Most companies attempting to drive customer loyalty fail miserably – and few so-called ‘customer centric’ companies actually generate sustainable customer loyalty that drives measurable business results. Why?…because they get three key principles completely wrong, right from the start:
- Loyalty is about the company acting loyally to its customers, not vice versa
- It is about a loyalty approach, not a loyalty programme
- Loyalty is about the store, not only about the CRM
What Customer Loyalty Is:
…And is Not:
|acting loyally (responsive, relevant, rewarding) TO our customers||about customers being loyal to us|
|an overall approach throughout our business||a proposition or program|
|earning Customer loyalty||thinking that customers are loyal to us|
|collaborative partnership to win customers together||tolerant of internal conflict between areas of the business|
|driving sales and cash margin||customers are responsible for % margin|
Loyal to Customers
We start to act loyally to customers when we understand them to a level of detail that ensures that we remain responsive to changes in their behaviour, relevant to ever changing customer needs and rewarding in the way we treat that our customers.
Acting loyally is really about optimizing the customers we’ve already got. This context demands change that is both incremental and transformational – evolution, but with a bit of manageable revolution.
Loyalty Approach v. Loyalty Program
We demonstrate loyalty to our customers by taking a loyalty approach wherein we commit to rewarding and delighting our customers with products and experiences that meet their wants and needs.
- We call this putting ‘Customer First’ when we decide what our priorities and actions are based on insights from our customer data.
- By doing so, a retailer becomes an even more prominent choice in the customer’s consideration set. This is not a tactic – it is a long-term strategy that makes the customer the focal point of our business decisions and objectives.
Customer First has proven to be the only approach that drives business sustainably – essentially, winning more sales by being loyal to the practice of putting the customer at the heart of the way our people, processes and systems work.
- Moreover, this data-led Customer First approach gives the retailer a material competitive advantage.
The Loyalty Programme is an important element within this loyalty approach, as the key source of the data that enables customer intelligence and this approach, and as the channel that enables us to talk to our customers personally.
The Value of a Loyalty Approach
A loyalty approach enables a retailer to better achieve its strategic objectives based on a superior understanding of customers.
- Simply put, embedding customer insight throughout the retail organization will enable them to make better, faster decisions and thereby increase sales and profit sustainably.
Best-in-class retailers (like Tesco and Kroger) have proven this model with growth in like-for-like sales and profits that consistently outperform their competitors and the general market, over years
- Tesco points to its recent slide as being caused by forgetting its own loyalty approach, now urgently remembered and reapplied.
What a Loyalty Approach Looks Like
The essential questions of the business are asked in a different way when we use a customer-centric loyalty approach, illustrated in the following example. Different, better decisions and actions result.
A true loyalty approach starts with unshakable executive management commitment and with simply written and broadly shared statements of our Customer Vision, Customer Plan, and Customer Promises (discussed later).
It’s About Growing Sales in the Store
An effective loyalty approach starts by getting the store experience right as the basis for developing a deep, long-term relationship with customers, every shopping trip.
- Best-in-class retailers have seen an incremental sales uplift in the early stages of a loyalty approach of between 1% and 2% and later stages between 3% and 4%, quarter over quarter and year over year.
Understanding customers is one thing – doing something with that understanding is another. We must not only ‘analyse’ to develop insights, but we must also put those insights into action. We must measure the results religiously, and provide tools that help improve everyday business decisions, thereby driving long-term customer loyalty, day after day.
A True Loyalty Approach
Customer-centricity is really about driving like-for-like sales by making better decisions every day, using customer insights. Customer loyal organisations better hear the voice of the customer using behavioural data, and therefore better understand customer wants, needs and desires.
Customer insight enables a retailer to put the customer at the heart of the way its people, processes and systems work. Companies that successfully put the customer first in business decisions become the customers’ first choice – increasing organic sales and brand value as they buy one more product, one more time.
Helping make better business decision by putting the customer first. To understand customers, we start by analysing the data we hold on these customers – understanding how they shop and behave, what is important to them and how they engage with our business. This insight will identify a number of business opportunities. Our goal is to exploit these opportunities through making better decisions using customer data by putting the customer at the heart of how we work.
Improved Customer Experience comes through using data-driven insights to improve our retail offer such as assortment, pricing and promotions. These insights connect us to our customer through the store. Think of the mantra “data to insights to action plans”…..this is how improved like-for-like sales growth and customer loyalty is delivered.
Organization Engagement uses customer-driven insight to help us better understand, anticipate, measure and continually respond to our customers. This is realised through empowering, aligning and equipping our people with relevant insights, values, goals, strategies and actions.