The rise of social media and collaborative technologies has forever changed customer loyalty. Today, it is critical to target and reward customer "advocates" to grow sales, reduce attrition and lower customer acquisition costs.
Building the Advocacy-Based Customer Loyalty Roadmap
• Cognizant 20-20 InsightsBuilding the Advocacy-BasedCustomer Loyalty Roadmap Executive Summary Today’s ticket to loyalty is to engage with consum- ers socially — on their terms — providing recogni- Organizations need to rethink customer loyalty. tion and rewards commensurate with value. Then, Traditional loyalty programs are not aligned you use social capabilities to build further upon tightly enough with consumer behavior. Many those special relationships, creating loyal custom- will keep their loyalty account open with minimal er advocates who will in turn influence others in interaction in the hopes of scoring something for your favor. nothing. But increasingly, the old “one-dollar- spent-equals-one-point” regime is out of step This white paper lays out the new loyalty with the way people shop today. framework and offers suggestions on how to engage with and reward your customer advocates Today’s consumers rely heavily on the Web for on social media. researching purchases, with many spending 75% or more of their total shopping time on Web The Loyalty Rules Have Changed research, according to “The 2011 Social Shopping Study.”1 This research encompasses a variety of Few things are higher on executives’ agendas than community and social tools, including user-gener- creating a superior customer experience to drive ated product reviews (59%), customer-to-custom- lasting loyalty. In a world where it is quick and er Q&A’s (42%) and community forums (26%). seamless for a customer to switch allegiance to another provider, companies must offer custom- Consumers are also adept at using social media ers — both consumers and businesses — the holis- like Facebook, YouTube, Twitter and community tic, fulfilling experiences they desire. Customer forums to broadcast their feelings — positive or experience has many components, including negative — about products and services. Important everything from the look and feel of your product subgroups include aficionados who become and environment, to how you deliver your service, passionate advocates for the brands they adore, to the color and font on your Web site, to your as well as vocal detractors who complain about a degree of corporate responsibility. Your customer negative experience they’ve had with a brand. Your loyalty program is another important facet of your loyalty program needs to capture and account for customer experience, one that can significantly both types of online sentiment and interact with boost — or detract from — your customer’s experi- consumers on social media; otherwise, you will ence. What’s tricky is that almost everything you miss a major opportunity to nurture the genuine think you know about loyalty is wrong. loyalty espoused by advocates or fix the problem of complainers and turn their negative rants into Companies in industries such as airlines and positive ones. car rentals traditionally approached loyalty programs as a simple points-earned system in cognizant 20-20 insights | december 2011
which customers receive perks or rewards com- the Trust Barometer, making advocates’ frequent mensurate with their spending. Simple, yes. But communications that much more valuable. effective? Not necessarily. Once trust is built, it has a protective effect on Most companies have no working definition of reputation, according to Edelman. That’s because loyalty — meaning they don’t know how their once a consumer considers your company organization defines and quantifies loyalty. For or brand trustworthy, most (51%) will believe some, the best definition of loyalty is just that positive information after hearing it just one or the customer belongs to the company’s loyalty two times vs. 15% when the company is distrusted. program. Buying something once a year may be Advocates thereby serve the critical function of enough to keep the customer planting and sowing the seeds of loyalty in others, Under the new in the program and, therefore, and the fact that they do it without interference in some sense “loyal.” from you, the company, makes their actions much definition of loyalty, more valuable in their peers’ eyes. a loyal customer is But this bar is too low — the mere act of joining a loyalty Under the new definition of loyalty, a loyalone who is delighted program says nothing at customer is one who is delighted with your with your services all about real loyalty. Every services and, therefore, talks about his or her and, therefore, talks consumer has a wallet or purse experience on social channels, thereby increasing full of loyalty cards, but most equity for your company and brand. Achieving about his or her will go to whatever provider loyalty in today’s real-time, virtual world,experience on social is least expensive or offers therefore, requires mastery of social media tools channels, thereby the best perk at the moment. and related collaborative technologies to build Participating in the battle of meaningful customer relationships. Figure 1 (nextincreasing equity for the discounts does not lead to page) provides the new equation surrounding your company higher profits. Nurturing real customer loyalty. and brand. loyalty, therefore, involves Breaking down the customer relationship to its