Will a focus on CX spell the end of loyalty?

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By: Wise Marketer Staff |

Posted on September 10, 2015

These are challenging times for marketers in general. The markets have changed, the customer has changed, and even the art of marketing has transformed in the last few years from being an intuitive, touch-and-feel discipline to one driven by hard numbers, rigorous analysis and not but not the least software, according to Ramasubramani Nag, principal strategy and planning consultant for Indian loyalty management firm Direxions.

One of the areas that has come under pressure is loyalty marketing. The marketing minds of today seem to be regretfully coming to the conclusion that loyalty marketing is dead. And, balancing this claim is another and more strident claim which states often and loudly that customer experience is the new competitive advantage. So the question that we are seeking to understand is this: Has Customer Experience Management replaced Loyalty Management as a strategic tool to building relationships with the customer?

Changing entities, changing landscape
The reason for the re-evaluation of the need for loyalty marketing has been driven by a series of changes. And these changes are:

  1. Changing market place
    In the old days, the market place was a geographic location. The sellers and buyers met in this fixed location and exchanged services for money. And the customers often met each other too in this place and exchanged information. In the recent years, the market place has added a virtual avatar in addition to the physical one. And the customer seems to be straddling both these market places with phenomenal ease. The second area - that of information exchange - has now been predominantly replaced by social media which has made information exchange so frictionless that the information asymmetry which once favoured the sellers has now swung decidedly in favour of the buyers.
  2. Changing customer
    The customer has changed dramatically. He is no longer content with a visit to the physical store. His information sources are not just friends and family any more. Leading life through multiple windows on multiple screens, he has far more access to information. He is time starved and is more demanding today than ever before. He is also driven by the need to share his experiences- both bad and good about any product.
  3. Changing marketing
    Marketing has changed so dramatically in the last five years that some of the old practitioners of the art are finding it difficult to cope. Even though the practitioners of data driven marketing had brought in some rigour more than a decade back, the change has accelerated in the last few years. Consider this sample: in 2009 there were fewer than 100 marketing automation vendors in the market. In the year 2014, this number had increased to more than 2000. Every aspect of marketing from prospecting, to led qualification to campaign management and evaluation have now been automated.

So Why has CEM become the buzzword now? The combination of the changes described above has resulted in complex and ever changing relationships between the customer and the brand now. In the earlier days, life was simple: the customer saw your carefully orchestrated campaign in press or TV, walked into a showroom and bought the products after checking with a few friends and relatives. Today the channels of interaction as well as the number of touch points have multiplied so much that the customer brand relationship represents a true web. And ensuring the satisfaction of the customer at each of these touch points has become critical to ensure that the customer eventually buys the brand- even more so because today's customer is perceived to be fickler than his early day counterparts.

The diagram above shows the difference between customer's experience of the brand then and now. As you can see the number of touch points has become decidedly more and to add to the complexity some of the connections have now become two way. What is not shown here is the typical journey from awareness to purchase and the journeys are multiple and vary from customer to customer.

And so managing each of these "moments of truth" has become more critical today than any stand-alone loyalty management initiative. Does that mean that loyalty management has lost its relevance?

Customer Experience and Loyalty Management
To understand whether loyalty management is going to survive or not, we need to go back to the philosophy which loyalty management strives to achieve. As seasoned practitioners of the discipline know well, loyalty management is not defined by the rewards or frequent flyer miles. Those are outward manifestations of a philosophy which was captured by an early loyalty practitioner- it is to say thank you to your customer.

It is recognizing that your customer is important to you and to show your appreciation of him. It is to show him how much you care for him. And these are principles which are guiding the new drive behind managing customer experiences. And so in terms of their stated goals both loyalty management and customer experience management seek to achieve the same thing- build and nurture long lasting relationships with customers. When you look at things from that perspective, it is obvious that loyalty management is not losing its relevance.

Most certainly the field of customer experience management has become critical today. The need to manage every interaction is critical to ensure that we move the customer up the loyalty curve. And every one of those interactions is an opportunity to improve or tarnish your relationship with the customer. And given the fact that there is a plethora of these touch points, customer experience has to be on the top of the list for every marketing manager.

"But it is not one versus another. I do not think that Customer experience management can by itself build the customer's loyalty. Neither can loyalty management standing alone help a marketer manage the customer's experience at every moment of interaction," concluded Nag. "But if the goal of a brand is to build lasting relationships with its customers on a one-to-one basis I believe that both these disciplines will need to work in tandem. Only that can result in a customer who is happy with his experience and continues his relationship with the brand over a long period of time."

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