From loyalty to advocacy

Dianne Innis ThoughtworksLoyalty programs should focus on interactions, not just transactions, argues US-based customer experience expert, Dianne Inniss.

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A consultant with ThoughtWorks, Inniss has worked with brands such as Hudson’s Bay, Target, Coach and Estee Lauder. Inside Retail Weekly caught up with Inniss when she was in Sydney recently to brief Australian retail executives.

Loyalty is inherently emotional, Inniss said, however most loyalty programs are designed to reward rational behaviour ie. acquiring points through transactions.

Retailers are missing an opportunity if they focus only on purely rational ways of generating loyalty. A better way, she argues, is to focus, “not so much on the nature of transaction, but on a more human-centred approach to loyalty”.

“If we think about more human-centred approaches to loyalty, it is less on transactions and transactional relationships and more about creating experiences, because that’s really where people feel an affinity and have a connection to a brand.”

A human-centred approach to loyalty builds connection through compelling experiences, which over time create a feeling of affinity with a brand.

To implement to human-centred loyalty program, Inniss recommends retailers experiment, test and observe.

Identify why a customer chooses to engage with you in the first place – what are you solving in their life? Then, design an experience that tackles that ‘why’ and test it on a small group of loyal customers, before attempting to scale to a larger population, which will enhance the business’ core value proposition.

Customer acquisition versus retention
Although more expensive than retention, organisational behaviour in Australia tends to focus more on acquisitions, according to Inniss.

“One of the things that’s interesting that I learned in the Australian market, is that most marketers are rewarded more on acquisition than on retention,” Inniss said.

“If we were to challenge that thinking by asking, ‘how do we expand the lifetime value of a customer?’ organisations might change.”

Retailers can use the concepts deployed in human-centred loyalty programs to drive new customer acquisition by identifying what makes customers stay and enhancing that element.

“The insights that you gain from what has been most successful from your loyal customers allow you then to trial and acquire based on similar characteristics or identified needs within the broader population,” Inniss said.

Head of retail for ThoughtWorks Australia, Dan McMahon, agrees that engaging your most influential customers will help you acquire new customers.

“Instead of spending so much money in customer acquisition, why would you not pay your existing customers to help you acquire new customers?” he said.

One example of this concept can been seen in Loyal3, a platform which allows companies to reward customers with shares in a company, rather than points. Customers tend to be more loyal to companies they own a part of. According to a study by Bain & Company, customer-owners spend 54 per cent more, make twice as many referrals and are 83 per cent more engaged than other customers.

Five facets for loyalty programs

  1. Contextual
    Think beyond the functional benefits of your products and services and think instead of how they apply to the context of your customers’ lives. What are the broader problems that they are trying to solve? What dreams are they are trying to achieve? For example, buying meat and vegetables at the supermarket becomes more about making a nutritious family meal in a busy life. How can you make that overall process easier?
  2. Personal
    Focus on the ability to drive personalised, value-adding experiences at scale. These must take into account customer’s unique interests and provide them with opportunities, which connect with them as individuals.
  3. Relevant
    Build loyalty by creating a sense of shared value between the retailer and the customer. It is important to understand that customers may define value in many different ways. For some, it truly is only about price, but for others it might be about prestige, social influence, and the nature of the experience or unique sets of products.
  4. Connected
    Being connected comes in two forms: taking advantage of interpersonal connections, and the modern tools to make a connection at meaningful moments. Typically loyalty programs are designed to reward individual actions, however programs can take advantage of the natural human instinct for connection by incorporating rewards for sharing with friends or promoting the brand. In the second instance, connectivity means capitalising on the intimacy offered by mobile devices to drive loyalty and influence behaviour at the time when it makes the most sense to get people to make a choice.
  5. Customer-centred
    Companies that put the customer’s need and life at the heart of their loyalty programs consider partners that can offer an extended ecosystem of complementary products and services.

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