How the Best Brands Build Lasting Customer Loyalty
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Customer loyalty is the likelihood of previous customers to continue to buy from a specific organization. To have loyal customers is a goal shared by most organizations, but not all reach this goal. Join Adrian Swinscoe as he outlines how the best brands go about building customer loyalty that lasts.
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How the Best Brands Build Lasting Customer Loyalty
- 1. How the best brands build lasting customer loyalty Adrian Swinscoe Author & Consultant
- 2. Housekeeping Outside : In Inside : Out The recording and slides for today’s presentation will be made available on cxweek.com along with other content and webinars from throughout the week Join the conversation on Twitter by tweeting @Qualtrics using #cxweek
- 3. Adrian Swinscoe Author & Consultant Adrian Swinscoe is a customer experience consultant and advisor, and has been growing and developing customer-focused large and small businesses for 20 years. He has previously worked with Shell, FT and The Economist Group as well as advising and consulting numerous other large organisations as well hundreds of smaller businesses to help them engage with their customers, build their customer retention and improve service. Adrian has an MBA from Cass Business School, City University as well as an MA in Economics. You can find out more about Adrian at www.adrianswinscoe.com and via his Forbes column www.forbes.com/sites/adrianswinscoe/ Say Hi on Twitter @adrianswinscoe
- 4. • Consultant, workshop leader & speaker • Large and smaller businesses • Interviewed 170+ authors and business leaders • Columnist for Forbes • Just published a book with Pearson
- 8. What is customer loyalty? ©2015QUALTRICSLLC. “Likelihood of previous customers to continue to buy from a specific organization. Great attention is given to marketing and customer service to retain current customers by increasing their customer loyalty. Organizations employ loyalty programs which reward customers for repeat business.” Source: http://www.businessdictionary.com/definition/customer-loyalty.html
- 9. Acquisition, retention, focus & churn • 40% of companies are more focused on acquisition than retention • 15% are more focused on retention • 45% have an equal focus on acquisition and retention. • Where’s your focus? • Average churn rate for B2B industries in the USA, UK and across Europe was around 11% per year, with the highest average reaching 24%. 9 ©2015QUALTRICSLLC.
- 10. Why do customers ‘churn’? ©2015QUALTRICSLLC. • Pitney Bowes found a range of reasons why customers churn (in order of descending importance): • Slow customer service • Late delivery of service • Doesn't ask about customer needs • Not in touch • Not told about updates and developments • Call centre can’t answer questions • Doesn't recognise my value • Irrelevant marketing • Only email queries allowed • No online self-service • Low marketing, low visibility Source: https://www.flickr.com/photos/60057912@N00/5398973509/
- 11. Most loyalty schemes don’t work • 96% of consumers would be tempted to switch by a good price promotion • 20% of consumers would switch if offered a better loyalty programme • 68% of customers said they were members of supermarket loyalty schemes but only 47% of them said they were loyal • An incentives-based ‘loyalty programme’ is no guarantee that your customers will remain loyal. 11 ©2015QUALTRICSLLC. Source: https://www.flickr.com/photos/11540081@N05/2983197457/
- 12. Who should be loyal to who? ©2015QUALTRICSLLC. • When we say loyalty what do we mean? • When asked about loyalty programmes: • 73% of customers believe that they should be a way for brands to show how loyal they are to them as a customer • But • When asked a similar question, 66% of marketers believed that it should be the other way round and that loyalty programmes are there for customers to show how loyal they are to brands. Source: https://www.flickr.com/photos/35275978@N00/3357200708/
- 13. What drives loyalty? 13 ©2015QUALTRICSLLC. “Loyal customers understand that there’s almost always something better out there, but they’re not so interested in looking.” Seth Godin • Loyalty has a number of elements to it, including: • Shared cause or interests; • DWYSYAGTDWYSYAGTDI; • Showing up regularly; • Forgiveness; • Owning up to mistakes and apologising; and • Acting in the best interests of those whose loyalty you are trying to earn. • We can see from this list that loyalty has large emotional and behavioural elements to it and often loyalty is not given it is earned. • Therefore, to earn loyalty we, first, we have to become the person or the business that people would want to be loyal to.
- 14. What drives loyalty? (2) ©2015QUALTRICSLLC. • Loyalty expert Steve Sims, Chief Design Officer & Founder of Behavior Lab at Badgeville believes that: • Many loyalty programmes are designed the businesses benefit and fail to take into account what customers want. • The best loyalty programmes understand their customers as people, their motivations, their context and frequency and not as ‘wallets’. • Loyalty is a lot like a habit. • However, even good loyalty programmes suffer from habituation. Source: https://www.flickr.com/photos/123780959@N07/14012595748/
- 15. Where do you earn loyalty? ©2015QUALTRICSLLC. • 49% - loyalty was earned at the point of purchase/service • 40% - loyalty was also earned when they had a customer service issue that needed to be dealt with. • Opportunities to generate loyalty exist across the customer experience • These opportunities should be identified and customer experience designed to maximise those ‘loyalty’ moments. Source: https://www.flickr.com/photos/56167315@N05/20357708451/
- 16. The DNA of successful loyalty programmes ©2015QUALTRICSLLC. • The best programmes tend to focus on the groups of customers that: • Can have the greatest impact on any business i.e. the most valuable ones; • Those with the highest potential; and • Those that at are the risk of leaving. • The most successful loyalty programmes have the following characteristics in common: • Clarity on what they are trying to achieve • Use data to find their most valuable customers • Build variegated loyalty programmes Source: https://www.flickr.com/photos/139267319@N03/24325276281/
- 17. The key to generating loyalty ©2015QUALTRICSLLC. “It's not how much we give but how much love we put into giving.” Mother Theresa
- 19. Last words 19 ©2015QUALTRICSLLC. •Where is your focus? •Who is being loyal to who? •Loyalty is much more than a programme •Customers are so much more than “wallets” •What are you doing that enhances the customer’s own story?
