“The customer’s perception is your reality” ― Kate Zabriskie, Business Training Works

It's risky to underestimate loyalty. In a recent Harvard Business Review piece about the loyalty economy, Bain Consulting’s Rob Markey pointed out that companies that achieve industry leading NPS scores for several years in a row grow revenue 2.5 times faster than their peers and deliver two to five times better shareholder returns for years to come. Unfortunately, companies continuously understate what it takes to develop and maintain loyalty.      

Oxford defines loyalty as “a strong feeling of support or allegiance.” Putting "customer" in front of "loyalty" yields this HubSpot definition: “a customer’s willingness to work with or buy from a company over and over again.” And yet, a majority of the time, the term "loyalty" is combined with the word "program" — as in, “join our loyalty program for the best incentives.”

This isn't to suggest loyalty programs are unimportant or unnecessary; they are both important and necessary for many industries. According to the Bond Loyalty Report, 79% of consumers say that loyalty programs make them more likely to continue doing business with companies and 73% are more likely to recommend companies with good loyalty programs. However, a program is just one aspect of customer loyalty, and a ubiquitous aspect at that. Bond also states that people belong to an average of 14.8 loyalty programs but are active in only 6.7 of them. As loyalty programs continue to proliferate, making sure your company’s program is in the 6.7 will require a broadened focus and effort.

The hard truth is that promoting loyalty is a company-wide effort. In a CX2030 study, Futurum research advises that as companies evolve their customer experience programs over the next decade, they must become loyalty companies rather than simply having loyalty programs. To do this, loyalty must be infused into the customer journey before a consumer becomes a customer and then throughout everything a company does that the customer can see, hear or experience.

The problem is companies significantly overestimate their prowess at customer loyalty. Ninety percent of companies told Futurum they provided the highest level of satisfaction to drive loyalty, while 42% of consumers said only three or fewer companies they dealt with provided a high level of satisfaction. That's a pretty large gap from company perception to consumer reality.

Related Article: How to Build Customer Loyalty, One Connection at a Time

Customers and Companies View Loyalty Through Two Lenses

Closing the gap between perception and reality requires an understanding of what consumers want from the company (loyalty drivers) and how they want to access those (loyalty enablers). Futurum found differences between consumers and companies in both areas.

For the loyalty drivers, consumers favored low-cost, high-quality, fast delivery with an added emphasis on human touch, social causes and brand consistency. Companies concurred for the most part, but consistently over or underestimated what consumers view as important. Some of the more significant differences included:

  • Low cost or special discounts — consumers 39%, companies 56%.
  • High quality products or services — consumers 35%, companies 53%.
  • Immediate (same day) availability — consumers 31%, companies 20%.
  • Live person on phone for questions — consumers 24%, companies 13%.
  • Consistency of brand and image — consumers 20%, companies 9%. 

And notably two areas that made the consumer top 10 were absent from the company priorities:

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  • Sale notifications when I’m nearby — consumers 21%.
  • Social responsibility (for my causes) — consumers 21%.    

There was less alignment between companies and consumers when it came to the technology that enables loyalty with four of the consumer top five not making the company list:

  • Real-time product or order tracking — consumers 31%.
  • High-speed access to site/content — consumers 29%.
  • Use of payment, spending, automated payment Apps — consumers 27%.
  • Private, secure chat (w/ brand) — consumers 27%.

Related Article: Bring Customer Loyalty Under the Customer Experience Umbrella

Closing the Perception Gaps

Transitioning from a loyalty program into a loyalty company will require a broad-based effort but it can certainly be done. Among other things, it will take a commitment to understanding what drives loyalty among your customers, a concerted effort to bring embedded company misconceptions about loyalty drivers in line with customer perceptions, an investment in enabling technology and a change of mindset about what constitutes loyalty. Some steps to move toward becoming a loyalty leader include the following:

Modernize the Customer Lifecycle

Futurum was onto something when it highlighted that loyalty must be infused from before a consumer becomes a customer and throughout everything a brand does that the customer can see, hear or experience. This harkens back to a classic in the marketer’s toolkit — the customer lifecycle. The lifecycle needs an update though to incorporate the concepts of loyalty and advocacy. Rather than the standard customer phases expressed in a traditional lifecycle (need, research, decide, buy, use, recommend) consider these instead: need, awareness, consideration, selection/purchase, experience, advocacy, engagement, raving fans, exit. These terms emphasize that with loyalty comes trust and advocacy, but that having customers willing to engage with you on a regular basis — to provide feedback and initiate dialogue — is critical and is what leads to the highest nuance in advocacy, “Raving Fans.”   

Move Beyond  Customer Measures to Incorporate Customer-Value Measures

As Markey highlights in the loyalty economy, executives will be reluctant to buy into the changes necessary to become a loyalty company unless they understand the “size of the prize.” Questions to ask include: How much did it cost to acquire new customers in each segment? What percentage of customers in each remains active? How frequent are their purchases? How much does it cost to serve them? What is the revenue per customer? Once understood, these measures can be used to track customers in different stages of the lifecycle, and to measure changes in value for customers exposed to various offers both within and outside the loyalty programs. These efforts can help to sustain the investment in and enthusiasm for expanded loyalty initiatives.

Related Article: Navigating the Challenges of the Post-Sale Customer Journey

Understand the Loyalty Drivers and Implement the Enablers

Take a close look at the loyalty drivers and enablers that your customers deem important and determine how closely internal priorities come to those. If your customers are anything like the consumers who participated in the Futurum study, you may have some work to do here. Steps include taking Futurum’s advice to close the perception gap:

  • Move beyond using sales tactics, such as low-cost offerings, to drive loyalty and focus instead on using loyalty attributes, such as premium services, experiences and support, to drive sales. Low cost commands attention, but it doesn’t necessarily deliver loyalty.
  • Think about how availability and immediacy can be part of every customer engagement with your company.
  • Make every part of the discovery and purchase process easy — from search to purchase to service — creating customers with greater visibility, leading to lower attrition, repeat business and increased word of mouth.

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