By Hayley Strang, Field Marketing Manager, Mapp
We all crave human interaction, especially as we navigate our way through the through the post-lockdown world. Who doesn’t miss being recognised by your favourite barista and being greeted with “the usual?”. In today’s world, this applies to online just as much as to a physical store experience.
Places that know your name are the ones that you’ll more likely feel loyal towards. And that is exactly what customer loyalty is: a feeling of allegiance as a reward for outstanding services and/or products.
Factors that influence customer loyalty are not all self-explanatory. They merge together from elements such as convenience (especially for physical stores), but also emotional factors like brand perception, personal experiences or word-of-mouth recommendation. Loyalty factors also differ among industries. Healthcare generally has a higher customer loyalty rate than retail, for example, as the element of trust is highly relevant in the health industry. However, with so many more people transacting online as a direct result of the pandemic, trust now lies at the very heart of the way retailers interact with their customers, both on and offline.
How is loyalty built?
You’ve probably encountered traditional ways of building loyalty: incentives (such as coupons and discounts). And while those are a great way to drive sales and introduce new products, they are lacking what’s in the deal for you: insights.
Insights are the most effective way to gain and retain real loyalty. Once you truly know your customers, building brand loyalty becomes intuitive. We see insights as the core element of customer centricity. How else can anyone provide outstanding customer experiences than by identifying what regulars desire before they have even articulated it?
How does customer loyalty help my business?
New customer acquisition is getting increasingly expensive. Meanwhile, 80% of your revenue derives from 20% of your customers. High customer retention means reduced acquisition cost, which should be your main goal in a cost-conscious environment. Identify your most profitable customers and nurture them. They are the key to increasing your revenue, as they are most likely already loyal towards your brand. Make those current customers the core audience of your marketing activities. When you have high levels of customer satisfaction, there is an increased chance of future brand loyalty, leading to follow-up purchases.
How does customer engagement influence customer loyalty?
Customer engagement is closely intertwined with customer loyalty. Customers are active on countless channels, from web to social media to mobile. How they want to interact with brands is down to personal preference, and you need to be able to reach them wherever they are. Customer engagement is quantifiable with KPIs, such as Engagement Rate, RFM, RFE, or Customer Lifetime Value (CLV), but also takes into consideration word-of-mouth referrals or reviews.
Engaged customers are likely also your most loyal customers. They follow you on social media, are actively talking about your products offline and online, and happily endorse your services. Studies have shown that engaged customers are also less price sensitive than non-engaged customers.
Implementing insight-led customer loyalty
So how do you establish true customer loyalty that can be implemented by analysing your customers’ actions and understanding their needs? Knowing where to start when working to improve customer loyalty can feel bewildering. It seems like such a massive task with no clear starting point. The good news is that the first step involves returning to what you already have, data from your customer base.
Now it’s time to remove data silos, align your CRM with your marketing solution, and get that must-have 360-degree customer profile. You may need to invest in some tech to get this done. Setting up this base for future marketing activities will save you money in the long run as you will be able to create value from existing insights. Properly deployed customer insights, for example, enable the implementation of a far more precise and effective churn prevention program and can help predict customers’ Lifetime Value. This empowers a brand to strategically invest in targeting highest-value customers across numerous marketing channels to drive the best outcomes.
Irrespective of how you put your customer insights to use, the most important thing is that you take action in the first place. Basing some decisions on data-driven insights is always better than basing no decisions on data-driven insights. There has never been a better time to take those first steps and make things happen.