How To Prepare Your Business For The Future of Customer Loyalty
It is pretty much undisputed these days that loyalty is the Holy Grail for most businesses. In a digital economy, most consumers have unlimited optionality in where (and how) to shop, engage (or ignore) your brand. Businesses that consistently create long-term, repeat-visit customers with both a functional and emotional connection to their business are going to succeed.
The challenge today is that loyalty is no longer “buy nine, get the 10th free” but rather a technology-centric, data-driven, holistic approach to engaging new and existing customers across channels to enrich their buying experience and affinity with your brand.
Most businesses we work with here at Belly start off believing that loyalty is a binary relationship where one rewards customers who spend the most money at their business (again: buy 9 get the 10th free). The challenge with this approach is that the loyalty created for the customer is to the program or reward vs. loyalty to the business. It rewards the spenders with nothing more than a 10% discount on pricing. Most importantly, it fails to recognize that the spenders are only one piece of the loyalty equation in the digital economy. What about the influencers and connectors that Malcolm Gladwell proved the importance of in The Tipping Point. This cohort of customers spread the word, influence others, and send droves of new customers to a business through advocacy for your brand. They are just as valuable (if not more valuable) as your spending customers because they indirectly drive spending customers at an exponential rate. If your loyalty program is not identifying this group of customers, you are wasting your time.
At Belly, one of the components of our platform is to identify and deepen relationships digitally with these influencers and connectors for our businesses. The impact is remarkable on driving repeat visits and loyalty for the business. It is purely a technology exercise and I do not know how it is possible in the digital economy to develop this kind of loyalty without a digital loyalty platform (DLP) that can create digital relationships with consumers. We then take it one step further by combining the digital relationship with big data to begin to assess how, where and when to target specific customer personas for our businesses. Our Belly engineering team further employs loyalty algorithms such as gamification to amplify the whole process and literally change the customer engagement behavior of the business. None of this is possible without technology and big data that is emerging in the loyalty space among DLP’s.
Fortunately, the shift to DLP’s is underway not only with the Fortune 500 (Starbucks Rewards), but also in the SMB space. A 2012 BIA/Kelsey study found that “SMB’s focus on customer acquisition vs. retention at a 7-to-1 rate, with more than thirty-seven (37%) spending over half of their budget on customer acquisition and only six percent (6%) spending more than half of their budget on retention.”
Now fast forward to 2015 where the same survey shows “sixty percent (61%) of SMB’s now generate the majority (51%+) of their annual revenue from repeat customers rather than new customers.” and “Sixty-two percent (62%) of SMB’s spend the majority of their annual marketing budget to retain existing customers with less than half going to new customer acquisition.” 
This is a material change in how SMB’s are allocating marketing spend from recent years, and clearly shows how SMB’s are beginning to embrace the economics of building loyal customer bases through DLP’s to gain competitive advantage. The future of customer loyalty is digital.
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