The Customer Loyalty Challenge: What Makes It Difficult?

Insights Mar 12, 2019 Chelsei Henderson 10 min read

Loyal customers will end up spending 67% more than new customers. Plus, it’s easier to sell to someone again than for the first time.

No wonder a People Metrics 2015 executive survey revealed 90% of respondents believe customer retention was a strategic priority. Why wouldn’t it be?

But here’s the thing…

Only 50% established a budget for improving the customer experience.

What’s the disconnect?

Where’s the bottleneck?

How can we fix it?

Today, we’re going to dive into this challenge of customer retention marketing. We’ll explore how companies can overcome common obstacles and win the hearts of their customers. By the end, you’ll know the basics of loyalty and the secret weapon smart companies use to execute on their customer retention goals.

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Key Takeaways

What is the Customer Loyalty Challenge?

Why Loyalty Matters

How Data Empowers Loyalty

Closing Thoughts

Customer Loyalty FAQ

Key Takeaways

  • For Heads of CRM:
    • Customer retention strategies that work today were not possible until recently.
    • The emergence of non-relational databases allowed companies to begin collecting and parsing detailed customer data.
    • A true single customer view allows you to create detailed, personalized segments using organized customer data that’s updated in real-time.
    • With modern software, and the single customer view, automated customer loyalty campaigns are more possible than ever before.
    • Many companies are stuck in an old way of thinking, and focus on the acquisition campaigns they know, rather than the retention strategies that are now possible.
    • 1-on-1 personalization is now possible on a mass, automated scale
  • For CMOs:
    • The legacy tools of the past can’t support modern customer loyalty strategy, leading to an ill-advised focus on acquisition instead.
    • Customers want a personalized experience, delivered through their preferred communication channel.
    • Beyond enabling personalization, modern software allows marketers to automate certain processes, creating greater efficiency, and leaving more time for strategic planning.

What is the Customer Loyalty Challenge?

We’re seeing more ads than ever. Your customers are getting bombarded with content aiming to grasp their attention and engagement. This isn’t slowing down. If companies don’t get in the game, they’re going to lose.

Loyalty is earned by providing consistent value, engagement, and attention. However, there seems to be a bit of a disconnect between what marketers believe it takes to cultivate loyalty and what actions actually attract a loyalty customer.

The way marketers believe you create loyalty:

4 Pillars of Customer Loyalty

Consumers are most loyal to brands who offer:

Loyal Customers - 4 Reasons

As marketers, it’s easy to get caught up in the storytelling and passion of the brand. Making others feel important and connected to your values is, no doubt, a smart way to establish that initial spark. However, it’s the convenience and consistency which attracts loyalty over time.

In a 2008 study, John Gattorna uncovered that 68% of customers tend to leave because of a brand’s ‘perceived indifference’. How can brands provide customers with a convenient, consistent experience that makes them feel valued?

The customer loyalty challenge lies in a brand’s ability to personalize the customer experience in a consistent, high-quality way. This has often been a challenge because personalization wasn’t a scalable concept. Understanding buyer behavior and gaining ongoing customer insights wasn’t feasible because of the manpower it would require.

Think of recent decades… It wasn’t possible to track customer buying behaviors across various marketing channels. You’d need large, manually-managed spreadsheets and forms just to track customer birthdays. Even after it became for possible for “big data” to collect detail-rich data sets in the mid-to-late 2000s, companies weren’t set-up to use them effectively! Legacy database management companies had already put all of their eggs into the relational database basket: a database system designed to handle only structured data entries, not the rich stream of unstructured data that was now available.

It was only in recent years that one of the secrets to customer retention was unlocked: using unstructured data to enable personalization on a mass, automated scale.

How? Non-relational databases became the norm. Companies began to organize that data into what’s known as a Single Customer View; a collection of highly detailed data profiles for every individual customer, updated in real time. With this amount of customer data now in play, marketers could track various aspects of customer behavior. They could create highly detailed customer segments based off the detailed information they were now gathering. This organized customer data now empowers marketers to make better decisions and create stronger campaigns, giving businesses the power to connect and engage with customers like never before.

