Building loyalty with a real value exchange
Loyalty is defined in the dictionary as 'a strong feeling of support or allegiance', so for brands to build customer loyalty they need to develop both an emotional and a rational engagement with customers, according to Richard Dixon, head of customer marketing for Black Sun Plc.
While it is essential that marketers consider the customer's feelings and needs, it is also imperative that brands also make a profit while they're building that loyalty, otherwise there is very little point in the investment.
But how can you achieve both? The answer lies in creating a two-way exchange of value. The first stage in creating a value exchange is to identify and quantify the changes in behaviours you require from your customers. These could include:
- More data so you have a better understanding of their needs and preferences;
- Increased frequency of visit for those customers who do not come as often as you would expect;
- Increased tenure or renewal rates for those brands that have subscription bases;
- Increased share of wallet;
- Active recommendations and promotion of the brand through social media.
There will of course be different targets for different brands and for different groups of customers based on their current profiles. However having understood what it is that will drive greater value to the brand, it is then possible to define how you can induce these behaviours.
The second stage is to identify how you can induce these desired changes in behaviours, with content that customers will value. Typically these will fall into the following categories:
- Attraction Do you understand who your more valuable customers are and is your proposition and marketing activity aligned to recruit these customers? In understanding what your most valuable customers look like, you will be better equipped to create marketing propositions that will attract more of them.
- Recognition In what ways can you recognise each of your customers at your key touchpoints, so that they feel a valued customer? Recognition may be for repeat custom, it may be to recognise the high value customers, or to recognise their recent transactions. This is a fundamental tenet of building customer relationships - and is often the one that breaks down first. How often do you get a mailer from a brand you are already a customer of? or find you can't return an online purchase to a retail store? Delivering recognition, and doing so seamlessly across the different touchpoints, is at the heart of a valued relationship.
- Affiliation How do you create a sense of brand affiliation? This is a critical component of the value exchange. It involves telling the brand story, enriching the customer experience, and delivering inside information to your customers so that they have a deeper level of understanding and engagement with the brand. This is probably the forgotten attribute of brands' direct marketing and loyalty marketing activity with its customers - and yet we see time and again that it is this type of content that can drive the highest levels of engagement.
- Aspiration How can we create a desire in customers to engage more with the brand, to spend more and become a brand ambassador? This typically requires brands to think about delivering more relevant content and communications that are tailored to each customer's activity. For example if you are a handset manufacturer you can nurture a desire in your current customers to buy the next model or generation of product by involving them in the development process, or by clearly articulating the benefits they will derive, or relating it to the features and functions they already use and so on. This activity will not only keep your brand front of mind, but will stimulate re-purchase.
- Rewards This is the final category, but it tends to be the one that most marketers focus on first. Rewards can take many forms, but they should have one thing in common: they should ONLY reward changes in behaviour; they should NOT reward customers for doing what they have always done. The only exception to this rule is where base retention is a critical challenge, and even then should drive to behaviours beyond the norm. Rewards can take many forms. They can be overt (i.e. communicated in advance), or covert (e.g. a thank you for a particular activity). They can be a hard reward (e.g. spend £x and get y) or a soft reward (e.g. an invitation to an event). They can be delivered by the brand, or sourced from a partner brand. Whatever shape they take, the common purpose remains the same: to inspire more profitable customer behaviours.
Once the value exchange is defined, it then needs carrying through the different communications channels. This may take time to implement, however you need to ensure that you have a single customer database in place, that the purpose of each channel is defined, and that you have a single, integrated communications programme in place. It is also best to implement through a series of rolling changes rather than waiting for a 'big bang' delivery. you will learn more that way, and will be more easily able to adjust the activity as you learn what works.
Last but not least, there needs to be a complete process for measuring and evaluating performance, so that you can isolate the effect of each activity and determine its contribution to driving value from the relationship.
Remember that building customer loyalty is a marathon, not a sprint. Yes, it needs to deliver results, but an over-focus on the short term will inevitably drive you toward rewards at the expense of the other attributes, which in turn risks focusing the entire relationship back on a purely rational basis without emotional engagement.