The top sixty lessons in loyalty marketing (The Wise Marketer)
The top sixty lessons in loyalty marketing
By Peter Clark (author, The Loyalty Guide)
Published by The Wise Marketer in February 2012.
We didn't expect to hear about so much fresh thinking, or to find so many innovations, or to discover so strong a shift away from traditional marketing practices...
When The Wise Marketer's team began to research and write 'The Loyalty Guide 7', they found that the loyalty market has never been so active, so passionate, so fast changing, and so heavily relied-upon by companies of all sizes to drive customer retention and acquisition, incremental sales and profitability, competitive differentiation, engagement and advocacy.
After completing work on The Loyalty Guide 7, the team reviewed their findings and drew up their 'Top sixty new lessons in loyalty marketing' from the report's 1,420 pages of up-to-date facts, figures, forecasts, trends and loyalty case studies from all around the world.
"Looking at how customer loyalty has developed over the past two years, and seeing the massive influence of developing technologies like social media and smart phones, the loyalty industry has never had such strong prospects," said Peter Clark, co-author and research director for The Wise Marketer's publisher, Wise Research. "Because this report is truly global and truly comprehensive, we've been able to present loyalty professionals with the first ever complete picture of the world of loyalty, from the smallest niche markets right up to the biggest economies worldwide."
Loyalty lessons that the report's authors feel should be shared with the wider community of loyalty professionals include guidance on a vast range of topics, including loyalty programmes and models, pricing and discounting, social media marketing, metrics and analysis, business operations, reporting and accountability, branding, customer retention and acquisition, email and mobile marketing strategies, digital and other channels, customer experience programmes, new technologies, consumer attitudes and perceptions, employee loyalty and efficiency, marketing relevance and customer feedback, among dozens of other key areas on which marketers need to focus.
"The sixty top lessons we've drawn from The Loyalty Guide 7 (available for order and download online) are just a small fragment of the thousands of points of insight, practical guidance, and useful reference that we've gathered over the past year," added co-author and managing director, Robin Clark.
The loyalty landscape is far more complex today than it has ever been, and it's no longer sufficient for marketers to take a "suck it and see" approach: expert guidance is needed now, more than ever. Some of the expert insights drawn in brief from the pages of The Loyalty Guide 7 report include:
- Loyalty scheme members respond better than non-members
Marketers can easily use their loyalty programmes to encourage and empower their customers to become more vocal advocates of their brands. For example, compared to emails sent to existing customers who aren't members of a brand's loyalty programme, messages sent to loyalty programme members have a 40% higher open rate, more than 20% higher click-through rates, almost 30% higher transaction rates, and more than 10% higher sales revenue generated per message.
- Retail and brand choices are heavily influenced by loyalty rewards
Consumer research into loyalty rewards and perks has found that they get very enthusiastic about the idea of redeeming loyalty benefits with other synergistic brands that weave throughout their lifestyles. In fact, most are likely to sign up with a loyalty programme that offers discounts and benefits at other favourite brands. Just like flashing your exclusive credit card to get extra benefits at a retailer, with an airline, or even at a restaurant or bar, customers want little treats just because they are a member of a loyalty programme. This finding supports the idea that consumers love to engage with multiple retailers and brands so they can redeem rewards for lots of different things.
- Loyalty data has saved retailers from the recession
Brand loyalty has been put to the test during the recession as hard economic times encouraged a consumer culture of promiscuous shopping. What saved many retailers was the realisation that existing customers should always come first, no matter what level of attention is being given to prospects. Neglecting those who are loyal to you can lead to the loss of customers before new ones have even been recruited. So businesses that have invested in loyalty schemes over the past few years, and that have integrated their marketing activities, have been much better placed to survive the recession, as long as they maintain their focus on existing customers. If they continue to focus on customer retention, their investment in loyalty schemes and database marketing will also help when by helping them target new campaigns more effectively.
- Mood-based advertising drives deeper engagement
There's a revolution in outdoor advertising coming, starting with adverts tailored to consumers' moods. Even the near future - within a few years - should see a new range of 3D outdoor adverts that talk to mobile phones, adapt messages to certain situations, access social network profiles and loyalty programme membership data, and even combine holograms, mood lighting and smells. These unusually full brand experiences, which have been dubbed 'Gladvertising', should offer marketers a whole new way of advertising.
- Brands can gain a competitive edge with loyalty metrics
Customers' brand experiences have reached new heights as consumers search for real innovation in the products and services they buy. At a time when brands are struggling to differentiate themselves from their competition and to find ways to profitably engage their customers, brands that respond with a truly consumer-centric view of their category - by delighting the customer based on predictive loyalty metrics - stand to gain the most and establish themselves as tomorrow's brand leaders.
- Get it right, and social media drives loyalty and engagement
There is a huge benefit to brands that engage with consumers in the social media space, but the challenge is to identify the type of social experience that consumers actually want. Indeed, having a deeper understanding of consumers' needs is the key to creating compelling and successful social media campaigns and social loyalty programmes. Social media is firmly ingrained in consumers' everyday lives, and these platforms are already out-pacing telephones, email and face-to-face meetings when people want to connect with friends and brands.
