For decades, many businesses have relied on customer loyalty programs to offer incentives for consumers to stay committed to their brand. However, many of these programs are becoming increasingly less effective drivers of long-term brand loyalty - especially when measured against a marketing strategy that focuses on customer experience and engagement.
Technology is fundamentally changing the way that consumers interact with business and making purchases. If your organization is not focused on this transformation and still relying heavily on loyalty and rewards programs for repeat business, you may be at risk of losing customers, and valuable opportunities to generate actual long-term consumer loyalty.
Why Customer Loyalty Programs Have Lost Their Effectiveness
Let's be clear, promoting customer loyalty should always be a fundamental goal of your business. However, the traditional tools of a customer loyalty program such as membership cards and loyalty rewards are no longer able to generate the brand commitment that they once could. Consumers are increasingly focused on the customer experience, and on an experience that is consistent, simple and optimized with them in mind. Companies that hope to win the attention of these consumers need to adapt rather than trying to manufacture loyalty through a punch card or membership program. Now, more than ever, customer loyalty should be viewed through the lens of the customer experience and brand engagement offered by your organization.
As the Harvard Business Review notes in a recent article, the psychology of consumers is not based primarily on rational choice but rather in what they term "processing fluency." In plain English, the preference of customers is to choose the easiest option that works. If Tide laundry detergent has made their clothes clean before, the customer is inclined to go back to Tide again and again and again. Of course, winning new customers still requires offering a good value proposition, but generating long-term loyalty is less about continuously appealing to their consideration and more about making the choice familiar and easy.
In practical terms, what does this mean? Customer loyalty has become the natural by-product of a customer experience that is focused on encouraging repeated brand engagement. Businesses that take steps to simplify the path to purchase and focus on facilitating social conversations of friends and influencers are more likely to establish a relationship with customers. That in itself can promote loyalty in today's consumer's marketplace much more than a program that aims to influence the purchase decision through an otherwise generic loyalty program.
Examples of Companies that Have Built Loyalty Without a Program
Understanding what it means to improve the customer experience and promote engagement can be challenging, and taking a look at what some of today's leading businesses have done may help to simplify that.
Amazon is one of today's best examples of a company that has managed to generate huge amounts of customer loyalty without utilizing a traditional loyalty program. The e-commerce giant has achieved these results by consistently seeking to make its purchasing experience easier than that of its competitors. For example, by offering a huge selection of products and providing free and fast shipping and returns through its Amazon Prime program, Amazon has removed many of the barriers that have traditionally made Internet shopping less convenient than shopping in a brick-and-mortar store.
In similar fashion, Uber has taken the advantages of both traditional taxis and black car services and combined them with an easy and engaging experience via the consumer's mobile device. The simplicity of ordering and paying for a ride through Uber has allowed the service to generate a huge customer base that is naturally inclined to turn to them first when they need car service. Consistent, simple and optimized with the consumer in mind. Uber removed several of the elements of car and taxi service that consumers found less than appealing; like not knowing when the car would arrive, how to handle the tip, and even the passenger capacity, to grab a huge market share and change the industry.
How to Improve Your Customer Experience and Promote Engagement
Given the critical role that consumer experience and engagement play in bolstering customer loyalty, taking steps to improve your business in these areas is key to winning long-term and repeat customers. Unsurprisingly, technological innovations are at the forefront of improving customer experience and engagement for many companies, from cognitive marketing to social media, to machine learning and artificial intelligence, to the Internet of things (IoT) and more.
For example, the increasing reach of the Internet of things (IoT) can enable companies to deliver predictive and personalized content to consumers, improving their experience and making engagement more seamless. Amazon recently demonstrated this with the introduction of Amazon Dash Buttons. Dash Buttons allow customers to reorder commonly-used products with a single push of a button; in this way, utilizing the IoT to make purchasing convenient and frictionless has allowed Amazon to again increase customer loyalty.
Similarly, machine learning and artificial intelligence are increasingly used to personalize customers' experience as well as predicting and responding to their needs. For example, the data that IBM gained access to through their acquisition of The Weather Company has been used by their Watson Marketing engine to understand how weather changes influence buying behavior; this allows those companies that utilize Watson Marketing to adapt to consumers' constantly shifting needs and improve their buying experience.
For businesses not in the position to fully deploy machine learning and artificial intelligence, consumer data can help replicate the personalized customer experience. Utilizing data to optimize marketing campaigns at every point of a customer's journey can be a cost-effective way for many businesses to create better customer experiences.
And that's what it ultimately comes down to, what is the experience you are creating for consumers and how will they remember it?
Is loyalty a one-way street with your brand? It can't be if you expect to succeed in today's economy. Consumers expect their loyalty to be rewarded with recognition of it, and an outstanding customer experience.
is one way that companies of all sizes can increase loyalty, and further connect with consumers by creating personalized, engaging and memorable experiences. Cox Business recently demonstrated this with the launch of their 'Lunch Is On Us' program in San Diego, California.
Using Facebook, LinkedIn, and Twitter, they invited downtown business employees and current customers, to enjoy lunch on them. The invitation was delivered to these employees via social media news feeds over five business days, and in-person delivery by Cox Business employees participating in the company's social media ambassador program.
The turnout exceeded expectations, with nearly 600 people taking them up on the offer to attend.
A one block area downtown was closed for three hours to accommodate the crowd, and food trucks, musicians, games, and giveaways made it a fun and exciting way for everyone to spend their lunch break.
It was a great way for Cox Business to extend their social reach and engagement beyond Facebook, Twitter, and LinkedIn platforms, and into a real-life, face-to-face event. It also provided local food truck owners partnering with them, an opportunity to connect with new customers and increase awareness of their weekly event held in the same downtown area.
A dramatic shift in consumer expectations, rapid advancements in technology and innovative digital strategies have all led to the current state of customer loyalty. And while the art of establishing and building customer loyalty is changing, there perhaps has never been a better time to a create and focus on a more personalized, one-to-one experience that drives real loyalty than there is today.
A version of this post was first published on the Cox Blue blog.