Loyalty is a business strategy, not just marketing

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By: Wise Marketer Staff |

Posted on March 7, 2013

Loyalty is a business strategy, not just marketing

The continued evolution of loyalty marketing was the central theme at the inaugural Customer Loyalty Marketing Summit hosted by IQPC earlier this month in the US, with some fifty seasoned marketing professionals sharing their insights, concerns and ideas, according to this report from The Wise Marketer's contributing editor, Mike Capizzi of Marketing Strategists LLC.

The emerging consensus at the summit was that loyalty marketing is alive and well; that the transition from customer tracking to customer experience management was well under way and that new ideas enabled by new technologies offered unlimited potential for even greater success.

The entire group embraced the concept that loyalty practices have had a profound effect on evolving the complete discipline of marketing. Initially, the ability to track the purchase behaviour of an individual shifted marketing's focus from product or service to customer. This quickly evolved to a revised set of marketing objectives where retention goals were elevated versus the traditional focus on acquisition. The retention mind set was especially prominent among the highest value segment of customers, now visible for the first time.

The evolution continued to alter marketing as segmentation practices reinforced the behavioural elements associated with an individual rather the demographic and attitudinal variables associated with a target audience. Today, we find ourselves at a convergence point in the loyalty marketing spectrum. Both audience and discussion leaders at this year's Loyalty Summit felt that customer experience management (CEM) was the next logical step in the evolutionary path.

Anthony Perez, vice president of business strategy for the Orlando Magic of the National Basketball Association (NBA), reinforced these themes with a discussion centred on CEM in the professional sports industry. While the "product" - characterized by Perez as championship calibre basketball - varies from team to team, and year by year, the "experience" should remain consistent. This principle has guided the Magic to deploy a customer centric approach using the constant elements of their facility, their business partners, and various enabling technologies. The result has been a customer experience strategy that keeps fans, especially high value season ticket holders, coming back for more. Perez went on to describe how the insights derived from the programme database by the Magic's marketing team have enabled the franchise to continue growing in spite of the club's challenges on the basketball court. All professional sports franchises around the world, in fact just about all entertainment businesses, could benefit from following the Magic's formula.

Wing Stop Restaurant's director of customer loyalty, Nicolette Tellinghuisen, led a discussion about how social, local and mobile (so-called 'SoLoMo') elements serve as the foundation for a loyalty marketing programme in the competitive fast casual restaurant industry. Tellinghuisen offered practical tips on the integration of local marketing efforts with mobile apps that could be centrally planned, controlled and monitored but deployed on an individual restaurant basis. She further discussed the complete integration of e-mail, SMS, in-store signage, local paid search, out-of-home advertising and a host of socially connected grass roots events that boosted business for local Wing Stop franchisees while advancing the total relationship between the customer and the brand.

Kerry Bodine, principal analyst for Forrester, also reinforced these themes with data drawn from Forrester's Customer Experience Index (CEI), a proprietary measure of how customers perceive their interactions with a company of brand. Over multiple years and a diverse set of industries Forrester has consistently found that a strong correlation exists between a brand's CEI score and the loyalty, repeat business, lack of churn, and likelihood to recommend metrics of an individual customer.

Bodine also presented evidence that superior and/or improving CEI scores translated to hundreds of millions in incremental revenue for the affected brand. In a few categories the effect reached the billion dollar level. She also demonstrated that CEI leaders over the past five years (2007-12) benefitted from a 22.5% increase in their stock price versus a 46.3% decrease among CEI laggards. For the same period the S&P 500 index was flat (-1.3%).

Bodine's research was subsequently reinforced by Kyle Herman of Nestle Purina when he described that all customer satisfaction and experience measures plus metrics of employee capabilities directly translated into impact on revenue and market share for the pet care brands he managed.

Zale Corporation's director of sales, promotion and loyalty, Mark Anderson, led delegates through an open discussion of loyalty programme design principles. Anderson stressed the significance of post-design programme audits, up-front and ongoing financial analysis, and the role of data-driven insights in guiding continuous programme refreshment. Finch Brands' president, Bill Gullan, aided in the discussion by pointing out practical uses of Voice of the Customer (VoC) research in formulating a loyalty strategy.

Piper Rosenshein, director of retention marketing for Barnes & Noble, presented a practical tutorial on best practices in e-mail marketing for best customers. The sophistication and complexity of B&N's digital communications efforts, coupled with their loyalty programme and multi-channel CEM initiatives, clearly mark them as an industry leader, although Rosenshein observed that it took a long time to get to that point, and the evolving effort increases in complexity each day. But Rosenshein concluded that the potential to produce even stronger results over time is worth the effort.

The overall theme of the summit revolved around the customer experience and how loyalty has evolved to become one of the most essential strategic elements for the whole enterprise. David Rompf, director of loyalty and engagement for The Economist, summed it up best when he said "Loyalty is a business strategy, not a marketing strategy."

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