Customer Retention: Q&A with Loyalty360

The following has been re-posted from Loyalty360. The original post can be found here.


Customer retention in 2018, regardless of industry or brand, is completely different than it was even five years ago. Daniel Kahan, Consultant with W. Capra Consulting Group, sat down with Loyaty360 to discuss common mistakes businesses make with customers, how businesses can understand their customers better, and meeting customers basic needs.

What are some of the common mistakes that either your clients make, or you’ve heard about that businesses make in terms of customer retention?

One of the biggest mistakes that a company can make is to buy too much into trends. It’s important to maintain a pulse on the market and act on any influential forces, but those who spend all of their time chasing trends deprive themselves of the capacity to lead.

A prime example in today’s ecosystem is the emergence of emotional loyalty as the next great wave in consumer engagement. The market has begun to discover that the functional view of loyalty, in and of itself, is a limited view of consumer loyalty. Some merchants, in turn, have been discussing how to abandon the functional model in favor of an emotion-based strategy. At first blush, this makes sense—in a purely functional model, once a business identifies the balance of how much they can reward a consumer without taking too much of a hit to ROI, what they’re left with cannot constitute a loyalty strategy. But that’s not to say that it’s useless. At its best, functional loyalty will be treated as a component of and a means to attaining the consumer’s emotional loyalty.

Then, of course, there’s whatever comes after emotional loyalty, which the most clairvoyant brands will be in tune with.

Why should big brands with established reputations care about their existing customers just as much as others?

Those at the top can best attest to the adage—“Uneasy lies the head that wears a crown.” The advantage of startup mode is the ability to experiment with new consumer engagement strategies without attracting the same scrutiny that a big brand may succumb to. While experimental failures may affect your bottom line, brand reputation remains in a growth phase.

For top-tier brands, any oversight in retention models can be worrisome. In retrospect, it’s easy to identify the closing of Blockbuster and Borders with a failure to act on digital trends—it’s less easy to spot this in the present. For example, when we think about Chipotle’s short-lived loyalty strategy in the wake of an E. coli outbreak, only time will tell if what we are witnessing now is a warning alarm or a death knell. Regardless, one thing remains certain—smaller and mid-level brands have their eyes on the giants, and they’re waiting for their opportunity, at the ready to convert new customers.

What is your advice for brands that want to know their customers better?

Big data may seem a tired concept, but many brands still struggle with understanding core customer experience factors—where did the first impression occur, how did the consumer behave downstream, and what can we learn from the customer’s buying habits to influence how we interact with them in the future?

As we discussed earlier, many brands are in the process of re-evaluating their loyalty strategies in light of an appeal to emotional loyalty. As the market progress, big data will remain a relevant component of personalization—yet, along with the revolution of emotional loyalty comes the ushering in of the privacy era. Consumers are becoming more alert to, and more suspicious of, companies collecting their data. This means that brands must tread a fine line to get to know their consumers in a way that eschews what may be perceived as intrusion. Once the user clicks the unsubscribe or opt-out button, the brand has lost a major opportunity to learn more about that consumer.

Do you see customer retention continuing to evolve and increase in difficulty with the shifts in consumer preferences? 

Despite whatever changes are occurring in the marketplace, customer retention will always come down to the KYC doctrine.

In the simplest terms, a customer will not return if their needs aren’t met. While the means to meet their needs may evolve, the objective remains to deliver satisfaction. In today’s world, that means not just meeting, but anticipating customer needs. Those who are most successful on this front may not necessarily be those organizations who employ the most complex predictive algorithms—it will be those who apply the right inputs.

For example, if Starbucks hadn’t recognized that the public was seeking safe holiday presents, and that consumers were increasingly leveraging gift cards to satisfy this need, they wouldn’t have established the program that evolved to ACH, and then, later, to mobile. By taking steps to understand consumer priorities, they implemented a mechanism by which they can further customize consumer segments to understand how consumers interact with their brand, both on a personal and social level.

The most successful businesses will not be satisfied with an all-star performance during direct customer touchpoints only—they will maintain their all-star performance even in those moments when the customer’s attention is seemingly elsewhere. These businesses understand how to place the customer’s brand before their own brand. They know that retention relies on entrenching themselves in the customer’s lifestyle.

So we’ve touched on big data and emotional loyalty (one of the year’s biggest buzzwords), and the crux of both topics, however sophisticated they may sound, comes down to the same simple letters that retention has always come down to—KYC.

What technology should be utilized for businesses looking to increase retention?

The answer will always depend on the brand and vertical, which is to say the consumer demographic. How a brand’s consumers interact with technology should, to a certain extent, guide the merchant’s technology stack.

CRM providers that provide advanced data modeling, loyalty hosts with robust and configurable platforms, front-end developers that offer secure multichannel solutions and location-based interactions with the consumer at critical junctures in the buying cycle, as well as fraud management platforms should be leveraged for any long-term strategy, but the right technology will be customized to a particular brand’s environment, no matter how that environment may change.

Once again, it all comes back to the consumer. Technology aims to solve problems for consumers or businesses (if a consumer has a problem, then the business has a problem). Consumers, in turn, adapt their behavior to this new technology. Then, as consumers evolve, new problems arise for technology to tackle. The right technology stack is the one that can efficiently progress this cycle to support the brand’s success.

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