The Customer Loyalty Challenge: What Makes it Difficult?
By Chelsei Henderson
Jul 14, 2020
14 min read
The Customer Loyalty Challenge: What Makes it Difficult?
Table of Contents
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.
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.
- E-commerce personalization, specifically 1:1 personalization, is now possible on a mass, automated scale
- 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:
Consumers are most loyal to brands who offer:
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.
How Data Empowers Loyalty
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…
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:
- Engagement and retention of new visitors
- Conversions from visitors to buyers
- 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 Bloomreach’s helps companies increase their customer retention and brand impact:
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.
Omnichannel communication focuses on providing optimal cross-channel treatment. Here’s an overview of our use case here at Bloomreach:
Customers aren’t receiving cohesive customer service. Cross-channel communication leads to information loss, which in turn causes higher costs and lost sales.
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
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:
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.
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.
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 Bloomreach.
If you’ve already explored those strategies and are interested in implementing more advanced techniques, please reach out to us. Learn how Bloomreach can help you overcome the customer loyalty challenge. Schedule a personalized demo today to learn more.