Except for supermarkets and convenience stores, most retailers see a customer an average of 5-6 times a year. The ongoing digital explosion will likely reduce the frequency to 2-3 in the coming days.
Unfortunately, traditional loyalty paradigms are built around the number of transactions and repeat purchases. To make it worse, even as customers’ behaviour and purchase journeys have become increasingly complex and non-linear, retailers are still stuck with a one-dimensional view of customer loyalty.
Rethinking Loyalty Program Paradigms
In the last few decades, customer loyalty got heavily tied to discounts, points and promotional offers – basically a purely transactional or functional form of loyalty. The biggest reason for this is sheer convenience – it’s easier to nail down the rational aspects like repeat sales, basket size, and customer lifetime value (CLV). However, this only provides a one-sided view of loyalty – for instance, a customer might detest a brand but continue purchasing their products due to lack of choice (Comcast?).
There are critical downsides to measuring customer loyalty from a purely transactional standpoint. And these downsides are becoming increasingly accentuated in the digital world.
Today’s ever-connected customers have hundreds if not thousands of choices at any given point. And as humans typically do when presented with a lot of choices – they rely on several factors like brand experience, emotional connect, convenience, price and reviews from friends and families to guide their choice. With so many variables on the table, how do brands begin to predict customer behaviour?
The answer lies in seeing customer loyalty with a dualistic mindset: one with an emotional as well as a transactional nature. And with each passing day, it’s becoming imperative for brands to view customer loyalty from this new vantage point.
What is Emotional Loyalty
Rather than give you a long-winded and boring definition, we’ll try to explain it with an example. Imagine a tourist exploring a new city. After a long day of sightseeing, he feels drained and craves a coffee and sights:
Phew, I badly need a coffee, is there a Starbucks nearby?
That sums up emotional loyalty – it’s a fast and almost instantaneous positive preference for a brand with zero rational or logical deliberations. Unsurprisingly, Starbucks also has one of the best loyalty programs in the F&B space.
Components of Emotional Loyalty
A customer feels an affinity for a brand when they deliver great goods and the branding matches their lifestyle. It’s important not to confuse ‘Affinity’ with ‘Loyalty’ . A customer might feel an affinity for a brand but it doesn’t mean he/she will be loyal to it. In a sense, ‘Affinity’ lies closer to ‘Preference’ or ‘Liking’. For instance, customers who only have an affinity for a brand will easily switch to a competitor with a better product or lower price.
As the name implies, ‘Attachment’ implies a connection to a brand. A large part of attachment is tied to how a company engages with customers. Make the effort to build meaningful connections through highly personalized communications that are relevant and useful to the customer to strengthen this aspect of emotional loyalty. Another great way to improve the brand attachment quotient is by rewarding engagement, in addition to transactions, and recognizing premium customers with exclusive benefits and acknowledging their status in every communication.
Trust is the most important element in the emotional loyalty construct. It’s essentially the framework on which Affinity and Attachment are built upon. Brand communication and customer engagement are critical in establishing trust. To create a sense of trust, offer authenticity, great support, timely communications, respect for customer privacy and ability to provide feedback.
How to Measure Emotional Loyalty
Marketers typically track behavioural loyalty metrics like conversion rates, customer value, basket size to gauge the effectiveness of a loyalty program. However, it’s equally important to analyze emotional loyalty metrics that gauge intent, sentiment, perceptions, and customer experience :
Net Promoter Score (NPS) :
Envisioned by Fred Reichheld of Bain & Company and Satmetrix Systems, NPS measures customer responses to the famed single question: “How likely is it that you would recommend our company/product/service to a friend or colleague?”. It is a highly popular framework due to its simplistic nature and how the score calculations are clearly defined. However, that simplicity can often hide the root of the problem. For instance, brands with very dissimilar distribution of Detractors, Passives & Promoters could arrive at the same NPS score. Therefore, NPS scores should always be used in conjunction with other Customer Experience metrics and business results.
Customer Satisfaction Levels :
Tracking customer satisfaction levels through simple surveys can offer brands a sense of how customers perceive the brand. These informal surveys allow marketers greater freedom in tackling specific issues and reporting them. Granted that they might not offer the clear metrics and apples-to-apples comparison NPS offers but they can reveal abstract and often hidden insights. For instance, when Expedia aligned Customer Satisfaction with other loyalty metrics, it discovered a key insight: customers are frustrated when offered two one-way flights at a lower price than a roundtrip due to the hassles with changing flights. This helped Expedia to streamline the booking process thereby elevating customer satisfaction.
Sentiment Scores :
Sentiment Scores are a good way to unearth the overall brand perception and customer intent. The common way to do this is through text analysis of internal and external customer feedback (blog comments, surveys, call center transcripts and social media data). Sentiment analysis generates a word cloud that uncovers what’s working well and what are the most painful aspects of the customer journey. A word of caution: Sentiment Scores are perceptions and might not directly translate to action so it’s important to overlay them behavioural metrics like repeat sales, churn rate etc.
How to Nurture Emotional Loyalty
Building emotional loyalty requires an integrated and dynamic mix of activities and interactions between your brand and customers that will drive personalized engagement at every touchpoint. Here’s how successful loyalty programs build affinity, attachment, and trust among customers:
Create unique, personalized experiences
From premium rankings to exclusive event passes, customers expect unique, personalized rewards and experiences that make them feel special and appreciated. Ensure your loyalty program offers these one-of-a-kind rewards by leveraging loyalty data to understand customer preferences and interests. Alternatively, offer early access to sales or limited-edition rewards to make customers feel good and build a greater emotional attachment to the brand.
Anticipate your customer’s needs
Just as customers expect a more personalized experience, they also expect brands will leverage customer data to predict their next likely action with a brand. Brands can add value for customers by demonstrating they understand their needs and are committed to creating a better brand experience for them. Enterprise loyalty program platform like Loyalty+ offers predictive modelling capabilities which capture customers’ contextual and behavioural data and leverages it to predict next-best-action in the customer’s journey.
Prioritize data security
Make data security a top priority— invest in loyalty management best practices that protect customers against fraud and spam. Doing so ensures great customer experiences while driving greater trust with brand advocates who know their data and privacy are respected.
Encourage two-way communication
A strong emotional relationship requires honest communication. The same holds true for emotional loyalty. Allow customers to connect with you to provide their feedback and opinions. This creates a sense of being valued, appreciated, and respected; creating attachment and trust. Conduct VOC polls and surveys to validate your product concepts or messaging while generating data that can be used to create more relevant, targeted experiences that will resonate with your target audience.