From Transactions to Interactions - the Omnichannel Customer Journey is all about Personalization

Impact Of Customer Loyalty On Business Growth

If there’s one thing that can be called the true heartbeat of a business – it’s its Customer. Irrespective of whether the business is an online or offline one, it cannot exist without the customers that support it. But the most brands commit the folly of spending a lot of money on acquiring new customers, but nearly not enough in retaining them.

Just how valuable is a repeat customer? A study by Bain & Company has shown that increasing customer retention numbers by as little as 5% can boost a business’ profits by 95%. Not only do repeat purchasers outperform shoppers in Average Order Values (AOV), but they especially help reduce revenue gaps; especially during bleak economic conditions and peak season sales. But how does a brand put a tangible value to a customer’s contribution to the revenue? That’s where the concept of Customer Lifetime Value (CLV) comes into the picture.

" as little as 5% can boost a business’ profits by 95% "

Key Observations from our Loyalty Experts for ‘Winning with Personalization’

In working with our global clients and creating powerful customer success stories, we’ve observed a few constants that enable successful personalization. Brands that have gotten these right, have gone on to create genuine value with customers.
Look at how your customers interact with your brand to pinpoint the moments that really matter. Personalizing these moments can go a long way. They get noticed more easily and remembered more often.
Get a sense of what data is helpful and what can be scaled back on. The idea that you should collect any and all customer data that you can is severely outdated. Get a sense of what data will be necessary and helpful for your personalization KPI. While customers are willing to share information like bdays, email ids and phone numbers, they can be less open to sharing certain types of personal information like location & usage data. With data analytics you can determine what is generating greater insights for personalization and loyalty. Then consider doubling down on those and scaling back on collecting data that is less useful.
Create value that goes beyond money. The value that customers experience through personalization doesn’t necessarily have to be monetary. In fact, monetary rewards alone — like discounts, coupons, and freebies— quickly become ineffective in guiding customer behavior. Consider a broad spectrum of benefits and rewards when tweaking for personalization. Many personalizations are cost-free (or very low-cost), yet offer convenience to customers, create deeper engagement and loyalty.
Allow customers to self-personalize. Sometimes the easiest way to personalize a touchpoint is to let customers do it themselves - like asking them to adjust site settings and choose which types of content are most important to them. Then pay attention to what you can learn from their choices. Forums and self-service knowledge bases also allow customers to take their experiences into their own hands.
Serve a combination of personalized & non-personalized experiences. We’ve observed that personalized messages and offers when used in addition to mass or non-personalized touches, receive a better customer response. A combination of at-scale and personalized experiences keeps customers engaged and best optimizes for both the brand and the customer - like stepping on the gas and then easing back to keep the automotive running smoothly.
Take the long-term view. Personalization can quickly become all about easy tweaks for short-term wins. Be aware of this myopic view on execution. Personalisation has the capability to play the growth engine for your brand, driving sustained customer relationships, from top-of-the-funnel all the way through to repurchase and service recovery. Look at personalizations as a long-term driver of growth.

Personalization Inspires Loyalty

Building personalization based on a variety of sources of customer data — including loyalty data — ensures an enduring relationship with the customer. Recurring personalized interactions create more data, with which you can design ever-more relevant experiences—creating a flywheel effect that generates strong, long-term customer lifetime value and loyalty.

Loyalty makes way for Deeper Personalization

Personalization allows loyalty programs to secure immediate repeat business while setting the stage for a long and prosperous relationship with lifelong customers. The cumulative effect of this approach reflects an increased Customer Lifetime Value (CLV), turning customer interactions into a valuable asset. By initially focusing on your most loyal customers, you can maximize the impact of personalization - generating ever more relevant data and higher response rates that further boost data quality.

Customer Lifetime Value (CLV) = APV * APF * T

Why Is It Important To Calculate The CLV?

To put it simply – because it’s becoming more and more difficult to hold a customer’s attention. Now, no single shop, brand, or retailer has a monopoly on the customer’s attention. Especially with the entry of smartphones into the game, customer attention spans are at an all time low.

Customer retention becomes important in this situation because in a world that is cluttered with brands and their messages, the only way your brand will stand out, is if you can provide a customer experience that sets the bar really high. Retaining customers and earning their loyalty then becomes important to sustaining the health of the company in the long run.

The official term that’s used to determine the cost of bringing a new customer into the business is called CAC - it stands for Customer Acquisition Cost. If a business owner is to examine CLV and CAC in relation with each other, he will be able to understand what makes the business profitable.

In short, CAC will help you determine how much you need to spend in order to make a customer purchase from your business and the CLV will help you measure how much money a customer will bring into the business once he becomes a loyal/returning customer.

Ads and marketing are another surefire way to attract customers to your business by making them aware of what you have to offer and how you stand out from the competitors. Therefore while spending on ads and marketing is important, it’s equally important to track the amount of money spent on ads and the returns you get from it. Return On Ad Spends or ROAS is calculated using the total revenue generated by using a specific marketing channel divided by the total amount of money spent on that channel. So the formula goes

Return on Ad Spend, ROAS = Revenue / Spend

The first and the most basic thing that calculating ROAS will help you determine is if a marketing channel is performing profitably. If the business has determined it isn’t, they can always just switch to a different one or use an omni-channel strategy but ROAS is the one factor that is most basic in helping understand a business what needs to be done on the marketing front, hence guiding them on the marketing channel strategy.

Calculating ROAS will also help understand what the audience conversion process looks like to you and how much it is worth to your business to put in the effort. This way, ROAS can also be used to measure CLV.

The Role Of Personalized Loyalty Programs In Boosting CLV

So now a business has a loyal customer who returns to them to make those specific purchases. What can they do to bring in more customers and retain existing ones?

Customer loyalty programs are a great starting point for this conversation. The benefits of most customer loyalty programs are long term, so it ensures that the probability of a customer associating with you for years is higher as well.

However, the problem with many customer loyalty programs that businesses offer, is that they tend to have an outdated, one-size-fits-all approach.

This defeats the very purpose of a loyalty program. For example, if a customer finds that the reward system that the program uses is inflexible or inconvenient, with little scope to change according to a customer’s preferences, then it’s more likely that they’re not going to return. A KPMG survey found that 80% of the respondents said they prefer surprise deals or personalized gifts to information on sales, special privileges, time-saving opportunities, or other traditional program benefits.

Perhaps the biggest benefit a loyalty program offer a brand is the spike in engagement. Research has shown that the customers who actively engage with brands make 90% more frequent purchases. That’s not all, they also spend 60% per transaction and are five times more likely to choose the same brand in the future. Unfortunately, traditional loyalty programs fail to leverage the full potential of this engagement goldmine due to the generic rewards and marketing communications.

Another major advantage of a loyalty program as a marketing channel is its demographic agnosticity. Customer loyalty isn’t just limited to the baby boomers. Millennials are the target audience that most companies are after, and they’re equally likely to respond well to personalised customer loyalty programs. 90% of millennials surveyed by KPMG were a part of at least one reward program and are more likely to participate in reward programs at places like restaurants, gyms, and grocery stores. Interestingly, the same survey found that millennials are actually less likely to associate with a customer loyalty program if it comes attached to a credit card, a big box retailer or while traveling.

This study clearly hints at consumer distaste for conventional loyalty programs and a preference for personalized, experiential programs that adds true value.

From Transactions to Interactions - The Omnichannel Customer Journey is all about Personalization