- Get it wrong, and social media drives brand defection
One in every two consumers don't want to be bothered by brand messages while they are using their social networks because 'digital waste' is polluting the online world as brands fail to understand what consumers actually want. Many businesses are wasting both time and money trying to reach consumers online without realising that they don't really like big brands invading their social networks. The race to bring brands into the world of social networking has been mainly driven by the channel's ability to address customers quickly and cheaply, but if those efforts aren't carefully targeted and properly personalised, they will be completely wasted on half of their recipients - and worse, they could drive existing and potential customers away completely.
- Social media has become a legitimate customer service channel
Social media channels such as Twitter and Facebook are having a profound impact on the level of service customers expect, and it's becoming more difficult for businesses to compete without having their customer service teams tuned in to social media. It's always been the case that the best brand marketing is highly responsive, especially to customer service requests, but it's also important that brands don't just see customer service interactions as opportunities to sell something else. Of course social media isn't a one-size-fits-all solution because customers expect brands to understand their individual wants and needs, so whatever the situation - whether it's a complaint via Twitter, an enthusiast on YouTube, or an old-fashioned phone call - brands have to be ready to listen, understand and respond accordingly.
- Using social media to deepen customer loyalty
Despite a lot of industry buzz about it, the use of social media as a marketing tool is still in the early experimental stage. Marketers across all sectors are already involved in social media but, after five or six years in the space, and despite growing social media marketing budgets, many are still testing the waters to see what works, what doesn't work, and how it all integrates with traditional marketing efforts. All of this is, of course, being driven by widespread reports of consumers' rapid adoption of social media as a lifestyle-wide communication platform.
- Social media in the mobile channel can produce true advocates
Consumers engaging with each other and sharing brand opinions through social media tend to generate favourable reactions, not only because they feel they have some ownership of the whole process, but also because they are more likely to relate to their friends' and family's opinions about the brand, because these feel 'more real' than direct marketing messages. Add in the fact that most smart phones now have strong social interactivity built in, and marketers have a powerful tool at their disposal, as long as they know something about their target audience. This could be through a downloadable app that the brand provides users for free, perhaps tied into platforms such as Facebook, Twitter, or Linked-in, which connects the brand directly with the consumer. The app needs to add value for the consumer, including useful information and updates that will make life easier, and that in turn will help cement their relationship with the brand.
- Marketers must embrace Twitter, not fear it
Online product research contributes to a far larger percentage of total retail sales than the 8% that's usually attributed to e-commerce, and the evolving nature of digital interaction and customer service is changing the fundamental relationship between companies and consumers. Tomorrow's winners will be those brands that use digital communication to influence and enable both online and offline purchases. But, despite the rise of social media, the role of the email channel is still secure because it's still extremely effective as long as messages are well targeted and personally relevant to the consumers who receive them. Brands must therefore use both email and social media in different ways, regarding email not just as a communication method but as a kind of 'social media glue'. In other words, it's not simply a choice between the two.
- Location-based apps can build trust and gather data
When it comes to location-based marketing techniques via smart phone apps, the issue of consumer privacy has always been a thorny one. But several studies have found that, the more value the brand delivers via its mobile app, the more information a consumer is likely to be willing to share. Looking at it from the consumer's point of view, a mobile app that seems to exist only for marketing purposes is unlikely to gain any real trust, but an app that provides value, useful information, benefits or perks is likely to be used repeatedly.
- Augmented Reality (AR) identifies hidden customer insights
The idea of Augmented Reality is that it's a system that superimposes digital data and images over the real world. While it might sound like science fiction, it's actually a very valuable marketing tool. But, as with most tools, there's no point using it if it doesn't fit with the job in hand. Smart AR ideas include in-store guides and recommender systems in fashion boutique fitting rooms, or even making a 3D model or simulator of a product available to website visitors. Useful information can be obtained through the tactile nature of the augmentation - a by-product of the user's interaction with the AR system - revealing customer trends that would otherwise be impossible to gather. The intelligence gathered by this kind of system might, for example, relate to a particular aspect of a product: something that is not always forthcoming during a standard product demonstration, but that is of vital importance to the sales and marketing process.
- The best way to earn customer loyalty isn't always clear-cut
Building a relationship with customers leads to improved behavioural loyalty and thus to increased bottom-line profits. That's obvious, isn't it? Well, no. In fact it doesn't always work like that. It has been argued that attempting to partner with all customers, regardless of their characteristics, might not always be the best way forward. There are factors that alter the importance of the 'relationship - behaviour - profits' equation quite significantly. Age is just one of these factors. In fact, studies carried out in the UK in the 1990s found that customers under 45 were most loyal and those over 65 were least loyal, while other studies found no clear relationship between age and loyalty. It used to be thought that older customers were more loyal to brands than younger customers, but even that notion is changing constantly.
