CRM: Tests of Loyalty
Customer loyalty is a powerful driver of business success. Realizing its power, though, requires taking a step back and rethinking what customer loyalty is and how it should be built. The biggest transformations come from taking a different approach to building customer loyalty. Over the years of working with some of the biggest marketers, that has led us to adopt seven rules for success that require clearer thinking, not just smarter analytics.
1. Retention and Loyalty Are Different
Retention means keeping existing customers. Loyalty is about maximizing share of wallet.
An example of retention for a mobile phone company lies in determining what should be offered to customers at the end of their contracts to retain them. An example of loyalty for an airline is all about getting customers to fly with you more than your competition to ensure you're getting the biggest piece of the pie.
The distinction is critical, because the levers that drive each also are different. Retention is best optimized through understanding and reacting to triggers that signal potential churn, such as gym members who change their addresses. Loyalty is generally driven by more fundamental issues like value proposition and overall experience. Zappos does it by providing free shipping and excellent customer service.
Think of retention and loyalty as two very different things, and run the right analytics to support each. A test and learn approach is also subtly different for each: Retention testing is often about short-term offers based on trigger analytics (e.g., the end of contract for a telco customer); whereas, loyalty requires different value propositions to be tested.
2. Loyalty Is More Than a Loyalty Program
Loyalty as a marketing mindset should not be thought of as loyalty schemes or programs. Loyalty is about segmenting how your customers want to be served, identifying their needs and behaviors, and developing an offer with the right value proposition to maximize share of wallet with that customer group.