Linking Loyalty to the Customer
- By Hanspeter Kipfer
- Sep. 01 2009 00:00
The fact that 25 percent of purchases are now made online is a testament to the extraordinary growth of internet shopping, adding another dimension to the key challenges facing businesses today: winning and retaining customers, while reducing costs. More than ever before, customers are expecting to take an active role in their relationship with a brand. Launching blanket offers to entice customers is no longer enough. Instead, they expect to be rewarded accordingly for their long-term commitment and presented with personalized offers each and every time they engage with a business.
This article looks at the concept of ‘Loyalty 2.0’: consumers are savvier today than ever before and businesses need to respond.
Launching successful Loyalty programs has traditionally been complex. Although they have been able to use and act on data obtained from customer transactions, the reality is that it has been a largely impossible task of analyzing multiple reports in a vain attempt to decipher customer trends and apply promotions appropriately.
For this reason Loyalty initiatives were often set up and then left to run — untouched and in isolation from the business. The Loyalty program database was often mined for tactical marketing campaigns — but it took too long to alter the rules of the program to embed short-term promotions. This has been principally due to the limited options for organizations that are considering launching a Loyalty program, because they have to build a bespoke system and manage it internally, then outsource programs to third-party specialist Loyalty agencies, participate in another company’s Loyalty program and purchase a specialist solution and shoehorn it into the existing IT infrastructure. Until recently, companies have been limited in their options — lose control of the Loyalty program or invest in additional IT resources.
Handing Loyalty Back to Marketing and Sales
Technology is now available that allows information relating to customers to be held in disparate systems, across all departments, to be analyzed and then acted upon — all within one application environment. Armed with this information, companies can then build highly tailored loyalty offers for customer segments or specific individuals. It is also possible to do this analysis in real-time, so businesses are able to present the most appropriate offers and rewards while the consumer is engaged online — or, in fact, across all channels of interaction. One US online insurance broker saw sales go up by an average of $20 per customer with this approach.
But the real value for the business is the ability to easily identify the key loyalty drivers, both online and offline, against a whole host of variables. For example, a major French supermarket recently faced low sales for one of its premium, specialist cheeses, which itself had a niche customer base. The company considered discontinuing the product, however, after analyzing purchasing trends for the niche customer base, it quickly realized that they were actually the company’s most valued, loyal customers. Having this level of visibility, the company quickly realized the need to continue stocking the cheese at a loss — or face losing some of its most devout customers. In this case, the supermarket achieved the right balance between generosity and loss. Without this insight, a simple decision such as this could have had long-term negative implications for the business.
Social media has caused a radical shift in consumers’ expectations. They expect communications with businesses to be as quick, interactive and personalized as when they log on to Facebook to interact with friends. The ‘Loyalty 2.0’ approach offers the potential to respond to this shift. Failure to embrace it will severely hamper loyalty efforts as customers tune in to more interesting, engaging and rewarding businesses.