Loyalty is dead! True or false? Part I

Digitalization and increased mobility have brought a radical change in customers’ expectation and behavior. Nowadays, when information is travelling at the speed of light, the effects of customer experience is exponential. Customers talk to each other about their personal interactions with a brand, providing each other with both positive and negative experiences that could affect one’s perception. Consequently, the word-of-mouth effect expedites the speed of which information travels. Customers are more demanding and knowledgeable and are constantly evaluating and re-evaluating their purchasing decisions, meaning that they will choose the brand that is most relevant to them at a specific moment.

The loyalty landscape is in a flux

Many companies struggle to find new ways to keep their customers loyal and to grow their share-of-wallet. A successful loyalty strategy is still an essential factor to drive sales, profitability, and competitive advantage. However, the loyalty landscape has changed. For years, the traditional model of awarding points for purchasing behaviors was the mainstay of recognizing loyalty. Today, this sales-oriented “spend-and-get” logic works to a certain degree, but customers are more demanding when it comes to companies’ incentives to win their true devotion. Thus, customers expect individualized treatment that makes them feel valued across all channels and touchpoints of their customer journey.

As loyalty is a key factor for the drive of sales, profitability and competitive advantage, almost all companies try in different ways to achieve loyalty. It is clear that an increased number of brands move beyond today’s programmatic and transactional approaches to focus on drivers for customer value creation. By considering the loyalty aspect as integrated activities provided by the business model at every stage of the customer lifecycle, this makes loyalty work a lot closer to branding and customer experiences than sales.

In this context, more traditional mechanisms to build loyalty – loyalty programs, sales incentive programs, CRM-communications, and enhanced service level – are up-dated and enhanced to better respond to customer needs. However, without an ecosystem that creates real value for customers, companies will struggle to inspire long-term customer loyalty.

The future of successful loyalty programs

Bearing all of this in mind, one can understand that loyalty is not dead! However, to focus solely on the programmatic and transactional approach belongs in the past. Nowadays, winning and sustaining the loyalty of customers has turned into an ongoing game and has forced companies to turn the traditional customer journey into an appealing ecosystem, which is emphasized in Part II.

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