Belinda Clark
Mar 14, 2024

Why most brands fail at building true loyalty

Loyalty programmes and actual loyalty are two different things. Rapp’s strategy director comes in with suggestions on how to create actual customer loyalty beyond buy-one-get-one-free schemes.

Why most brands fail at building true loyalty

While participating at a conference recently, I was asked what I thought was missing from loyalty in SEA. Without much deliberation, I replied, "Well…actual loyalty". Having recently moved to Singapore from the UK, I was immediately struck by how many loyalty programmes and 'packages' exist here. Anyone who's ever visited a nail salon in Singapore will have experienced the hard sell of a buy-10-get-two-free manicure package (for a $1,000 down payment, no less).

It's so prolific that I have loyalty cards, apps, and packages at almost every store I shop at, with only the Yuu card and Linkpoints crossing retail boundaries. But while there are many (perhaps too many) loyalty programmes in Singapore, most lack the higher-order loyalty driving components needed to drive true loyalty.

You must be wondering: what do I mean by true loyalty?

True loyalty is the ‘Big L Loyalty’ that brands are striving for, while ‘Little L Loyalty’ refers to the loyalty programmes and other incentives brands use to encourage repeat transactions. In effect, the latter is buying loyalty, not building it. True loyalty is much harder to come by. A recent PWC customer loyalty survey suggests that "many businesses misunderstand consumer behaviour in three key areas: how loyalty is defined, when it's won, and where it's lost".

Brands underestimate the value of customer experience (CX) and its impact on true loyalty. Approximately 40% of customers cite leaving a brand due to a poor CX. The Oxford Dictionary defines loyalty as "strong feelings of support or allegiance", which couldn't be a better description of true loyalty. Strong feelings of support or allegiance are gained through the accumulation of moments, experiences, and emotions in a customer's journey that influences their ongoing support, continued purchase and (crucially) recommendation to family and friends. As 52% of customers agree, brand recommendation is the surest sign of loyalty.

True loyalty is the accumulation of things like easy (and often free) returns and refunds from Zalora; it's the quick fix made to a non-delivered item from RedMart, and it's the friendly service and consistent quality products offered by Cold Storage. When a customer's problem is quickly resolved, a process is made smoother, or a human connection is made, intense feelings of support and allegiance are created. In fact, 81% say that positive CX makes them more likely to make another purchase, while 73% would defect to a competitor after multiple bad customer experiences—even with a loyalty programme. And those positive customer experiences can add up to big money, with companies that excel at CX growing revenues of between 4-8% above their market.

“Uh huh”, I might hear you say. "Good point, that all makes sense, but what's so different about them? And how do I drive true loyalty, if not through my loyalty programme?"

If you're nodding in agreement but with few plans to change, you're probably part of the 'agree-do' gap. Those who agree CX is a big part of driving loyalty don't know how to change or don't want to. It might seem like common sense but striving for ‘Big L Loyalty’ requires focusing on different activities and often significant changes to our work. But where to begin? How do marketers change not just their viewpoint on loyalty but their plans, actions, and the way they measure success?

The best way to drive Big L Loyalty is to be customer-obsessed. It's to understand who your customers are and their journeys deeply. By living and breathing the day-to-day experiences of customers, you will see first-hand the roadblocks, the missed opportunities and the moments that matter. First-party data (often referred to as 1PD) helps immensely when it comes to understanding your customer and is also great at helping you identify critical roadblocks to your success.

Once you know your customer's journeys, the next step is to assess whether your loyalty programme aligns with and complements these journeys. Is it encouraging additional visits to your store or an unnecessary monetary reward at the end of a planned purchase? Are there moments outside of purchase where customers are celebrated for their loyalty? And does this reward include valuable money-can't-buy-experiences? If your answer is no, it may be time to rethink.

As is often the case, looking internally is the best first step to change. In most organisations, CX and loyalty programmes are managed by different people and sometimes even different departments, but it needn't be that way. A shift from ‘loyalty programme management’ to ‘loyalty management’ requires that CX and loyalty programmes be planned and managed by the same department and the same team, or at least teams that collaborate.

In this way, loyalty is considered holistically across the customer journey rather than just measuring how much money customers spend with the brand's loyalty card. Your customer obsession must kick in once your teams and talent work together. Planning and managing your customer journeys and the everyday CX are crucial to driving true loyalty, and that involves understanding and methodically working through improvements to the customer journey for success. But the final piece of the loyalty puzzle always shows the value of everything you do. That is the measure of your success.

Traditional monetary or points-based loyalty programmes use financial metrics (sales or member numbers) to determine success, while NPS or CSAT frequently measures CX. In combining CX and loyalty, no single metric can suffice. Instead, I propose two metrics that could work together: CLTV (customer lifetime value) and CS (customer satisfaction).

While CLTV is a long-term measure of customer value to a business (and critical for CEO and CFO buy-in), CS determines overall satisfaction with accumulated experiences across the customer journey. This way simultaneously measures total customer value (not just immediate sales) and true customer satisfaction. While CLTV gives C-suite executives their desired financial ROI on their investment, CS provides the marketing team with a measure of the impact of their combined loyalty-driving initiatives (ideally showcasing the areas needing further improvement). Combining these measures gives a fuller picture of customers' true loyalty and the value of loyalty-driving initiatives.

Now that we think of it that way, it does sound quite different.

Let's work together to close the loyalty 'agree-do' gap. Who's with me?


Belinda Clark is strategy director at Rapp.

Source:
Campaign Asia

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