- It's essential to equip your employees with current customer data
Legacy systems and outdated architectures always limit your employees' ability to see a consolidated view of the customer that can be easily navigated. Ideally, all customer-facing employees should have access to customer summary data, but also have the option to 'drill down' into successive levels of detail when necessary. Even during the recession, top performing companies achieved a 91% customer retention rate and increased their net client value by 6% while the majority of other companies saw a decline in customer spending - and all the top performers showed double their industry's average efficiency rating when searching for customer data, and they also all had significantly higher customer satisfaction ratings.
- Adding value is a sure path to customer retention
Too many brands are overlooking simultaneous opportunities to increase ancillary revenues and customer satisfaction. More than one third of marketers cited either 'costs' or 'resource availability' as the main barrier to selling add-ons, despite the fact that value-adding enhancements can usually be designed and deployed by third party providers at comparatively low costs. It's surprising that nearly one in three marketers have never even considered offering membership benefit packages to their loyal customers. There's a great deal of untapped potential for innovative and exciting loyalty programmes that consistently engage customers with added value.
- Unlock the value of your customer database
Although many companies are now becoming more aware of the importance of customer data quality, some of their efforts are focused in the wrong areas, so some data that could have provided valuable customer insight is inevitably being lost or discarded while other less useful data is often retained. Ironically, the worse the the state a company's database is in, the richer the exploration of that data can potentially be. It's only when you eliminate duplications and start to analyse the data that you can really see the true value of a customer database.
- Predictive analytics to drive change
The analysis of customer data is what makes your targeting either successful or dismal. Not only are many marketers wasting money on redundant or poorly targeted offers but their customers are taking note, and neither of these situations can be good for the long-term health of a brand. By eliminating data wastage, marketers can make much more efficient use of their budgets and boost their return on marketing investment. Turning customer data into a manageable and accessible asset is not necessarily an easy road but, for those who do so, it pays dividends and strengthens the brand's ability to interact with and build upon its customer base.
- Mobile marketing isn't just about text messages
Short-term mobile marketing tactics are narrowing marketers' long-term strategies for customer loyalty, while smart phones are rapidly changing the way people interact with brands. For example, in retail, a mobile phone can be used by a customer to get directions to a retailer's nearest store, to get in-store product reviews, and to conduct self-service mobile commerce, all of which provides the customer with an enhanced service. The ability to target customers via the mobile channel - often location-based and in real-time - allows marketers to establish a much more intimate relationship with their customers.
- Retailers could easily make more of the mobile channel
Too few retailers have a solid mobile channel in place, despite the fact that 41% of retailers plan to launch their own transactional mobile site or mobile app. And consumers are driving significant demand for a new, convenient shopping channel, just as they did in the early days of online retailing. But this time the cultural shift that retailers need to make is much smaller and, in many cases, simply requires the optimisation of an existing website rather than a whole new technological development.
- Customer data is the key to powerful email marketing
More than half (53%) of consumers feel that almost all the commercial email they get is irrelevant, and the negative effect of it can be very damaging to the brand, in terms of reputation, increasing unsubscribes and even lost customers. While this is not such a big issue when targeting older, more affluent consumers, it is when mistargeted emails are sent to younger, cash-tight consumers that marketers risk losing any long-term positive relationship with them. Of course, these same young people who bad marketers are alienating will be the affluent, older consumers of tomorrow, and the impact of today's bad practices will probably be very far-reaching. Indeed, for email to work as an effective channel, drilling down into customer data and using those insights to more accurately target and personalise messages must quickly become the norm for marketers everywhere. When a customers gets an email from a brand to which they have entrusted their contact details and preferences, they expect something more personal than mass marketing - and they certainly don't expect irrelevant or redundant messages, or offers for something they've already bought.
- Web 2.0 drives community brand engagement
When it comes to consumer-facing Web 2.0 applications, community initiatives (such as social media websites and product user groups) are evolving quickly, including an increased business focus on broader community participation from both internal and external audiences. In particular, online communities directed at specific interests and groups of people tend to allow for more targeted marketing activities. The development of best practices for companies to follow is vital, and learning how to encourage participation without forcing it, how to manage communities without clamping down, and discerning which technologies will work best in each case, are all essential to the success of social media deployments.
- Make sure the web channel doesn't fail at a critical moment
When an internet-based application such as an e-commerce web site fails, 82% of shoppers blame either the business that owns the website or the web hosting company. In today's economic climate, in which customer retention is vital to business survival, it is therefore more important than ever for organisations to minimise 'web stress' by introducing more robust technologies, planning digital campaigns to include staggered demand (so the website isn't overloaded with visitors all at one time), and to optimise consumers' website experiences, whether it's simply finding product information, or placing online orders.
- Consumers are less loyal & more rational
The global recession has fundamentally changed consumers' attitudes and spending behaviour, with an increased emphasis on service and quality being noted. This is a trend that marketers must pay attention to, particularly as consumers are now far less loyal to brands than they were before the recession began. The key to capturing consumers' loyalty in the post-recession era will be to focus on rewards, recognition and relevance. In the new economy, the way to create customer engagement and relevance will be to connect with consumers in ways that show them you understand who they are and what they care about.
