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Zero One: Elusive Customer Loyalty

Companies wanting to win customer loyalty must change their mindset and metrics.

Let’s face it: Customers are fickle – so how can you gain their loyalty?

That’s the problem facing companies and digital marketers as they ramp up customer loyalty programs next year. Marketers expect their budgets to rise or stay the same in almost every category of loyalty spending, says Forrester, but challenges such as leveraging data, creating the mobile experience, and measuring emotional loyalty lie ahead.

“Our recent conversations with loyalty marketers reveal a desire to shift from transactional loyalty to emotional loyalty,” says Forrester analyst Emily Collins in a research note. “Marketers want a deeper, lasting relationship with customers that tugs on both emotions and purse strings. But the current state doesn’t support that progression.”

With so many online choices available to consumers, and product comparisons and reviews literally at their fingertips, marketers face an enormous task to win over customers. Loyalty efforts used to be about keeping existing customers happy, but in today’s marketers need to nurture loyalty at every stage of the customer lifecycle.

For example, consider 1-800-Flowers.com’s comprehensive loyalty strategy.

“1-800-Flowers.com uses its loyalty strategy to test communications along the customer journey and improve its approach to delivering the next best action,” Collins says. “The brand uses these insights to prompt app download, give opportunities for social sharing, and encourage opt-ins to reminders for the consumers’ important dates.”

Too many marketers fall short of this.

Related: Zero One: The Sorry State of Customer Experience

One of the biggest problems is the inability to leverage customer data to personalize loyalty efforts – offers, content, experiences – to the individual customer. Data collection isn’t the problem, rather data management and execution. Forrester says 74 percent of marketers collect customer preference data, but only 45 percent use this data for personalization.

“This is a huge missed opportunity,” Collins says. “By closing this gap, marketers can tailor their loyalty initiatives more directly to their customer needs and better meet customer expectations.”

Another missed opportunity is mobile.

Only a couple of years ago, marketers set their sights on the mobile customer experience. Their goal was to capture a customer’s attention and win in the “five second window” of interaction on a smartphone. But this proved to be difficult, and many marketers failed to become mobile masters.

Case-in-point: More than 40 percent of customers who researched products online on a smartphone did so while shopping in a physical store, comparing prices or searching for coupons or reading reviews, Forrester says. Yet less than 50 percent of marketers say they’re currently piloting or using mobile rewards and offers.

There’s been a dramatic shift in consumer mindset in the digital economy, and marketers need to get on board. But it’s difficult for a large company or department set in its ways, both organizationally and culturally, to change.

This is most apparent in the metrics used to measure loyalty. For instance, Forrester found that 58 percent of respondents define active members based on their enrollment in a loyalty program and then redeeming points. Think airline frequent flyer miles programs, which aren’t so much about emotional loyalty to a brand but saving a few dollars.

Today’s marketers need to be measuring digital engagement. These include mobile interactions, customers contributing ratings and reviews, and social shares. But Forrester says less than a third of marketers measure active membership this way.

“While marketers want to move their programs forward, they remain in a traditional points-and-rewards mindset for measurement,” Collins says.

Tom Kaneshige writes the Zero One blog covering digital transformation, AI, marketing tech and the Internet of Things for line-of-business executives. He is based in Silicon Valley. You can reach him at [email protected].

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