- 21. My Contact Details If you would like to discuss any of the content today please get in touch: http://www.adrianswinscoe.com/ Mobile: +44(0)7971 608821 adrian@adrianswinscoe.com https://twitter.com/adrianswinscoe https://www.linkedin.com/in/adrianswinscoe
Editor's Notes
- Econsultancy (2014) 40% of companies are more focused on customer acquisition than retention, 15% are more focused on customer retention and 45% have an equal focus on acquisition and retention. Pitney Bowes (2010) Average churn rate for B2B industries in the USA, UK and across Europe was around 11% per year. Selected examples of average churn rates: 24% - Office supplies 16% - Insurance companies 16% - ISPs 13% - Banking services 12% - IT support 11% - Electricity supplier 6% - Accountants 5% - Lawyers
- fast.MAP (2013) 96% of consumers would be tempted to switch loyalties to a competitor by a good price promotion; 20% of consumers will switch loyalties if offered a better loyalty programme by a competitor brand; and 33% use loyalty programmes to try out and buy from brands they wouldn’t normally use. The Logic Group and Ipsos MORI (2011) 68% of the consumers they surveyed reported that they were members of supermarket loyalty schemes, but that only 47% of them said they were loyal to the supermarket. Customer loyalty schemes don’t necessarily drive loyalty; Customers want something ‘special’ in exchange for their loyalty. 71% said that would like better offers or services; 48% said that would like better customer service than other customers; But, customers also said that they like ‘free stuff’ and rewards. But, if presented with a good enough and better offer then they will buy from another business or brand. Therefore, having an incentives-based ‘loyalty programme’ is no guarantee that your customers will remain loyal.
- Kitewheel (2014) Surveyed nearly 600 consumers and marketing decision makers to examine the state of perceptions, engagement and communication between brands and connected consumers. One of their most interesting findings concerned loyalty programmes where they found that: When asked about loyalty programmes, 73% of customers believe that they should be a way for brands to show how loyal they are to them as a customer; However, when asked a similar question, 66% of marketers believed that it should be the other way round and that loyalty programmes are there for customers to show how loyal they are to brands.
- Loyalty has a number of elements to it, including: Having a shared cause or interests that are aligned; Doing what you say you are going to do when you say you are going to do it; Showing up regularly; Being able to forgive someone when they make a mistake; Admitting when you are wrong and then apologising; and Always acting in the best interests of the people whose loyalty you are trying to earn. We can see from this list that loyalty has large emotional and behavioural elements to it and often loyalty is not given it is earned. Therefore, to earn loyalty we, first, we have to become the person or the business that people would want to be loyal to.
- An interview with loyalty expert Steve Sims, Chief Design Officer & Founder of Behavior Lab at Badgeville, offers some clues as to what drives loyalty. Through his research and experience, Steve says that: Many, if not most, businesses design their loyalty programmes for their own benefit and fail to take into account what customers want. To design a good loyalty programme, businesses really need to understand their customers as people, their motivations, their context and frequency if they are to design a loyalty programme that works better. Loyalty is a lot like a habit. This has a lot to do with how we tend to look for patterns and consistency on a conscious and sub-conscious (habit) level and, also, our natural tendency to move towards things that are rewarding to us or away from things that are threatening to us. Therefore, the more positive experiences that a customer has with a business, the more likely that their cumulative experiences will develop into a habit. However, even good loyalty programmes suffer from habituation over time as novelty and interest wains. Therefore, defaulting to traditional, tactical, episodic marketing campaigns to sustain interest over time is unlikely to work and firms need to innovate and think both creatively and strategically if they are build and sustain their customer’s loyalty.
- research by Clickfox in 2012 found that the most critical times for generating loyalty were at the point of purchase or when a customer had an issue that needed resolving. Going into more detail, their research found that: 49% of people surveyed said that their loyalty was earned at the point of purchase/service; and 40% of the people surveyed said that loyalty was also earned when they had a customer service issue that needed to be dealt with. Wise companies know that opportunities to generate loyalty exist across the customer experience and, as such, they design and deliver customer experiences that identify and maximise those ‘loyalty’ moments.
- However, research by McKinsey (2012) shows that the key to building a customer loyalty programme that works is in the detail and the best programmes tend to focus on the groups of customers that: Can have the greatest impact on any business i.e. the most valuable ones; Those with the highest potential; and Those that at are the risk of leaving. Moreover, McKinsey’s research goes on to show that the most successful loyalty programmes have the following characteristics in common: They have clarity on what their programme is trying to achieve Doing so will help you target the right sets of customers, design and deliver the most appropriate benefits as well as identifying the best metrics to measure performance. They dig into the data to find their most valuable customers Many loyalty programmes use frequency of purchase as a proxy for customer profitability. That is not always the case. Customer data should be analysed to clearly understand which customers have the greatest profitability and sales influence. Your programme should then be tailored to reward these customers and to provide incentives to stay. They build variegated loyalty programmes McKinsey talks about ‘Published’ and ‘Unpublished’ elements of successful loyalty programmes. Published programmes are often those that are publicly available but then tend to be tiered, segmented or tied to different stages of the customer life cycle. They also tend to be accompanied by different levels of benefits depending on the customer’s value or potential. In practice, this can be seen in programmes that have different levels such as bronze, silver, gold and platinum. Unpublished programmes tend to be private, invite only and in many cases tend to be more experiential in nature. For example, many brands will invite their best customers to an exclusive product launch, a sporting event or a fancy dinner as a way of making them feel special and part of an exclusive club.