Customer Loyalty is Dead

By Ubbo Maagdenberg, Managing Director, Emark

I will tell you right off the bat: customer loyalty is dead. The question is, did it ever exist in the first place?

Let us start by busting three myths about customer loyalty:

  1. Customers want a relationship with your brand.
  2. Truth: Actually no, 77% of all customers don’t want to have relationships with brands.
  3. An increase in interaction is the key to building relationships with customers.
  4. Truth: No it isn’t. Increasing communications can actually create a feeling of information overload.
  5. Customer loyalty is achieved by frequent brand engagements.

Truth: loyalty is achieved through shared values.

There are a lot of misunderstandings when it comes to customer and product loyalty. Consumers mainly opt for the lowest cost per transaction and do not feel any need for a long-term relationship with a brand. What they do need is a good product and great service at a fair price. To consumers, products and service are not two separate things, but part of the same experience.

The new normal

Consumer preferences are changing rapidly due to the introduction of new technologies and the omnipresent mobile web. Research by Accenture shows that many organizations struggle to keep up with the ever-changing consumer behavior. This results in a decreasing customer base and potentially lowers revenue.

So what about loyalty? 53% of consumers

reported that the number of brands they consider has increased notably the past decade. 45% believes that the chances of switching brands are higher than 10 years ago. The easier it is to switch between products, the lower the threshold to do so.

Many companies try to gain loyalty through a benefit- or savings program. The problem is that the effect decreases over time, especially with similar programs popping up everywhere. Additionally, there are only a few companies that carry out such a program properly and consistently.

In today’s connected world brand loyalty only lasts until something better, cheaper or faster comes along. Which is pretty often. So the question is: what are new strategic changes to increase customer loyalty?

Mobile payments

The answer might be simpler than expected. People working in marketing often have a very narrow way of looking at their channels. Often conversion is the only point of interest. But those who are willing to look beyond conversion alone will be amazed by the possibilities.

In a previous article I described the potential of a new combination of connected touchpoints. In this mix of new and existing channels there are enough opportunities left to create new and exciting ways of connecting with customers. The “2015 State of Marketing” study by Salesforce shows that not even half of global marketing efforts are focused on mobile marketing. Meanwhile the 2015 Loyalty Report by Bond Brand Loyalty shows that 48% of consumers would like to have some way to connect with brands through mobile apps that focus on rewarding brand loyalty. Research also shows that customers who use mobile loyalty applications show more satisfaction towards a brand than customers who do not use an app: 62% of app users report that they are really satisfied with the brand in contrast to only 45% that report the same level of satisfaction while not using the app. The study by Salesforce also shows that especially brand loyalty programs and mobile applications make a good fit. 37% of the questioned marketers are running such a campaign and described this campaign to be the most successful and effective way of connecting with customers.

The biggest potential hides in the combination of mobile payments and loyalty programs. From traditional banks to Apple and Google, every company that is handling money is working towards a future without traditional wallets. The possibility to manage all loyalty programs from a single digital wallet will benefit consumers greatly and also provides a lot of opportunities for marketers. Printing or cutting out coupons will by then finally be history. Just open up your digital wallet app and show a virtual coupon that is redeemed instantly is the kind of seamless and frictionless user experience it needs to be. A serious mobile strategy is key to be successful: providing customers with easy insights into their accounts and making it accessible and useable both online and offline will be the norm.

Focus on service as part of the product

Somehow someway the three biggest customer frustrations are still directly connected to poor customer service. For years the main frustrations among customers boil down to problem solving at first contact, service that does not live up to the expectations and long waiting times while trying to contact customer service. I argue in favor of using an approach called service design thinking to pro-actively deal with any bumps in your customer service. I believe that every part of the customer journey should create a positive brand experience and that you should present yourself as a service provider whenever possible. A customer will only commit to your brand if the triangle of experience, price and quality is right.

Focus on engagement

Customer engagement is the sum of measurable customer behavior in relation to your brand or product. Customer loyalty is the result of that sum in the long term. Engagement is the main driver behind loyalty and brand preference. That’s why customer loyalty programs must always be embedded in a larger marketing strategy with customer engagement as its main focus.

Four rules of building a customer engagement strategy in the new normal:

  1. Integrate customer loyalty programs within the overall customer experience
  2. Deliver personalized experiences
  3. Make sure social media are part of your loyalty program
  4. Offer value that goes beyond traditional rewards triggered by transactions

Traditional reward structures are in need of an upgrade. Customers want to be recognized and rewarded for brand engagement and not only when they allow you to sell them something. Mobile is the perfect channel to achieve this goal: easy, always on and up to date.

About the Author

“The power of data is changing marketing as we know it,” Ubbo Maagdenberg. Ubbo is a Managing Director for Emark out of the Netherlands. Emark is a part of the Marketing Cloud Partner Community in the Channel Partner Program.

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