyalty from our customers and why do we want it?
The demand for a loyalty program is often centered around the desire for repeat purchase and reduced churn coupled with an improved level of behavioral insight.
Retention VS Loyalty
Retention and churn are indicators of loyalty, not measures of it and are certainly not the same thing. They are useful when looking at whether your CRM is running but they will tell you little about the degree of customer loyalty you are driving and will provide you with virtually nothing in terms of actionable insight.
Retention is simply a commercial measure. To some extent retention can be bought with gimmicks and offers. But loyalty less so. Retention is linear and one dimensional, simply indicating whether the visitors to your site are placing orders with you and continue to do so over time. But depending on the industry, the length of time between these orders could be several months so there is little insight into organic loyalty in this measure and more to be learned around margin erosion through unnecessary incentives.
So, What is Loyalty?
Loyalty is multi-faceted in its measurement and is more concerned with whether the visitors to your site are showing you greater consideration as a result of the experience they have with you.
It’s not something that customers switch on when they want to buy and then switch back off again once they receive their order. It remains with them in every interaction with your brand, in every thought about their needs, in every conversation with their family and friends. Who are actually your potential customers.
In order to successfully foster loyalty from your base, you have to really “get them” and moreover, demonstrate to them that you do.
For some businesses even the most regular and valuable customers will be very likely to shop with competitors. Spending with your competitor’s brand usually means more spend generally in the market rather than loyalty to them. So loyalty has to do with more than just orders and spend, and is certainly more than just a card and some points.
Loyalty as a Mindset
So, if loyalty is no longer about cards and points, what is it about and does it exist?
Loyalty is a mindset. The mindset of your customers and the mindset of your business coming together.
Does it exist? Yes! In every visit. The visitors on your site give you subtle indicators throughout their visit about what they need, why they are there, how you can best serve them and, over time, what would cause them to become a loyal customer. These indicators manifest as data.
Data alone is useless and quite frankly, overwhelming. However, when used as the central focus for your planning and execution it starts to really change things for your performance and for the customer experience, in turn driving loyalty.
How to Approach Loyalty
Approach nurturing loyalty broadly and with an open mind. Resist the temptation to rely on long-held business myths and instead incrementally test and learn what works. Be prepared for things not to work but take an approach that allows you to adapt when they don’t.
Put things in place that allow your customers to see that you are testing and learning and changing for the better, not everything has to be perfect before you share it with them.
Building loyalty isn’t about second-guessing customers and trying to coerce them into staying loyal to you. It’s about opening up to your customers as a brand, showing who you are, what you stand for, and attracting your people.
Having a good understanding of how your customers respond to you is a good starting point but there should be a mixture of tracking those naturally and asking directly. This might be in relation to the actions you take on product, promotion, campaign or customer service. But, you should also strive to track those responses by customer group. A high response rate to a campaign is positive as long as it engaged and motivated the group of customers it was aimed at.
Building Loyalty in Your Brand
Loyalty will show itself in spend and orders but also in returns and refunds. You will see it in referrals and recommendations, but you’ll also see it in cross category purchase and delivery choices.
Pay attention to engagement and its relationship to conversion and also channel preferences. And, respect any changes in those. What’s key is that, as a business, you understand the behaviors of customers who show you loyalty and why they behave in that way.
When you achieve that you will then know how to attract similar customers, what to protect and invest in most in your business, and the role all your departments play in building loyalty.
Final Words
Ultimately, as a brand, you earn the right to be part of your customers lives because you make their lives better in some way. You drive loyalty to your brand by understanding how you make their life better and replicating that in every area of your business.
Sure, whether they like your stuff, they are happy with the price and can access what you sell – are all important – but you have to be comfortable with your customers also finding that in other brands, maybe your competitors.
What other companies will find hard to mimic is how you develop solutions centered on what’s important to your customers and the feeling that gives your customers when you get it right.
And, your customers are always right. So, try to be right too.
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This was Part 1 of PostFunnel’s new Loyalty Series. Follow us so you won’t miss part 2.