- Shoppers are reluctant to discuss their purchase decisions
It's strange but true: most shoppers tend to avoid talking to brands about their products and even dodge the websites of the retailers they will eventually buy from until their decision to purchase has already been made. Word of mouth (WoM) is acknowledged by most marketers as being highly effective, but it doesn't yet work the same way with social networks. Apparently these online communities are more about friendship and conversation, and product and service reviews don't yet fit completely into the discourse.
- Good customer experiences are more profitable
Customer experience is playing a significant role in determining where consumers choose to shop and how much they are willing to spend. An exceptional customer experience creates more loyal customers and it also has the power to impact a company's top and bottom lines. In fact, by focusing on delivering exceptional customer experiences, businesses now have the opportunity to grow their customer bases, improve brand loyalty, and increase overall profits and revenues.
- Bad customer experiences travel fastest
One in four consumers say they are far more likely to spread the word about a bad experience than a good one, suggesting a strong inclination to engage in negative word-of-mouth (WoM). Marketers trying to find their best WoM advocates will have a better chance if they look within their loyalty programme first, because that database contains up to three times as many WoM advocates as a non-rewards customer database. Loyalty marketers have already built a powerful WoM platform (in the form of their rewards programme) but they must also remember that even the strongest of advocates can also switch sides depending on the treatment they get from the brand.
- Employees should enhance the customer experience
With economic conditions heightening consumer sensitivity around purchasing decisions, retailers that design differentiated experiences based on their products and services can drive growth, profitability and lasting consumer loyalty, while also maintaining a price premium over competitors. Customer loyalty is born from shopping experiences that create strong psychological connections, rather than from points or rewards programmes alone. Retailers should therefore focus on enhancing service through investing in knowledgeable staff and making the best possible use of enthusiastic, motivated, and empowered front-line employees.
- Shoppers want to 'channel hop' as they shop
Consumers want a better shopping experience including greater control over where, when and how they shop across a growing range of channels, which now include social media and smart phones. There is a definite need for retailers to provide shoppers with more personalised offers and information that reflect their product and communication preferences, as identified from their browsing and purchasing history and location - or presence - in online, mobile and physical stores. As a result, retailers need to harmonise the cross-channel shopping experience in this era of converged retailing. For example, they can begin by offering customers the option to manage their loyalty account preferences online or in-store, and give them the ability to receive digital coupons via their loyalty card account, mobile phone, or even paper coupons at in-store kiosks. One in two consumers feel this kind of service would be useful, and they would also like the option of receiving mobile coupons via their smart phones.
- What women want when they're shopping
While women are universally edging out the men in most shopping categories, not all female 'chief shoppers' are equally powerful, it seems. This is most significant for marketers who are trying to tap into the buying power of women, because it means that females are taking over the primary purchasing decisions for items previously handled by male shoppers. As marketers continue their shift toward using all the latest technologies, it's important to remember that, for example, Baby Boomer women are the most open to new opportunities, they have money to spend, and they have more time to spend it.
- Don't let email relevance and frequency be your downfall
More than half of consumers' e-mails would be opened and read if marketers could simply demonstrate that they knew the individual, and a large number of consumers would be more likely to subscribe to e-mails and be more tolerant of higher message frequencies if marketers demonstrated knowledge of their preferences. And mobile e-mail users were found to be much more sensitive to the frequency of messages received using a small screen. Most consumers will open and read messages that are personalised based on preference data, and these 'preference seekers' are much more engaged and interested in receiving tailored messages. This could be a very profitable segment, but marketers need to work hard to satisfy subscribers through more robust preference capture and relevance, along with frequency metering, testing, and behaviour analysis. One useful tip that helps marketers maintain their relevance is simply to provide a link back to a central 'subscriber preferences' centre on every page of the brand's website.
- Mobile and tablet devices offer most hope for online retailers
Shopping on the high street still beats online shopping for most consumers, despite the proliferation of online channels and weakened consumer spending in stores. It seems that retailers are missing an opportunity to use technology to enhance in-store experiences, and to integrate this with the online retail experience. Mobile devices such as smart phones and tablet computers are perhaps the most promising platforms for this because their popularity continues to soar among consumers. In fact, more than one in two smartphone users would value the ability to scan bar codes on products to get more information. However, there is still a distinct gap between shoppers' intentions and retailers' strategies. Shoppers don't just group stores according to the product they want to buy; they group them according to the experiences they expect to have. It's essential that retailers understand which competitors they are being compared with in order to keep up with rising service expectations. Ultimately, the key is having a shopper-centric perspective rather than merely having a product focus.
- Most shoppers defect after a bad service experience
Most of today's business leaders feel that the next major battleground is the 'customer experience', despite fewer than one in ten consumers feeling that companies are doing a good job. In fact, in a commoditised market, other key factors such as the customer experience (which includes good customer service) become the key differentiator. Morale and consumer confidence drop significantly in times of recession, so it's absolutely critical to inspire confidence and build long-term relationships with customers as early in the customer lifecycle as possible. While businesses are making tough decisions to survive the recession, it is also critical to maintain a longer-term view of building a strong and loyal customer base.
