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Customer Loyalty Experience: You Can’t Afford to Ignore It

 

“All we have left is customer experience.” - A representative from a consumer company at the 2013 Social Media Shake-up conference, Atlanta, GA.

 

This is a fitting statement on the rapid commoditization in the retail industry. Commoditization and consumerization have made the seemingly simple, yet incredibly difficult-to-master, game of customer experience a necessity to outpace competition. For consumers, the cost of switching to a competitor has never been lower. It is clear that customer loyalty is eroding—be it the elimination of multi-year contracts for wireless phone or cable providers, the minimal effort required to switch from one retail bank to another, or the ability to buy any product, anytime, anywhere at the lowest price.

Customers do not give a second thought about switching to a competitor if they can find better pricing or perceive that they can receive better service elsewhere. The competitive landscape is also changing rapidly with new, innovative, and fast moving competitors constantly entering the market. In addition, with the rise of social media and mobile devices, retailers have little control over customer conversations or their physical context. Retailers can choose to engage in social conversations to their benefit, but the conversation will go on, with or without them. Retailers can optimize store layouts and displays but they cannot stop mobile comparison shopping. The only differentiator that can work as a solution is an exceptional customer experience (CX).

However, while many retailers have started focusing on customer experience, they often miss out on customer loyalty, a critical component of a CX strategy. Rather than deliver an omni-channel customer experience, retailers adopt a siloed approach and loyalty is treated as a set of incentives offered as a separate program, only employed after the first sale. In fact, long-term loyalty should be the outcome and vision of a dynamic CX strategy that draws the customer experience into a synergistic whole, cutting through siloed functional and channel behavior.  Retailers should design loyalty for specific customer segments and sub-segments and must embed it into the customer experience. The benefits of this approach include:

  • Enhancing the overall customer experience
  • Increasing purchase size
  • Accelerating purchase cycles
  • Ensuring completed purchases

These benefits when combined with social media, amplify the loyalty effect and value.

Gaining Deep Insights into Customer Segments
Designing and executing a compelling Customer Loyalty Experience (CLX) strategy requires a deep understanding of customer segments and sub-segments.  Using an ‘insight-to-outcome’ design approach will help define the data and focus the analytical methods to generate actionable insights and offer a superior customer loyalty experience. 

With long term loyalty as a defined outcome, retailers need to tune data collection and analytics to uncover critical loyalty drivers as customers move through different stages in the customer experience lifecycle across multiple touch-points. It is possible to even uncover new segments based on loyalty characteristics. Following are a few of the loyalty drivers one should look for:

  • Intrinsic and extrinsic drivers of customer behavior
  • Loyalty triggers
  • Attachment criteria
  • The right rewards for each segment

Customer Loyalty Experience: You Can’t Afford to Ignore ItThe adjacent figure illustrates how new insights from social and unstructured data, when used in combination with conventional data sources, help create a complete customer profile. 

Using Social Insight to Identify Action and Loyalty Drivers
For most retailers, social media data and analysis is limited to the marketing department using this data to measure the share of voice and spot keyword trends and issues. As a result, other departments such as sales, support, and product management, miss the opportunity to capture insights that would enable them to have a greater impact on the CLX. Using social and unstructured data can help identify customer behavior such as loyalty and reward drivers, the channels used by various segments, and the games customer segments prefer to play. All these are critical insights that will help define the CLX programs.

For example, in a recent CX engagement with a large retailer, we learnt that a significant portion of their target segment comprised savvy-shopper moms with children under the age of thirteen. This segment tends to seek loyalty programs that offer discounts for future purchases and uses feature phones rather than costlier smart phones.  Without this knowledge, gleaned from social insights, it might have seemed logical to develop a mobile application that encourages social sharing with other moms. That strategy would have failed with this important target segment. Instead, we designed programs around text messages with coupons and discounts, which generated a favorable response.

Customer Loyalty Experience: Aiming for the Right Fit
After obtaining a deep understanding of the customer segments, and the key loyalty and engagement drivers, retailers tend to believe that they are ready to identify programs that will deliver a superior CX, translating into long-term loyalty. While retailers might find it tempting to brainstorm a host of programs that seem like sure winners, they might not deliver the value and loyalty, nor align with the drivers and behaviors that customers exhibit. It is also important to avoid copying the competition with the belief that their CLX programs are backed by extensive research.  For instance, most companies build mobile apps not because their customers want it but because the competition already has one.

Customer Loyalty Experience: You Can’t Afford to Ignore ItRetailers need to begin by defining the desired CLX outcomes and associated KPIs. This will ensure that the CLX programs are aligned with their goals and progress can be measured through defined KPIs. Next, retailers need to identify the loyalty drivers and behaviors uncovered from the customer insight processes that will deliver the desired outcomes for each step in the CX lifecycle—from the first touch point through purchase and re-purchase. This includes identifying the appropriate channels—in-store, mobile, web—and contexts to avoid forcing customers into a channel they do not engage with.
The end result of the ‘incentive to outcome’ process (refer the adjacent figure) is a clearly defined  CX map that includes a complete view of customer segments, desired channels, loyalty drivers, target outcomes and KPIs, and programs to deliver an exceptional customer experience. 

 
Calculating the Costs, Priorities, and Return on Customer Experience
When retailers have a deep understanding of customer segments and their loyalty drivers, they might believe that the CLX programs they have identified are good enough to be implemented right away. However, many of the CLX programs that retailers identify might be great for top-line revenue, but implementing and supporting them could be cost-prohibitive. It might require a paradigm shift in how the staff engages with customers, requiring a large training effort, reorganization, or hiring new staff. Not all changes to the CX translate into a proportional level of value to customers or the business. A sustainable CLX needs to deliver real and lasting value to customers and must be profitable.

Customer Loyalty Experience: You Can’t Afford to Ignore ItA Return on Customer Experience (RoCx) analysis will help retailers identify the programs that create a win-win situation for customers and business alike, and will help prioritize the programs they should pursue first. To conduct a RoCx analysis retailers need to:

  • Identify and weigh the scoring criteria. These criteria may include cost, competitive differentiation, time or complexity to implement and innovation among others .
  • Score each of the CLX programs against the value it will bring to the business and customers (refer the adjacent figure).

The result will be a clearly defined set of programs with a greater promise of success and Return on Investment (ROI).


Conclusion
To survive and thrive in today’s hyper-competitive retail market, retailers must provide an exceptional customer experience that will ensure customers keep coming back regardless of competitive influences. Designing a Customer Loyalty Experience will not only help retailers identify programs that deliver long term value for customers and generate a positive ROI for their business, it will also give them customer insights that would have otherwise gone unnoticed.

TCS Retail Forum Journal
Read other articlesTCS-Retail-Forum-Journal-Issue-3

- Unified View of Customer: It’s All About Customer Experience
- Curate Digital Customer Engagement with Extreme Personalization
- How Retailers Can Create the Right Social Circle
- Customer Loyalty Experience: You Can't Afford to Ignore It
- Realizing Unified View for Better Customer Engagement: Understanding What to Build


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