Our lives have been changing at a fast pace in the past few years, primarily due to an unprecedented pandemic. Online experiences have increasingly become an inevitable part of daily lives in many areas including but not limited to shopping, recreational activities, and collaborative working. Demand for digital propositions, products, and solutions has significantly mounted up, and digital-native companies have continued to disrupt the traditional business models, which has effectively driven businesses to rethink their digital strategies. It has become considerably difficult to attract and retain customers amid continuously changing customer behaviours and the competitive landscape. Customer loyalty has therefore turned into one of the most vital and discussed areas that businesses look to drive in this digital-first era. In this article, we would like to share tips on driving customer loyalty and increasing competitive strength.
Invest in Your Trustworthiness
Trust in a brand is consistently seen to be more important to customers than many criteria such as price, service, and quality. Therefore, it is crucial for brands to focus on and invest in their trustworthiness to build a loyal customer base. Across many industries, a trusted relationship with customers has the potential to lead to many benefits: increased retention, more referrals, and more meaningful engagements. In this context, we would like to mention the Trust Equation that was first developed by Charles H. Green at Harvard to express the components of trust.
Resource: The Trust Equation
The first component, credibility, is related to the promises the businesses commit and can be illustrated with Amazon’s “one-day delivery for prime members” model, which works impressively. Reliability is more around keeping up the promises and, in Amazon’s case, can be clearly seen when the orders turn up on time every time. The last numerator, intimacy, is related to making customers feel secure, which, for example, can be observed when Amazon accepts a refund without question.
These components can effectively be used to identify and fix trust issues for businesses. It is worth highlighting that these components are multiplied together, so any absence could result in unwanted consequences. One other important part of the equation is the denominator – self-orientation. To drive trustworthiness, brands should do their best not to put their interests above customers’. As an example, we could think of businesses directing their efforts to enrich customer value and not solely shareholders’ equity.
Driving the numerators up will help you broaden trust for your brand and allow for long-lasting engagements. At the same time, brands should consider having as low self-orientation as possible to increase customer loyalty and trust.
Increase Your Focus on Relationship Equity
Customer equity is widely believed to be driven by three primary elements: value equity, brand equity, and relationship equity (aka retention equity). Value equity can be described as the customer’s assessment of the utility of a brand based on perceptions of what is given up for what is received. Brand equity, on the other hand, is more about the customer’s subjective assessment of the brand, which is predominantly driven by brand image and meaning. It is probably easier to think that value equity addresses the customer’s brain, whereas brand equity addresses the customer’s heart.
Brands mostly pay attention to customer satisfaction and brand image, which primarily address value equity and brand equity components. However, there seems to be a limited focus on relationship equity, which is, in simple words, the customer’s tendency to stick with the brand.
We will now talk through two ways to make your customers stick to your brand: increasing customer switching costs and building engaging communities. An example of the former could be the frequent-flyer programs used by many airlines these days in which passengers earn miles that can be redeemed for flights and other benefits. Passengers are less likely to switch to another airline after having accumulated a number of miles in a given airline, which effectively triggers repurchase and retention. A useful example of the latter could be brands that host and build communities through forums, bulletin boards, and chat rooms to enable customers to be connected with people with similar interests, habits, and needs.
Investing in relationship equity through either increasing customer switching costs or building communities would not only provide brands with long-term customer engagement and increased loyalty but also help them differentiate from the competition.
Leverage Loyalty and Reward Programs & Technologies
Loyalty and reward programs are incredible tools to increase customer loyalty, drive attach rates of higher margin products, grow customer equity, and create trading up. Through personalized campaigns and rule or scenario-based reward-earning systems, brands could offer customers an experience unique to their specific needs and wants. According to a study conducted by McKinsey & Company, members of top-performing loyalty programs are significantly more likely to increase the frequency of purchases, choose brands over competitors, and recommend brands to others. This, therefore, suggests that loyalty and reward programs have a great potential to be used to increase customer loyalty toward brands.
Resource: McKinsey | Preparing for loyalty’s next frontier: Ecosystems
To illustrate the impact of these programs, we would like to mention one of our success stories – Hopi. Boyner Group is a leading fashion group with 250+ stores in Turkey, serving millions of shoppers and owning some of the most successful and well-loved retail brands in Turkey. Boyner Group was looking for an advanced omnichannel, multi-merchant reward and loyalty program that would resonate with its shopper base. The program was required to enable Boyner to create an ecosystem in which all stakeholders, including merchants, deliver targeted campaigns suitable for its shoppers to enhance the shopping experience across physical and online channels and utilize the customer shopper data to boost customer retention and loyalty.
Lixus, our next-generation loyalty solution, also used by Hopi, offers state-of-the-art features that meet the needs of our clients, their partners, and end-users. Lixus enables quick and easy campaign delivery, dynamic campaign and communication planning, and a scenario-based rewarding mechanism.
As a result:
Hopi has become one of the largest multi-merchant loyalty programs in the market, with 12M+ users,
Hopi has created an ecosystem with 200+ merchants listed on the app,
Hopi has enabled data-informed decision-making through real-time data collected from 8,500 beacons and 40+ sources,
Hopi, connected to 16.5k+ points of sale, has improved the omnichannel shopping experience.
If you would like to hear more about our solutions, please contact us.