- Mobile wallets make consumers cautious
The mobile wallet, which has been brought into the limelight once again by Google, may not be poised to kill off the consumer's trusty leather wallet or purse. While only one quarter of consumers are interested in using their mobile phone instead of cash to pay for purchases, nearly half are much less keen on the idea. Even those already planning to use a mobile wallet have some concerns, with security and fraud (79%) and viruses and malware (66%) being the top two worries. It is true that there will always be consumer concerns about adopting any new technology, but they will need to see that their worries have been properly addressed before they wholeheartedly embrace mobile payments. Consumers already see NFC (near field communication) technology as inevitable, and they are expecting supermarkets, mobile phone companies and consumer electronics retailers to lead the charge in offering contactless payment facilities on a widespread basis.
- Travel incentives boost employee performance
An analysis of the use of travel awards as a motivational tool observed that one of the strongest benefits an incentive travel programme has is its influence on corporate culture. Both the incentive travel award and the recognition afforded by corporate leaders when employees participate in such as programme are key motivators. One key measurement of programme success therefore is its relationship to employee retention and performance. Among employees who have earned incentive trips, almost all (88%) exhibit greater than average performance levels.
- Customer satisfaction surveys are essential
With today's marketplace being increasingly driven by customer needs and opinions, there are a number of reasons behind marketers' increasing focus on customer satisfaction surveys. Studies have found that 70% of complaining customers will not defect to a competitor if their complaint is resolved to their satisfaction. But, while this may seem encouraging, other studies have found that an average of 27 complaints go unreported for every one that is heard by a company. In other words, an average of 960 out of 1,000 customer complaints go unheard until it's too late, and only 28 of the remaining 40 complaints will not result in a customer defection, even assuming a 100% success rate in resolving those complaints. In order solve this problem, it is therefore necessary to check customer satisfaction at least once before every interaction is concluded. In this way, 700 out of every 1,000 complaints can potentially be prevented from turning into defections, instead of only 28.
- Measure everything you can, even if it's difficult
In a fast-changing world of consumer technologies, social platforms and communication channels, marketers need to measure a more complex range of factors in order to demonstrate marketing effectiveness. But most companies are currently measuring only what is easy and not evaluating all the available metrics effectively. There are tangible benefits to be had by marketers who measure the more challenging metrics, such as the customer experience. Companies that do so tend to exhibit a stronger alignment between marketing strategy and the organisation's overall corporate strategy, as well as greater overall marketing effectiveness. The next step for marketers is to ensure that the right metrics are being measured and, more crucially, that they are being measured in the right way. Improving marketing effectiveness through a more robust approach to accountability will go some way toward aligning the activities of marketers with their organisation's goals.
- Email marketers fail to follow best practices
Marketers are still overlooking email marketing best practices, even though they are sending significantly more emails and spending more budget on this channel than they were even five years ago. Consequently, it is time for marketers to get back to basics. For example, some crucial basic areas seem to be dropping off marketers' radars, such as email triggers, deliverability and re-marketing. Once marketers get the basics right, they can then use all the available technologies and best practices to help email marketing evolve into an even better customer engagement channel with even greater response rates.
- Recession-led shoppers have redefined the rules
The recession has made it necessary for consumers to rethink and adjust their shopping patterns, which has resulted in a more strategic, informed - and even coldly calculating - approach to the 'shopping game' that has traditionally been driven by impulse, advertising responsiveness, and the fundamental attractiveness of brands. Consumers have embraced a persistent recessionary mindset, with 93% remaining cautious and saying they'll keep their spending at its current level even when the economy improves. Consumers' new rules are based on value, not brand image, as personal gratification and a desire to feel smart about what they're are putting in their shopping baskets are trumping brand satisfaction. This new level of price-consciousness, value-orientation and bargain-hunting is likely to remain a prominent feature of the retail landscape for many years to come.
- Different types of shopper emerge around the world
Global consumer packaged goods shoppers should not be defined by their country but instead by their shopping attitudes and behaviour, especially their attitudes toward price and their propensity to pre-plan their purchases. It's natural for marketers to try to customise their merchandising strategies to countries or geographies. There is an intuitive logic to doing that; but retail strategies should align with shopping styles, which are not necessarily dictated by geography. For example, so-called 'brand lovers' dominate China, India, Russia and Turkey, so marketers can take advantage of the opportunities that this provides as brands become more affordable in these growing economies. On the other hand, there is a need to continue to promote and meet the needs of the 'bargain hunters' that are now typically found in the US, Canada, UK and Australia, for whom 'smart shopping' has recently become something of a way of life. The bottom line is that retail strategies need to align with the local shoppers rather than geographical areas or countries.
- Email and social marketing are now a major priority
Most business plan to increase their marketing spending, with 60% increasing their email marketing budget and 55% increasing spending on social media marketing. While email marketing leads the pack in terms of increased of investment, marketers still need to overcome the twin challenges of data integration and resource constraints. Whether managing and optimising existing email marketing programmes, or enabling integration with social media and mobile, there is a big opportunity for full-service email marketing providers to help brands get the most out of their interactive marketing investments.
