Data and engagement can create powerful customer loyal strategies for Asean brands
More than two years ago, the world moved at a relative pace. There was a predictable uptick in the market trends including the online shopping ground.
But Covid-19 changed the game. Brands faced challenges of a newer kind.
While it triggered a freefall in most market shares and trends, it accelerated online shopping sales like never before. Customers had more options to transact online with brand marketplaces and Digital-to-consumer (D2C) came to the forefront. The introduction of digitized payment methods led to further increases in online shopping sales. Convenience became the key differentiator which every brand was trying to sell.
Amidst all this, customer behavior was changing dramatically. Uncertainty became the new normal and there was only one way to sync with this phenomenon – data.
The lever to catapult this changing customer behavior was to procure first party data and leverage it appropriately.
Brands were, and are still, trying to comprehend recent shifts in dynamic customer behavior. In 2021, we collaborated with Boston Consulting Group (BCG) to study and review consumer data expectations in the post-pandemic world and identify how data-driven engagement is fast becoming the key driver for business growth across industries.
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At a time like this, customer loyalty rose like a phoenix. Our research stated that loyalty is still the least evolved dimension in a brand’s marketing and sales plan. The fact that loyalty has a strong impact on a brand’s topline growth is still an ‘unexplored country’ by many brands.
The traditional perception around customer loyalty has pivoted to a new direction. More industries like consumer-packaged goods (CPG) and automotive have begun their forays into the loyalty space, while other industries that had already embarked on loyalty programs weren’t faring too well.
This is because loyalty is an ongoing process. Loyalty is not confined to when a customer walks into a store and redeem points, it starts much earlier - it begins the very first time a brand actually engages with that customer.
Loyalty is more about what is done in-between the transactions. It is about how customer behaviors are rewarded based on their engagement with the brand.
A thorough loyalty program starts with building a core strategy and understanding the customers of a given brand. It should cater to transactional and non-transactional (read experiential) benefits thereby enhancing the customers’ experience on both behavioral and emotional levels simultaneously.
To give a wider view, let’s talk more about recent industry-shifting trends in loyalty.
1. Redeeming customers spend double that of non-redeeming customers
One understated fact is that brands tend to focus unduly on new customer acquisition whilst often ignoring their existing customer base. They forget, or are unaware even, that a brand’s existing customer base actually has the potential to drive more sales and build up brand revenue.
We have a scientifically proven value delivery framework that supports this theory. For instance, we would review a group of customers who have redeemed points and compare it with a statistically similar group of customers who have not redeemed points over a period of time.
By deploying a machine learning algorithm (which we call the k-nearest neighbor), it has been noted that in successful loyalty programs- the redeemers group spend >2 times higher than the non-redeeming members. This number can vary anywhere from 2 to 19 per cent. While calculating this, we consider varied parameters like total sales, average visit, average spend per visit, and average discount percentage per customer.
2. Focus on building experiences and loyalty will follow
The number of unified customer profiles a brand can draw is mind boggling.
It thus becomes certain that a one-size-fits all loyalty program is not a sustainable approach in the long run. Brands must offer personalised experiences to customers based on their purchase behavior.
In fact, personalisation can’t be restricted to purchase behavior alone because customers exhibit different behaviors across different channels. A customer walking into a store will display a totally different behavioral model than the same customer opting for online shopping.
These different behaviors on different channels need to be rewarded differently. Therefore, brand should focus on building an omnichannel experiential model for customers.
Newer strategies like gamification have enabled higher customer engagement and many brands are incorporating such strategies in their loyalty programs. Brands have moved beyond the world of rewards and are now willing to incorporate innovative and experiential benefits to customers.
It is no longer a ‘discount-only’ game. It is more about how you make your customers feel in the entire purchase lifecycle, how you build and enhance a brand experience for them. Brands who have begun to think in this direction are definitely in for a longer sustainable growth strategy.
Research indicates that customers spend almost 50 per cent more with brands they are loyal to. Hence, building experiential benefits for customers is a vital key to have a loyal customer base.
For example, one of Capillary’s customers (a global FMCG brand), launched a ‘Spin the wheel’ feature on their mobile app in Vietnam. This gamification element gives customers a chance to access a variety of vouchers and rewards, and nudges customers towards more purchases. Within two months from the launch of this element, the brand saw their monthly transactions grow 2.5 times compared to the market average.
Brands which have begun to think in this direction are definitely in for a longer sustainable growth strategy. Research indicates that customers spend almost 50 per cent more with brands they are loyal to. Hence, building experiential benefits for customers is the key to growing a loyal customer base.
3. Loyalty: the strongest way of fetching first-party data
It is also a known fact that customers today limit the amount of personal data they share online. This is where procuring first-party data is gaining more importance and loyalty is the best means to fetch that first party data from customers.
Our research with BCG also states that while data can be the answer to everything, data privacy can’t be compromised. Given the norms, brands would need to culturally change their pre-defined marketing practices and must ensure transparency as part of their data strategies.
While this is one aspect, capturing non-transactional data is equally significant. It enables brands to create better ‘customer personae’ and leverage these to create an ideal reward system for them.
As data and customer engagement continue to rule the world for now, loyalty is here to stay and flourish. Loyalty not only impacts your brand growth in terms of generating topline revenue but it will eventually build stronger brand connect and foster meaningful relationships with customers in future.
The writer is the co-founder and CEO of Capillary Technologies.
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