In a new blog series, we sit down with our board advisor Jan-Pieter (JP) Lips, to define customer loyalty, how brands are trying to differentiate themselves through loyalty strategies and what the future of loyalty looks like.
JP is an Executive at Adyen, a payments platform that delivers end-to-end infrastructure to enable frictionless payments for some of the world’s biggest brands. JP was previously co-founder and MD of Nectar, the UK’s biggest loyalty programme.
Customer loyalty is an evolving term in business. How would you define it?
Loyalty is the extent to which consumers willingly repeat-purchase with a given brand.
It’s often construed as customers’ unconditional allegiance to a brand or business, as a binary status of being loyal or not loyal. That leads some people to say that loyalty is dead, because consumers are being more promiscuous in today’s world of greater choice and accessibility. But loyalty is relative – even the best customers of many businesses spend money with their competitors today. And when customers become more promiscuous, the pursuit of loyalty becomes more important, not less.
How has the approach to customer loyalty evolved?
The biggest evolution has been the ability to capture and leverage data to shape how companies achieve loyalty.
Retail-based loyalty began as a basic reward, such as a stamp to incentivise the customer to repeat return. The implementation of electronic transactions with programmes like Clubcard and Nectar was a game changer that enabled brands to understand shopper behaviour in store. The growth of online commerce has further transformed loyalty, enabling brands to capture more granular data and interact with consumers 1:1 in real-time. This has empowered companies to build far more detailed customer profiles and consequently create personalised and engaging loyalty schemes that themselves are far more measurable. And through good use of technology, the store environment is catching up with online in terms of sophistication of marketing.
Can you elaborate on the use of data?
Data, and the insight it can generate, is central to generating loyalty. And more and more businesses have access to customer data, due to the digitisation of commerce and the proliferation of loyalty programmes. The key is figuring out how to best leverage this data to create strategies that build loyalty.
For example, a bank has access to a mountain of data about how their customers spend their money, often reflecting much about how they live their lives and their day to day behaviour. This insight is extremely valuable, but has not always been utilised.
We’re currently seeing digital banks harnessing their data to deliver activities around increased financial planning, inclusion and responsibility, through additional services like real-time spend trackers and caps.
While these often go beyond their ‘core’ offering, they are services of real value to an often-younger customer group, as they learn to manage and optimise their finances. Conversely, at the opposite end of the same sector, premium banking customers are looking for a very different proposition, in particular products, services and benefits aligned with lifestyle-based needs, which are different to those of a twenty-something.
Why have some companies struggled when it comes to leveraging data to create value-driven customer loyalty programs?
Many companies struggle with creating a single view of their customers. Despite having access to rich data, much of it comes from different pockets. For example, many retailers will have an ecommerce site separate from their retail operation, which creates two worlds that usually don’t talk to each other, generating very segregated pools of data. These retailers are omnichannel, but the channels are not truly connected, and this restricts the flexibility of the customer and leads to operational costs in the retailer.
To address this, many companies are working to create a single customer view and unify their systems with the shopper at the centre. This is often referred to as Unified Commerce; creating a seamless experience across all different channels.
Unified Commerce strategies connect the customer journey to create a more seamless, ‘branded’ experience across each interaction or access point – physical store, online marketplace, ecommerce site, mobile and social.This gives brands the ability to reach their customers in more ways and create a tailored customer engagement for each access point.
I have had much exposure to the huge potential of a Unified Commerce approach with Adyen, where we enable companies to accept payments from any channel, such as mobile devices, on-line or point of sale, using a single platform.
Today, the most effective and engaging customer loyalty programs come from brands that unify their approach and infrastructure. Businesses that allow silos to persist in their customer engagement will not be able to get the most out of their data and consequently their loyalty programs.
So, if a company has a unified data set and infrastructure, they can easily implement an effective customer loyalty scheme?
Not necessarily. It’s not always easy to find the ‘so what’ and turn data into something that is actionable. In some industries it’s well developed - grocery companies do it very well because the behavioural data they receive is repetitive and frequent, giving it great predictive value. They are able to clearly profile customers based on that data and gather invaluable purchasing information that can be used to optimise such things like inventory, product placement, branding and in-store advertising.
What advice would you give to brands looking to upgrade their customer loyalty using data?
Be very clear on your goals when it comes to your data. Accessing (or acquiring) customer and/or behavioural data is half of the job. It is how brands use data to enhance, personalise and refine their products, services and customer engagement to add value that’s the key.
There’s a plethora of solutions in the market that can help businesses access, interpret and leverage data. Most businesses realise the importance of data and are eager to leverage it. In their eagerness, some invest heavily in tools and solutions to utilise or analyse it further, but often fail because they aren’t clear on what they exactly want to achieve.
I would also encourage business to integrate data expertise into their business or strategic teams. Too often these teams are small or siloed from the rest of the business. With so much gold lying within a company’s customer data, it’s essential you include your data specialists in strategic planning.
Finally, if you aren’t deploying a Unified Commerce approach, you should!
In terms of the benefits of leveraging data for generating customer loyalty, what mindset should business have?
The most effective loyalty programmes generate their biggest impact over the long-term, yet many businesses are quite short-term focussed (i.e.acquisition over retention) due to such factors as strong competition, and a desire to see immediate measurable results. The best use of data should combine the long and short-term - create quick wins whilst building towards something more structural, generating a better understanding of how your customer responds and behaves.
Finally, what does the future of customer loyalty look like?
The end game of customer loyalty is a fully personalised experience. Something I have always believed is that all marketing will eventually be direct marketing, which will be the bedrock of customer loyalty strategies.This may sound resource intensive but increased automation will make this increasingly achievable, and impactful.
We will see an almost complete turnaround to the experience you would have had if you were shopping at your local corner store – the owner knows you, what you like, what you don’t like, and gives you recommendations on what to buy – a far more personalised experience.
Furthermore, payments as we know it will likely disappear. I can see stores being like Uber – a customer walks in, gets what they need and leaves, with the transaction happening seamlessly.