If you want to embed loyalty into your brand as a standard behavior the first step isn’t simply the fine-tuning of your existing Customer Value and Loyalty programs.
That would amount to flying blind, albeit with good intentions. Rather, it’s breaking down loyalty into its component parts and understanding the personal motivations that define what loyalty really is and then building a program (or programs) that, via engagement, builds loyalty.
This step, in the rush to act to increase loyalty, is often overlooked. The tendency to want to walk before you can run isn’t uncommon in any area of business in which there’s pressure to innovate and achieve results quickly. But it pays to pause for a moment and dig a little more deeply into what motivates loyalty at a psychological level. Once you master that topic then it should become easier to design loyalty programs that are far more effective - because they will meet customers’ needs, rather than just your own.
And why? By understanding the customer you can increase engagement with more than 200%
With that in mind, let’s look at the types of loyalty (yes, there’s more than one) in a little more detail. They are:
Heart Loyalty, also known as Affective Commitment
Put simply, this type of loyalty happens when a customer stays with a brand simply because he or she wants to. This sort of affective commitment to a brand is product-driven and occurs when customers are very emotionally invested in a company that delivers products they love. The good news: Heart Loyalty is reasonably simply to achieve. Generally, it involves delighting your customers with a highly personalized experience, usually manifested in a thoughtful and well-designed rewards program that delights the end-user by anticipating his likely motivations.
Head Loyalty, also known as Continuance Commitment
This sort of loyalty happens when a customer feels like he or she should remain with a brand. ‘Should’, as we know but must underline anyway, is not the same as ‘want’. Head Loyalty relationships may last for a while and during that customers may engage in repeat purchases (and might even become heart loyal customers), but they have their limits. Valuable behaviors such as referrals are a bridge too far and these customers are much more susceptible to competitive offerings that can match the value your brand provides. As is often the case with continuance relationships, when a promotion ends the commitment ends as well. These end-users want the most value for their money on a continual basis and their loyalty is to the offer rather than the underlying brand itself. To retain Head Loyal customers, the best tactics are continuing promotions, free trials, and special offers. But the real goal is to turn them into Heart Loyal customers.
Hand Loyal customers
These are the customers who tend to buy out of habit. They buy the same brand every time, without checking for price or for what else is on sale. Hand Loyal customers are a ‘nice problem’ to have, but the danger is taking them for granted. Your CVML program needs to manage these customers by creating highly engaging offers that promote more regular contact, bringing them more closely into your brand fold and thus turning their habitual choice into some more natural and based on a higher level of actual commitment.
Beyond these three types of loyalty (and you will have all three present among your customers) there is one other issue to take into account; not a form of loyalty itself but the question of normative commitments. Normative commitments arise from a sense of obligation rather than loyalty (for instance, a contract) and when the circumstances that drive the commitment are gone, the customer will depart as well. Negative feelings often accompany these commitments and, dangerously, they can spill out into conversations with peer groups which can seriously damage the reputation of a brand.
In short, this article is really about the bedrock required to build an effective CVML program. It doesn’t start with platforms, technologies, offers, and services. It starts with understanding the different types of customers in your database and realizing that each segment requires a different approach, a different marketing technique if you really want to build a loyal customer base and maximize RoI.
Here are some powerful results:
By understanding high value customers’ behavior, their needs and communicating with them the way they feel appropriate (“we value you, we truly appreciate that you are our customers and here is a special offer for you”) we could engage nearly 80% of an operator’s high value customer group.
Here is another great case proving that, by defining different customer segments and using differentiated communications outreach, one can increase loyalty program acceptance rates by as much as 37%
We (at Evolving Systems) can help you to do that. If you’d like to discuss this further, please contact us.