Technology has evolved beyond comprehension over the years and so consumer behavior is changing. Our interaction means the consumer is ever more demanding and no more so than in the Services industry. It’s getting harder to retain a customer, grab their attention, and keep them loyal to your brand.
By Christopher Kronenthal
When we look at loyalty from a business perspective, we know that acquiring a new customer can be anywhere from 5 - 25 times more costly than retaining an existing one. In addition, increasing customer retention rates by as little as 5% can increase company profits from 25% - 95%. That’s not including the fact that members of loyalty programs tend to spend on average between 12% - 18% more annually than non-program members; and in some industries, loyalty schemes can make up as much as 20% of a company’s profits.
A new way to start engaging consumers is by changing the emphasis from just tactics to supporting technology. However, the majority of IT infrastructure that manages loyalty programs has been around for decades and these aged platforms are unlikely to be able to support the customer-centric, highly personalized loyalty schemes that today’s consumers demand.
In retail, there has been a clear shift from traditional services to more customer-focused ‘experiential’ models, which explains why consumer loyalty has moved to the forefront of strategic business roadmaps. However, market feedback has indicated that the majority of ‘catch-all’ schemes do not meet the expectations that come with the current digital age.
This is caused by several factors; customer data is fragmented due to different parts of the business providing data which are unable to ‘talk’ to each other. The wealth of data is largely inaccessible to merchants and can’t be used to develop a loyalty strategy across their entire business. In addition, customer experience is splintered as a result of the use of multiple channels and applications that are often run by different teams - not to mention different companies - with differing priorities. These factors have created an ‘imperfect data storm’ which arguably makes it even harder — if not impossible, for loyalty to deliver consistent positive interactions.
Current loyalty platforms still rely heavily on triggers, which adds a layer of friction for the consumer and can result in poor redemption rates. A customer’s desire to engage rapidly disappears when they are asked repeatedly to prove who they are, or need to remember a membership card number every time they interact with a business.
To start attracting today’s customers, loyalty models need to be re-engineered to include payment-linked ID engines, which can help deliver the convenient and personalized experience that consumers want and importantly, expect. Various token options also exist, so merchants have the choice to provide the right solution for every conceivable payment scenario. For example, transactional tokens can be created for APIs, with APIs also being an option to update expired card data, and bulk token files can now be created for over a million accounts.
Analytical tokens also have the benefit of added transactional security, so when it comes to processing card data, you can allow for a hierarchical method of access and usage, meaning that sensitive payment information is only accessible by certain members of staff.
Areas of specific focus:
- Personalized benefits: In this day and age, loyalty has to deliver real value that resonates with the customer’s habits and lifestyle. People are increasingly willing to share their data in order to get genuinely personalized experiences, so companies need to start using the ‘exchange’ ethos to their advantage. This will allow them to deliver more relevant promotions, up-sell and cross-sell relevant products and services.
- Emotional connection: Customer emotion and retention are directly linked, which is why the top five reasons customers give for feeling a connection with a brand are associated with caring. The established benefits of emotionally-connected customers include reduced price sensitivity, visiting retailers more often, and spending almost 50% more than consumers without an emotional bond.
- ‘Follow-me’ rewards: Flexibility of payment can be a driving factor in delivering customer loyalty. Consumers want to be able to earn, transport, and redeem rewards across different outlets and access loyalty through their mobile devices. If a company can offer this, they are more likely to deeply resonate with consumers, particularly millennials.
- Omni-channel experience: Consumers want speed and ease when accessing their loyalty scheme. A quarter of Americans (26%) abandon a loyalty program if it isn’t supported by a smartphone app.
Retail organizations need to harness and utilize the latest technology to connect all customer-facing functions supported by an agnostic and powerful engine to deliver next-generation, real-time connected commerce and loyalty.
From a technical and marketing perspective, payment infrastructure is fast becoming a technology issue and the natural doorway to develop an enriched loyalty program. Payment platforms that are omni-channel and formed of global transaction networks enable businesses to capture and record transactional data rich in insight including what, when, how, and where consumers buy.
It is not only a point solution, but one which can turn simple transactions into powerful and profitable relationships. With the right technological architecture, loyalty can be undertaken as part of on-going business operations which can be used by organizations to deliver truly seamless customer-centric and profitable loyalty programs. To find out more on tools to deliver richer loyalty experiences, read the full whitepaper here.
Christopher Kronenthal is President and CTO of FreedomPay.