loyalty loop customer experience

[Guide] Make Your Customers Come Back for More with the Loyalty Loop

October 20, 2016

Despite the digitalisation of their business activities, many companies retain a traditional approach towards consumers. Rather than being customer-focused, they are transaction-focused. The loyalty loop shows which contact points have room for improvement.

In classic marketing, the assumption is that you have to choose one of three axes on which to position yourself: operational excellence, product leadership or customer intimacy.

Three classic marketing axes

It has been seen that many retailers have placed an emphasis on operational excellence as a result of the crisis. Whenever people have less to spend, they want to be able to make their purchases at a minimal cost. Operational excellence means that you succeed in making a product cheaper while retaining the same margin. This is the method used by discount stores such as Aldi, Lidl and Action to successfully come through the recession. But you don’t necessarily need to market yourself as a prize fighter in order to achieve operational excellence. For example, Coolblue has decided to do its own distribution, which has helped it to achieve good profit margins. Digitisation plays a huge role in achieving operational excellence because it helps company processes to be simplified, as a sales channel, for customer service, and so on.

Long term customer relations

What you see happening now is a turnaround from operational excellence to customer intimacy. Companies want to get to know their customers in order to be able to keep selling to them for as long as possible. Just take a look at Ryanair. In the past, passengers expected no real standard of customer service at all - they were brought from A to B, and if they had been stupid enough to forget to print their boarding passes in advance, it cost €80. Now that the financial strain has left the market, Ryanair wants to appeal to a new target group and the service has significantly improved, which is partly down to the introduction of an app that makes it easier for customers to arrange everything themselves. Digital technologies can be an outstanding way of helping to build up a positive customer relationship, because customers can be found online.

In classic sales, you as a company invest a huge amount to ensure that customers come to you to view and purchase products. You then send an order confirmation - probably from a do-not-reply address - and hopefully receive a customer review, since they’re worth their weight in gold. An old-fashioned, tunnel-vision type of thinking is prevalent, while customers are moving in a loyalty loop. They start with inspiration followed by orientation, selection, transaction, experience of the product, service, interaction and engagement. These eight links are essentially down to the personal relationship between the customer and the company. This in turn results in loyal customers who keep coming back to you.

 

 

Loyalty loop diagram

Source: HBR.org

Ignite the conversation

Getting to know customers isn’t just about putting on special offers and giving discounts, it's also about supporting the customer journey. Take this example: many B2B companies send product catalogues out to customers as a matter of course. This is a typical example of an old-fashioned approach. Why not start a discussion to find out how the performance of the customer can be improved?

Digital opportunities allow the option of collecting a wealth of customer data. Using cross-references means you can be of far better help to the customer by offering recommendations on the product range and also by providing relevant content. You can make use of relatively small steps to increase your relevance to the customer.

In spite of all this, it seldom occurs in practice. Many companies focus instead on the orientation and inspiration links. They aim for a direct hit, but they might as well be using a blunderbuss. They don’t involve themselves in the interests and needs of the customer, and they fail to tell a relevant story.

Big data, content performance, account-based marketing – these are all separate components spread throughout the organisation. This means that they don’t work together effectively in supporting the customer journey. Sites such as Booking.com or Hotels.com send travel suggestions, ask about customer experiences when they check in, call customers in the event of any questions, and so on. This is possible because those companies do not have silos, but instead hold central responsibility for the customer experience.

From transaction to interaction

I hope that we’ll also see these kinds of customer experiences in fintech, for example. These companies are so complex that it’s difficult to gain an integral overview of customer interaction. In this case, too, companies stop at the transaction, even if you do see a little change. The Internet of Things means that some insurers are using a USB stick in the car to assess how safely the insured party is driving and then calculate the premium on that basis.

The technology exists. FBTO pushes the fact that customers can use insurance units where necessary, for example, using global cover when taking out travel insurance. Once a customer has made this kind of change in the app, you as a company know that it’s now time to wish them safe travels and send them a holiday checklist.

There is a health insurance company in South Africa which offers insured parties assistance to lead a more healthy life once they have taken out a policy. For example, they will receive a discount if they send in their starting ticket for a marathon. This helps you build up a bond with the customer. And who would ever leave the insurer who helped them quit smoking?

Make use of the relationship instead of giving discounts

Once you’ve got to know the customer, you must use this relationship much more quickly instead of communicating in a promotion-driven way. Companies such as Microsoft and Facebook use smart chatbots to talk to users. This helps them to collect an enormous amount of knowledge about who their customers are. The tools for gaining insight after the transaction are already present.

How should you begin? Four points for attention:

 

  • First identify the customer need, and determine which technology you require in order to meet it.
  • Research who will be responsible within the company for all or parts of the customer experience and try to put one person in charge.
  • Actively measure how well you are doing in the seven links of the loyalty loop.
  • Enter into discussions with the customer on what is important at key moments.

In order to properly shape the loyalty loop, an enormous amount has to take place in organisations that still retain silos as a company structure. But there is a need: too many companies manage their affairs with a marginal improvement here and there. A disruptor then occurs, and another company heads off with the booty. Anyone taking action now to excel in customer intimacy will be sure to stay one step ahead of the rest.


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