The notion that companies should pursue customer loyalty seems non-controversial at first glance. Whereas brands pay significant sums to acquire new customers, existing customers are essentially free if they can keep them. So, it makes sense that marketers should spend time and effort on cultivating customer loyalty.
Yet to anyone who has followed the debates initiated by Byron Sharp's How Brands Grow will know that customer loyalty has become one of the most hotly debated topics in marketing today. Custom loyalty is very common, according to Sharp, but it is incredibly difficult to engineer even with marketing's best efforts. Marketers should, therefore, consider this before investing too much into customer loyalty programmes.
So, what do brand marketers think about loyalty now? Are they still striving to cultivate loyalty or are they having second thoughts about their current customer retention programmes?
To find out, ClickAcademy, in association with Amazon Web Services, recently held roundtable discussions with dozens of client-side marketers at its annual Digital Cream event in Singapore. At the Cultivating Loyalty table, Liz Clark Martinez, Head of Planning, McCann Health moderated discussions on the topic and brand marketers revealed what they thought about customer loyalty in 2020 and their plans for the future. Below is a summary of what was said on the day.
1) Loyalty means different things to different brands
First off, attendees agreed that what is meant by 'customer loyalty' differs greatly depending on the brand.
To some, customer loyalty is about retaining customers following a purchase. To others, it means encouraging customers to buy habitually or convincing them to buy from the company at a greater rate than other companies.
Regardless, in order to achieve customer loyalty, marketers need to know what it means for their brand - and to their management - so that all efforts within a company to encourage loyalty are aiming for the same results.
2) Advocacy may not require loyalty
Traditionally, it was assumed that customer loyalty was a prerequisite for customer advocacy of a brand. This has often been visually represented in the buying journey funnel, with loyalty after conversion and advocacy after loyalty.
Marketers are now questioning whether loyalty works like this. Many believe that customers do not necessarily need to be 'loyal' before they become 'advocates'.
If this is the case, brands do not have to devote themselves to encouraging repeat business so that customers speak highly of them to other consumers. 'Loyal-less' advocacy can come from consumers having an excellent experience with the brand, whether they repurchase from them or not.
Marketers should, then, aim to deliver an excellent customer experience across messaging, touchpoints and service to drive the benefits of loyalty (advocacy) even if they struggle to engineer repeat business.
3) Companies are not structured for improving CX and loyalty
In larger organisations, there are many marketing roles and, too often, people are working in silos. At companies where this is the case, it is difficult for any one marketer to map the whole customer journey and understand the whole experience.
The result of this is that customer loyalty initiatives only happen at the tail end of the journey. Only people who are already customers are encouraged to become loyal with transactional programmes such as frequent-buyer rewards or discounts.
But if loyalty is a result of a positive experience, then any improvement to CX, even at the start of the journey, contributes to the likelihood that a customer will remain loyal.
Marketers should then think beyond transactional loyalty programmes and instead work on offering a great overall customer experience, thereby paving the way for retention.
4) Measuring loyalty requires both hard and soft metrics
There are two main ways that marketers measure loyalty.
The first is using transactional data which provides hard metrics: Conversions, sales, repeat sales and customer lifetime value. Using hard metrics to measure customer loyalty has the advantage of using data that is relatively easy to obtain and consistent throughout an organisation.
The problem with hard metrics, though, are that they don't provide details on many things which marketers need to know in order to increase loyalty such as customer sentiment toward the overall experience.
This information is only available through the other way of measuring loyalty, soft metrics. Soft metrics include measurements like customer opinions and emotions as they progress through the buying journey. While soft metrics provide a more holistic picture of how customers view their experiences, they will be different at each stage of the journey and more difficult for marketers to obtain and interpret.
If marketers are to increase loyalty by improving the customer experience both hard and soft data will have to be combined using human judgment.
5) The future of loyalty: Personalisation and brand values
One change marketers look forward to is using customer behaviour data for more than just analysing the past to aid in decision making. Customer data can also now be used to predict what customers want before they themselves know and allow marketers to provide personalised information and offers in order to improve the overall experience and encourage customer loyalty.
Additionally, marketers believe that there is a trend toward brands communicating their values to customers in an effort to build affinity and loyalty. Doing so will require more than interpreting customer data, though. To engage customers in this way requires a deep understanding of the customers' values and a lot of effort to communicate shared values in an authentic voice.
Overall, then, it seems that marketers striving to increase customer loyalty, in whatever way they define it, have many obstacles to overcome but the reward - a loyal, repeat-buying customer base - may very well be worth it.
A word of thanks
ClickAcademy would like to thank Liz Clark Martinez, Head of Planning, McCann Health for moderating the Cultivating Loyalty discussions and Venkat Narayanan, CEO, BigTapp for acting as the subject matter expert at the table.
We'd also like to thank all the marketers who made time for Digital Cream Singapore this year - and we hope to see you all at future ClickAcademy events!
