We recently had the honor of speaking at the first Ignite! CX Conference, hosted by the AMA Cincinnati. Marketers and Customer Experience professionals from all over the Midwest attended this hugely successful event dedicated to understanding how to craft more meaningful interactions with your customer base.
It was encouraging to see the emphasis on using and interpreting data as an integral part of crafting the customer experience in many of the presentations and was a great setting for our discussion in the Loyalty Track focused on The Promise and Peril of Customer Loyalty. Customer information is a top priority of CEOs for ongoing success, but it’s also the information they trust the least. In our session, we were asked why that could be and the answer is simple: it’s burned them too often in the past.
We’ve seen many organizations get excited by the “Promise” of customer loyalty: spend less money retaining and strengthening current customers and attract new, loyal customers to the brand. However, especially with the surge of Big Data, we’re focusing on the wrong customers, which gives us the wrong information, and therefore leads to the wrong decisions being made for the organization. These wrong decisions cost valuable resources and lead to the mistrust of customer information.
Customer loyalty should explain behaviors, such as retention, share of spend, margin, and referrals. Your loyalty metric should show differences in the loyalty segments (Loyal/Promoter, Neutral, Vulnerable/Detractor) in these categories, or categories that are meaningful for your organization. If not, you are setting your organization up for failure.
Recognizing that segments in your population exist is one of the primary ways to avoid the “Peril” of customer loyalty. Understanding what each segment needs is essential to make sure you are listening and applying the most resource to the customers that are good fits with your model. There will always be a segment of customers that purchase from you, but do not necessarily want what you offer and how you offer it. These bad fit customers tend to make up around 8% – 16% of your database.
There are three steps that can move you toward the “Promise” of customer loyalty:
- Ask your customers two questions
- Who are the toughest competitors for your business?
- Have customers experienced any significant problems in the last 12 months?
- Conduct an in-depth relationship assessment with a sample of your customers
- Make sure that your loyalty metric links to past and future behaviors
- Segment the population and understand the segments
- Understand how they view your performance relative to competitors
- Integrate and Project
- Integrate operating and CRM information into survey data
- Map segment and loyalty information onto your entire customer base
Each of these three steps on their own will provide incredible value; together, they will lay a good foundation for obtaining and utilizing the right customer information.
If any of this resonated with you, and you would like to have a more in-depth conversation about avoiding the pitfalls of customer loyalty, send us an email at info@loyaltyresearch.com or call us at 317.465.1990.