Master Lifecycle

Why Loyalty Matters

Take a look at products on Amazon and you’ll see a shameless race to the bottom. Their e-commerce monopoly encourages sellers to offer low prices to accompany Amazon’s fast, convenient service.

When you also consider the rising ad prices, the need for customer loyalty starts to become apparent. With increasing customer acquisition costs, investing in retention may be the saving grace for B2C companies in 2019.

Behemoths like Amazon often seem like insurmountable competitors. But remember, they grew that large because of their dedication to the customer.

“We see our 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 bit better.”
– Jeff Bezos

If you want to win at the game of business, it starts with customer loyalty.

That’s what the giants understand. It’s why Amazon Prime offers so much value to the customer. In exchange for a $119 a year (or $12.99 a month), members receive loads of benefits.

Loyalty Program

Remember, Amazon started as an e-commerce bookstore. By focusing on the customer experience, they have expanded into dozens of industries, grown stock prices by over 42,000%, and acquired companies like Twitch, Zappos, and Whole Foods.

It’s not easy to grow a customer-centric company, but it’s clearly worth it. In Amazon’s case, Prime customers spend 4.6X more than non-Prime spenders.

Customer Loyalty - Case Study: Amazon Prime

What kind of impact would it make if 50% of your customers spent 4.6X more with your company this year? There’s a huge opportunity for business growth once you learn how to overcome the customer loyalty challenge.

Thankfully, it’s not as difficult as it seems…

How Data Empowers Loyalty

Today, access to user-friendly technology has made personalization easier than ever. If you’re looking to overcome the customer loyalty challenge, there’s never been a better time.

Retention is one of the most important performance indicators in your business. The three most important steps for companies to watch in the process include:

  1. Engagement and retention of new visitors
  2. Conversions from visitors to buyers
  3. Retention of buyers into repeat spenders

It’s often in a brand’s best interest to monitor their customer retention on a weekly basis. By doing so, they set themselves up for continuous improvement.

If your business is large or growing quickly, achieving your customer retention goals starts with investing in the right technology. Most major companies need software to handle the labor-intensive part of loyalty-building (e.g. the process of gathering accurate, comprehensive data and putting it to use in strategic marketing campaigns).

Here are three examples of how software like Exponea’s helps companies increase their customer retention and brand impact:

Omni-Channel Communication

Omni-Channel Communication

Customers want a consistent experience throughout their time with your brand. This experience should start with your first interaction. Unfortunately, many companies can’t track their customer conversations across multiple channels. This lack of continuity isn’t a good start for lasting customer loyalty.

Omni-channel communication focuses on providing optimal cross-channel treatment. Here’s an overview of our use case here at Exponea:

PROBLEM:

Customers aren’t receiving cohesive customer service. Cross-channel communication leads to information loss, which in turn causes higher costs and lost sales.

SOLUTION:

The solution required a holistic approach to bring all the channels together. Here’s an overview of how we thought to solve the problem.

  • Ensure all channels use the web to submit service requests from customers.
  • Create web layers so a customer service agent gets assigned to a specific customer.
  • Enable automated direct actions (e.g. email a link) for various scenarios

You can read the entire use case here »

RFM Lifecycle Automation

Loyal customers can vanish without warning. Create automated campaigns based on segments using recency, frequency and monetary value as criteria. An enticing incentive at the right time is the perfect way to reactivate loyal customers, and is a part of proper customer lifecycle management, which will ensure you’re sending the right offers to the right customers every time.

Companies can only sell a new customer 5-20% of the time. Pretty weak compared to the 60-70% of the time you’ll close the deal with a past customer… So, what’s the solution?

Here’s what we shared in our use case on the subject:

SOLUTION:

Check the activity of loyal customers. When they become inactive for a defined period of time, give them free credits for their next order and send an email with this incentive.