recognizing customers with simplest elements shows where loyalty is born. the greatest lifetime potential, as well as current First, a customer or consumer buys your product status, and providing perks that address their or service based on need or desire. If the purchase personal desires with a strong “social” element. brought satisfaction when consumed, it increases From Loyalty to Advocacy the trust this consumer has in your product/ service, as well as your organization. This, in turn, At its peak, loyalty is a two-way street. You boosts your organization’s brand image, resulting provide your most valuable customers the value in an increase in your ability to deliver value to they desire, advocating for them by operating consumers, since you now understand their needs honestly and responsibly, while on the other side better. This also increases the trust consumers of the aisle, your customers become advocates have in your product or service, which further for your products and services. A customer who enhances their loyalty. becomes an active advocate for your company is a true treasure. This person can talk about your If you can capture the loyal base of such customers brand, engage others in discussions about it and through a membership program and provide them influence more people to buy your products and recognition and relevant rewards, this generates services using social environments like Facebook more good feelings and conversations about your as his or her platform. product or service on social media and elsewhere, producing advocates for your product or service. Social media has transformed the way people In theory, at least, customer advocates will shop. With the exception of a small number of increase their consumption of your organization’s markets and demographics, customer loyalty no products and services, resulting in more satisfac- longer exists separately from online social inter- tion and greater loyalty. Thus, this virtuous cycle action. According to the Edelman Trust Barometer repeats. for 2011, people are much more likely to use a search engine (29%) than a corporate Web site The key to enhancing loyalty is building social (11%) for information, where they are just as likely advocates. To do this, you will need to increase to find peer opinions as corporate-controlled your interaction and engagement with your information.2 Most people — nearly 60% — need to customers in general and loyalty program hear something about a specific company three members in particular. to five times before they believe it, according to cognizant 20-20 insights 2
The Advocacy-Based Loyalty Framework Value Trust Lo ge ya Ima lty Apps Advocacy- Based Mobility Reward Game Dynamics Program Consumption Memberships Satisfaction Location Conversations Advocacy Strategies Positive Sentiments RewardsFigure 1Instant Engagement frequent flyer programs, where members rarely earn enough points for a free flight (80% byThe Dutch airline KLM has excelled in customer some estimates).5engagement by converging loyalty and socialmedia with its “KLM Surprise” campaign.3 To Make it Funcombat the near-universal weariness of airtravelers, KLM decided to bestow “Random Acts of The use of game dynamics, coupled with rewardingKindness” on a few lucky travelers. KLM followed loyal behavior through the use of achievementpassengers’ airport tweets, checked their profiles systems, is another increasingly popular strategyand offered them personalized presents, based with leading-edge organizations. For example,on their interests and worth about $100, such as PepsiCo recently used the social networkinga gift card to their favorite retailer. site Foursquare to pinpoint loyal consumers and reward them with “Gold Tickets” to a Big BoiFor a modest commitment of time and money, concert.6 According to a campaigner blog piece,KLM provided customers and prospects with an the Golden Ticket was unlocked by 2,400 people,instant dose of attention aimed at making them and there were more than 2,000 Foursquarefeel special. As KLM targeted individuals who check-ins at the Big Boi concert, giving the Pepsiwere already Twitter users, these cost-effective campaign extra fizz.acts generated a great deal of immediate buzz —in the best cases spreading happiness, according The application of location-sensitive and mobilityto the tagline — for the airline. technologies enables organizations to engage with consumers at the point of presence,One can well imagine the impact this program increasing the frequency with which they interacthad in generating good feelings and customer with timely and relevant offers. For example,loyalty. It certainly generated a lot of discussion. Hallmark leverages Facebook credits to incentAccording to Digett, the KLM Twitter feed had users to interact with its Facebook applica-1 million unique views the month the program tion, The Hallmark Social Calendar. Users arebegan.4 Many KLM passengers — even those who encouraged to create social calendars with thedid not receive a Random Act of Kindness — were important dates from their lives, with the oppor-proud their airline displayed a kind, human side tunity to earn Facebook credits that can be usedin an industry where extra charges rule the day. for virtual merchandise.7 These programs areSuch initiatives may, in fact, be more effective clearly popular with consumers, though it is stillin driving real customer loyalty compared with a bit early to judge their returns. cognizant 20-20 insights 3