- Digital marketing is being held back by a lack of resources
While digital channels are a high priority for 85% of companies, 74% say they still don't know how to use these channels more effectively. It seems that marketers will continue to face significant challenges with two out of three saying they're under pressure to deliver better results with lower budgets. However, the greatest challenge appears to be a lack of availability of skilled people within the company that's limiting marketers' ability to deliver the goods, suggesting that the effects of cutbacks within marketing departments are still being felt. Despite the fact that there's evidence of a slight recovery in marketing budgets and spending, an ongoing squeeze on resources threatens the effective usage of digital channels.
- Customers recommend the higher-tech retailers
While most consumers have yet to use the whole range of new in-store and online retail technologies, 40% of those who have done so say they'd recommended a retailer as a direct result. While consumers want to be able to track deals and coupons from retailers, very few want to let retailers to track their digital activity or physical location within a retail store, even if doing so is clearly in the consumer's best interest. Clearly, privacy and freedom from harassment are still paramount in most consumers' minds.
- Mobile customers must be segmented by behaviour
Although technology and new gadgets are stealing the limelight lately, mobile marketing needs to focus more on customer strategy to achieve measurable success. The current exponential growth in the smart phone and the mobile market is a clear opportunity for marketers that can be addressed only by properly segmenting mobile customers by key behaviours and attitudes. A knee-jerk 'build an app' strategy or an over-simplistic data collection programme simply won't be enough. Companies need to know how and why customers use their mobile devices. Only then can those insights help produce campaigns that are truly relevant to each segment, and that are therefore relationship builders rather than 'alienators'.
- A great multichannel experience is a technical undertaking
Boardroom executives generally understand the importance of a multichannel customer experience, but most are failing to invest in the processes and frameworks needed to make it happen. The customer journey is becoming increasingly complex due to evolving technologies and a proliferation of digital devices, so it's getting more and more difficult for marketers to keep up, even with the help of a strong IT team. It is only the most mature of companies that have already overcome all the technical challenges involved in truly integrating the whole multichannel experience, and it is interesting that these companies are generally using a much wider range of data sources than other companies in order to understand the customer experience as a whole.
- Social media metrics aren't necessarily about sales
With a proliferation of tablet computers and the growth of brands using mobile and social media platforms, consumer behaviour toward retail brands in particular is changing rapidly. The effective use of social media is going to be vital to success, but there's no point having a Twitter feed that never gets updated, or a Facebook app that doesn't relate back to your brand or product range. Similarly there's no point in developing an incredible, interactive social media hub for your customers if the experience they have when they're in your stores is old-fashioned and formal. But a common problem is not being able to easily link social media activity to a return on investment (ROI). For this reason, it's important to establish goals for any social media campaign. When some analysts believe that social media channels aren't directly generating transactions or revenue, it may be that they're missing the point. Businesses should consider the role of social media throughout the overall consumer buying process, and the impact that social channels can have, ultimately affecting purchase decisions, even they aren't driven directly or measurably from a specific social channel.
- Affluent customers need a lifestyle-oriented approach
For brands targeting the affluent luxury consumer, the essence of 'lifestyle branding' - that is, being relevant to the lifestyle and needs of the target audience - is to align the brand's values with what the customer values most. In establishing and communicating values that align with wealthy consumers' own personal values, marketers have to earn those customers' trust and respect. In order to build a true connection with each customer, marketers need to adopt a '360-degree lifestyle' approach and try to better understand the many different values and priorities of their customers, then use that insight as a platform for building long-term connections between them and the brand.
- Green issues have created a new breed of brands
Six out of ten consumers say they prefer to deal with environmentally responsible companies, and there's a new breed of companies brands helping to support that ambition. These so-called 'helper brands' provide useful information to consumers, helping them to understand what green and eco claims really mean, and which ones are truly sustainable products. While consumers' preference for brands that are "in me, on me, and around me" is still prevalent, people also value brands that make going green easier by means of online tools, tips, and other forms of engagement.
- After three decades, airlines still have a lot to learn from loyalty
The intelligent use of passenger data can easily be used to build loyalty and boost revenue, but airlines still have much to learn from the vast arrays of valuable passenger data that their loyalty programmes hold. It is vital for airlines to take better control of their passenger data now and, if they don't take up the challenge of knowing their passengers better and using that data more effectively, other tech-savvy companies will be keen to take advantage. Airlines might even end up buying back their own dissected data in the future. It would be far better for them to develop systems now that not only boost customer service levels but that will also be the foundation of new revenue streams later on.
