The 2016 Nielsen report addressing customer loyalty, “Allegiant Alignment: What Faithful Followers of Retail Loyalty Programs Want” based on the 2016 Nielsen Global Survey of Loyalty Sentiment polled more than 30,000 online consumers in 63 countries throughout Asia-Pacific, Europe, Latin America, the Middle East/Africa and North America. They found loyalty programs continue to hook and keep hooked individual consumers. Nielsen noted, “more than seven in 10 loyalty-program participants in the survey somewhat or strongly agree that all other factors equal, they will buy from a retailer with a loyalty program over one without. Which continues the trend identified in 2013 and 2015 surveys.
Jeff Bezos may have said it best, “We see customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little better.” Loyalty programs, or in Amazon’s case, Amazon Prime is an excellent example of adding value to the membership and in Amazon’s case, having your most loyal customers pay a fee and in exchange receive a host of benefits.
Then is 2015, Nielsen again looked at customer loyalty and found, “Consumer Loyalty is Not Much Deeper Than Our Pockets.” The 2015 global survey of 30,000 online respondents in 60 countries shows that price is the top driver of store switching behavior—and by a wide margin. Nielsen advises, “Approximately 84 percent of survey respondents indicated a strong preference to choose a retailer with a loyalty program over a competitor without one. The data points toward the efficacy of having a customer loyalty program over not having one. The vagaries of how customer relationship management (CRM) solutions are implemented is where the differentiation between brands takes place. Membership in the loyalty program does not guarantee loyalty, of course, but it does open the door for companies to earn the customer’s loyalty at every encounter.”
“How Loyal Are Your Customers?” Customer loyalty is driven by-product quality coupled with how successfully the engagement with the customer is executed, according to the November 2013 Nielsen report. ,which was derived from the Nielsen Global Survey of Loyalty Sentiment in which 29,000 Internet respondents from 58 countries participated. Nielsen’s global survey noted loyalty to be fickle, especially when competitors appear with product, promotions and technological infrastructure that not only catch the customer’s eye but also engage the customer with the least amount of technological friction.
This does beg the questions, “How are you going to engage with the customer when they are not standing in front of you?” and “How are you going to use the customer data derived from the engagement?” These two questions are not as simple as they may appear.
Use of Data
Information technology infrastructure capable of handling a robust influx of data is paramount. Data may come via a myriad of sources, including marketing, manufacturing, fulfillment, sales and support. Customers are likely to be well versed in digital engagement and will be in search of a frictionless experience. The challenge for the IT decision makers at midsize firms is to ensure that infrastructure is interconnecting all internal entities. Most importantly, it enables the company to avoid fragmentation of effort and to speak with one voice. Furthermore, it means having in place the technology to support personalized engagement oriented to the touch points between the customer and the company.
The customer may engage via social networks, a help line or loyalty program portals. In each case, the customer is choosing the manner in which it is most convenient to engage. IT leadership, especially in midsize businesses, is accountable for ensuring infrastructure is adequate to the task. If the infrastructure is not sufficiently integrated to allow the instant engagement to roll up to a customer service screen, then the customer experience will be fraught with potential disconnects. This is especially important for those small and medium businesses (SMBs) that may have a local physical presence as well as a far-reaching virtual presence. Capturing the interaction on both planes, the physical and virtual, allows SMBs a level of dexterity to make real-time adjustments to their customer interaction based on engagement data.
The loyalty program’s connectivity with the company’s social networks permits direct marketing and early warning to support staff in the event of a product failure. Moreover, there is no better way to engender word-of-mouth activity than personalization of the customer engagement via the social networks. The integration of social network engagement with the other areas of the company requires infrastructure concordance. The Nielsen reports indicated large swaths of respondents expected loyalty programs to provide perks, such as free products, with the North American market expecting discounts or other money-saving offers from the loyalty program. SMBs have the ability to engage their customers on the fly, making adjustments as necessary based on sales, social media network sentiment, volume and engagement, thus keeping their loyal customers loyal.
Privacy and Security
Loyalty programs require an investment in maintaining the privacy of the participant. If the loyalty program for the drug store chain is compromised, will the prescriptions be at risk (Walgreens, drugstore.com, CVS and others have experienced breaches which affected customers in recent year)?
If the airline loyalty program database is compromised, will the travel patterns of the participant and the personal identifying information be at risk?
In late-2016 the KFC UK loyalty program found itself picking up the crumbs following the compromise of 1.2 million customers data. In 2015, Toys R Us loyalty program was compromised, and users were advised.
Are Customer Loyalty Programs for You?
Given more than 3.3 billion consumers participate in loyalty programs, so they are clearly here to stay, yet not all loyalty programs prove successful, and customer engagement comes in many flavors. Companies that make the investment in customer engagement that provides customers with useful information and that enhances their experience will be best positioned to win the customer loyalty sweepstakes.
A more condensed version of this article, by Christopher Burgess, previously appeared on an IBM blog.