You can read the entire use case here »

Personalized Communication and Recommendations

Segmenting your email newsletters is much better than sending the same message to every subscriber. But newsletters can be customized even further, targeting individual users with personalized recommendations. Using a recommendation method like collaborative filtering, you can even predict what an individual customer might like based off the interests of customers that are similar to them.

Here’s a section from one of our client success stories about how Exponea consultants implemented a test to increase revenue per visitor (RPV) by sending out customized newsletters:

“How do you entice your customers who are extensively browsing, but not buying, to make a purchase?

Our consultants found that these customers were more likely to add items to their carts and complete their purchase once a recommendation newsletter was sent to them. Three types of newsletters were evaluated, each containing a list of recommendations based on the customer’s last seen items, brand interest, or collaborative filtering.

The collaborative filtering newsletter demonstrated the best performance, yielding an increase in RPV by 19%.”

Read the full mymall success story here »

Closing Thoughts

Retention isn’t something your company should consider as an afterthought. It’s never been easier to implement accessible technology to power your loyalty campaigns. There are tons of tactics you can begin without enlisting the support of a marketing automation company like Exponea.

If you’ve already explored those strategies and are interested in implementing more advanced techniques, please reach out to us. Learn how Exponea can help you overcome the customer loyalty challenge. Schedule your commitment-free demo today.

 

Exponea in Action

Customer Loyalty FAQ

Q: What are some of the DOs and DON’Ts of retention marketing?

DO…

  1. Research. Learn as much as you can about your customers. Call them. Interview them. Survey them. Get to know them. Roll up your sleeves and get ready for some good ol’ fashioned hand-to-hand combat.
  2. Dedicate. Increasing retention requires dedication from senior management. You’ll need to invest in the right technology. And it’s important to have a dedicated team assigned to fulfilling the strategy.
  3. Engage. The more you can talk and share with your customer, the better. Think of it like building a relationship. It requires many sincere actions over a period of time. Play the long game and don’t be distracted by short-term gains.

DON’T…

  1. Be disingenuous. Build loyalty because it’s best for the customer; not because it’s best for what you can get from the customer. It’s about building value and establishing trust. Think more about what you can give them than get from them.
  2. Harass or spam. No one enjoys getting too much communication from someone they don’t know very well. While it’s hard to break through the volume in today’s world, make sure your consistent communication isn’t too pushy.
  3. Make assumptions. Ask the customer what they want. You may assume your customer base wants a rewards program when they’d prefer more access or discounts. Assumptions can lead to bad choices, lost money, and a bad taste with previous customers.

Q: What is customer loyalty?

In a choice between your brand and a competitor’s, how many previous customers would choose your brand without hesitation? Would they feel enticed to learn about the competitor’s product? Would they even remember that they had bought yours in the past?

You can think of customer loyalty as the number of previous customers who would choose your product without hesitation.

Q: What is a customer retention strategy?

A customer retention strategy is a documented overview of your plan to increase loyalty. It starts with deep research into your existing customer. Through extensive dialogue and research, you can uncover their key pain points and needs.

The complete strategy uses this research to better align your company with the customer’s needs. With it, you’ll have a clear path on how to implement and measure the plan.

Q: What are the main tactics for customer retention marketing?

Once you develop a solid strategy, it’s time to implement the tactics. Some of the most popular methods of building a customer loyalty campaign include:

  • Operating a rewards program
  • Personalization
  • Referral marketing
  • Customer service
  • Gamification
  • Communication
  • Gifts and other delightful surprises

The 1-3 tactics your company implements will depend on your industry, goals, and resources. However, it’s reasonable for most brands to expect a positive ROI from their loyalty investments. And in a low-cost, convenience-driven retail environment, it’s only going to become more important for brands to develop a real loyalty with their customers.

Q: What drives customer loyalty in 2019?

We’re living in a world of unlimited options, methods, and variations. Building true loyalty with customers isn’t a small task. Increasing customer retention depends on delivering an exceptional experience time and time again, in a variety of ways.

Companies can drive loyalty by attending to their brand image, customer service, customer satisfaction, product differentiators, reward offerings, and cultural relevance.

Customer Experience

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