- Mobile operators are struggling for true customer loyalty
With less than one third of consumers participating in telecom operator's loyalty schemes, and consumers ranking loyalty schemes that offer occasional high value gifts as being the most appealing to them, there is a clear opportunity for mobile loyalty programmes to gain greater traction. Effective loyalty schemes should target the right customers - those being customers who are the most likely to defect (which tends to happen most to new subscribers within their first 2 years). The top three reasons that mobile network subscribers change providers are: wanting a new handset; believing they pay too much for calls; and providers not offering loyalty benefits. But it is strengthening customer relationships that will be the true key to customer retention for mobile network providers, because the mobile network industry has the lowest levels of relationship strength compared with the automotive, retail, financial and air travel industries.
- Broadband customers are among the most volatile defectors
On the fact of it, it might be unsurprising that more than half of broadband internet customers have switched providers at some point in the past few years, and that churn has become a significant problem within the broadband internet sector, where products and services have become increasingly commoditised. The key to understanding the problem, and to retaining more customers, lies in understanding that customers expect broadband service to be 100% reliable, with the connection speed being the second most important factor involved in their satisfaction. The fact that one in four broadband customers say the customer service they get from their provider doesn't match their expectations suggests that broadband customers are increasingly intolerant of faults and service interruptions, no matter how small, and no matter how quickly problems are solved.
- Causes are critical to loyalty, if they fit well
Cause marketer is a coming trend, and one that will certainly do no harm if built into every loyalty initiative. Whether the cause is green, pink or of some other variety, the trend toward cause marketing may represent the next major step in engaging customers and increasing customer loyalty. However, authenticity is essential if consumers are to take up the cause alongside the brand. If the cause is not authentic and a good fit with the brand and its own values, integrating it into the brand's marketing mix will usually fail.
- East versus West: sweeping changes in the loyalty market
The past few years have been unforgettable for the world as a whole, but for practitioners of customer loyalty marketing this period has been nothing less than dramatic. As the western hemisphere was coming to grips with a deep recession, loyalty marketing was going through its own baptism of fire. At the same time, markets in the eastern hemisphere saw the galloping growth of loyalty marketing. India, the second largest marketplace in the world (after China) saw a huge surge in activity as international giants in coalition loyalty programmes (such as Payback, for example) entered the market which had been buoyed by an increase in consumer demand for loyalty schemes and rewards. All these changes are helping the development of loyalty marketing as it spreads throughout new geographies and customer groups. However, there is still room for deeper strategic thinking about customer behaviour when it comes to making choices about loyalty. Ultimately, that could prove to be the 'holy grail' of loyalty marketing.
- Expect big reductions in loyalty points and liability
Big brands may be beginning to shy away from points-based loyalty programmes, thanks in part to the financial liability that they so easily create. Traditionally, the bigger the brand, the more customers it has. And the more customers it has, the more loyalty programme members it has. The more loyalty programme members, the more loyalty points are issued. The more loyalty points issue, the greater the liability accrued, and the more scary the Profit and Loss report. In future we can expect a lessening dependence on points to drive behaviour and, instead, companies will focus more on offering both hard and soft (tangible and intangible) benefits. At the same time, brands will strive to increase the relevance of member communications to help drive behavioural change through their loyalty programmes.
- Social media metrics must account for a very loyal bias
One of the most measureable outcomes from social media marketing is customer engagement. On Facebook, for example, companies are tracking fans and 'Likes', while on Twitter they're tracking followers and 're-tweets' of the brand's messages. But, when assessing the ROI of social marketing efforts, it is important not to inaccurately assess a campaign's impact by comparing the purchase patterns of engaged contacts with those who are not engaged. A common belief is that the social engagement motivates incremental purchasing. That's true, but it's only half the story. This idea neglects to account for a 'self-selection bias' arising from a company's most loyal customers, who are much more likely to be the first to engage with the brand via social media, and are therefore over-represented in the base of engaged contacts, resulting in a false reading for the campaign's sales lift. Recognising that the most loyal customers will engage first, marketers must use targeting and messaging to increase engagement among non-buyers and their less loyal contacts, because it is these segments that offer the real potential to generate a positive ROI as engagement helps convert them into new and more valuable customers.
- Social advocacy must have an air of sincerity and authenticity
Social media is certainly an excellent conduit for word-of-mouth promotion. Marketers can create special offers for loyal customers to share with their network, or they can run promotions that motivate customers to post links or comments about the brand. In addition to the viral impressions to your loyal customers' contacts, there is also an implied endorsement from these customers that will influence the purchase decisions of their friends and family. But this kind of promotion must be run carefully because the motivation for existing customers to promote your products or services must come across as being sincere and not self-serving. For example, when a campaign asks customer to post on their Facebook page in order to enrol in a prize draw (a self-serving purpose), the message may come across to their friends and family as being rather like 'spam' that's just being pushed out to their whole network - and that means it could lack the implied endorsement that personalised messages should deliver.
- Push customer behaviour toward greater profitability
Most retailers, especially in the food industry, are under pressure to grow and increase their market shares, but one of the biggest challenges during a recession is that shoppers are much more likely to trade down, spending more on private label goods and products and less on name brands. Retailers with a high percentage of non-food sales also tend to find that selling high-margin goods becomes more of a challenge, especially with the growth of online discounters such as Amazon. Shoppers continue to use more channels, spend more time getting the best deals and use online savings sites such as Groupon. And these trends mean that retailers have to work even harder than before to retain customers and increase sales from their existing high-spending customers. Marketing programmes that target and reward this type of change in behaviour are likely to deliver impressive results in a cost-effective and measurable way. So, while today's shopper is more aware than ever of the deals and prices available to them, marketers can give them a real reason to think twice about where they spend their money by offering a worthwhile reward for doing so. This is the first step in changing shopper behaviour so that both sides benefit.
- Youngsters are more receptive to direct mail
Young people (specifically 15-24 year olds) are highly receptive to direct mail, and the so-called 'young online generation' are also the most likely to buy in retail stores. Consumers in 'active retirement' and 'rural solitude' are most responsive to face-to-face engagement. Both of the latter groups incorporate older and more isolated individual who are likely to make visits to physical retail stores with a specific purchase in mind. Older groups tend to be far more comfortable making a purchase based on face-to-face engagement, and retailers have to understand that, while these consumers tend to live further away from the shops, they always try to make their trips into town really count.
- Generation Y is redefining how customer loyalty is earned
The 'Millennial' generation (aka. 'Generation Y' - those born between 1980 and 1995) is presenting marketers with some new challenges and changes as it comes of age and takes the reins of the global economy. In fact, these consumers are set to change the whole way in which companies and brands build sustainable customer loyalty. In the US at least, the Millennial generation is bigger than the Baby Boomer generation, and is three times the size of Generation X. With so many Baby Boomers retiring now, it's important for marketers to understand how Millennial attitudes toward technology, data privacy and rewards are changing the way brands build strong, profitable relationships with their best customers. Millennials are even more willing to participate in loyalty and reward programmes than their parents, but they also expect loyalty programmes to be free, easy and fast to use.
- Every loyalty programme needs a 'golden circle' to drive aspiration
Not all customers are equal. The value of a customer is really just a function of their level of commitment to the products or services you make available to them. The breadth (i.e. the number of products) and depth (i.e. the level of utilisation of each product) of the relationship, combined with the cost of service, provide you with a score which can be ranked against all other customers, providing a relative weighting of the importance of each and every customer in your database. Consequently, not all benefits offered to members of a loyalty programme should be equal. In fact, you can demonstrate that your company fully understands the relative value of different customers. The 'perfect customer' (i.e. a loyal and profitable one) must be afforded the very best benefits: the 'golden circle' of benefits. These elite benefits could include anything from a higher points earning rate to better and more frequent discounts, to extended currency validity, to dedicated customer service consultants, or even a string of peace-of-mind or time-saving benefits. The point is that a golden circle creates a stronger feeling of aspiration for those in the lower segments, encouraging them to move upward through your segments.
And there you have it... These sixty lessons are just a very small selection of the insights found in The Loyalty Guide 7 - our latest report containing over 1,400 pages of solid loyalty marketing data, practice, and theory - everything you need to know in one global report. It explains and illustrates the whole of customer loyalty and engagement, social marketing, metrics & analytics, best practices, new concepts, technologies, models and the latest tools and innovations. It's also packed with detailed case studies, research, market sizes, forecasts, models, charts, illustrations, and materials to support any marketing initiative, presentation or proposal.
Find out all about the principles, practicalities, measurement, analysis, and bottom-line effects of customer loyalty, customer engagement, and social loyalty marketing, and get expert guidance from loyalty marketing thought-leaders worldwide. Learn exactly how to gather and use customer data to increase customer profitability, reduce churn, and to monitor and increase customer frequency, spending, profitability and share of wallet. Perhaps most importantly, find out where your competitors are succeeding or failing, and why.
A full executive summary, table of contents, downloadable samples, pricing and ordering info are online now at www.TheLoyaltyGuide.com.
Copyright 2012 Wise Research Ltd / The Loyalty Guide / The Wise Marketer
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About the author...
The Loyalty Guide is brought to you by Wise Research Ltd, the internationally respected research organisation set up to provide specialist business intelligence on the latest worldwide developments in customer loyalty.
Wise Research Ltd is the company behind The Wise Marketer, the online customer loyalty information source. The business was founded in 2001 by Robin and Peter Clark, both acknowledged thought leaders in customer loyalty and customer relationship marketing.
Peter is a loyalty systems specialist with over 20 years experience in designing, specifying and implementing database, customer marketing and customer relationship management solutions, and 8 years of marketing journalism experience. Peter implemented his first leading-edge CRM system in 1997 and has continued to adapt, refine, test and analyse the latest concepts, tools and systems for customer loyalty programmes.
Robin was the editor of Customer Loyalty Today, the world's first subscription journal on customer loyalty, from its launch in 1993 and was the author of two editions of the best-selling Customer Loyalty Report in 1995 and 1997.
In authoring The Loyalty Guide, Peter and Robin have gathered, collated, analysed and presented in an easy-to-access format their decades of specialist expertise, and have conferred with the world's leading experts to ensure this report provides you with the very latest and most up-to-date market intelligence.
See http://www.theloyaltyguide.com for details.
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