Digital Capgemini

Customer loyalty in the digital age

Author

Capgemini

August 14, 2017

UK customer loyalty programmes are transforming to adapt to the digital era, utilising cutting-edge technology to provide an increasingly personalised omnichannel shopping experience.

When loyalty programmes first appeared, the idea was simple; provide customers with a card that enabled retailers to track their shopping habits and in return, shoppers were rewarded with discounts on goods and services.

However, this purely transactional concept of building customer loyalty is being pushed out as demographics, technology and shopping habits change.

These evolutions are having a dramatic effect on retailers seeking to develop customer loyalty among an increasingly fair-weather shopper.

The advent of mobile device connectivity has radically restructured the sales journey, transforming it from a linear progression, to something more circular, with key steps occurring simultaneously through multiple platforms.

Shoppers have changed their habits using both fixed and mobile Internet platforms to compare products on the basis of price, availability and, critically, customer service, while often using traditional bricks-and-mortar retail outlets to complete purchases.

Around 80% of consumers use mobile phones inside a physical store to check product reviews, according to a recent study by website design firm Outerbox, underlining the advent of the omnichannel shopping era.

Combine this with the growing spending power of the notoriously choosy Millennial generation and it is easy to see why some commentators have branded the concept of customer loyalty as dead.

However, customer loyalty has not disappeared, although it has radically changed. The era of transactional loyalty may have passed, but forging new relationships with customers based on behavioural loyalty is alive and kicking.

“Retailers can no longer buy loyalty. Customers want a relationship with retailers,” says Bhavesh Unadkat, Principal Consultant, Retail Customer Engagement, Capgemini Consulting.

“They want a level of personalisation, they want a consistent experience.”

Twin track

This new paradigm is triggering retailers to use a host of technological solutions to dig deeper into shopper data to create a tailor-made, individual retail experience that connects with customers and keeps them coming back.

According to a recent study by UK marketing consultancy Rare, rather than being driven by reward schemes, 86% of customers report loyalty is now driven by likeability with 83% identifying trust as the key factor.

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In order to establish strong positive relations with customers, brands are working on two parallel fronts: ensuring a smooth and pleasant shopping experience combined with detailed customer data analysis to provide a comprehensive shopper profile.

Successful retailers are seeking to develop an omnichannel approach, offering customers a smooth transition between mobile, desktop and bricks-and-mortar sales and support channels, in synchronisation with customers habits, according to the results of a recent study by e-commerce platform design firm Tyzens.

One key trend that analysts expect to shape the future of retail and boost ease of experience is the growing popularity of mobile wallets, where payment card details stored on a mobile phone turn the device into a payment system.

The full potential of this kind of technology can be seen with the launch of online retailer, Amazon’s pilot Go store in Seattle in 2016, which has no checkouts at all.

Sensors located around the store monitor items shoppers collect and the total is automatically deducted from their Amazon account when they leave. Amazon plans to launch a Go store in the UK in the coming months.

What kind of checkout experience is the smoothest for shoppers? No checkout at all.

According to Tim Mason, CEO of Eagle Eye, which validates and redeems digital promotions in real-time, the ease of the shopping experience is key to building loyalty in this new age.

Rather than offering customers discounts, it offers them something more unique and valuable in today’s time-poor society: convenience.

“What is identified here with the Amazon model, is that there are plenty of ways of getting some data or even all of the data. No one of them is necessarily the right way but you have to do one or more of them in order to be able to make the data picture of your customers,” says Mason.

The phone as bridge between online and offline

According to him, better loyalty relies on linking people’s offline presence with their online one, all of which is tied to the ubiquity of smartphones.

“If you think about how much the smartphone enriches people’s lives. People use it to search where you can find something, once you have found where you can get it, you will then use the map to get you there. When you get there, you put your phone in your pocket and go and get the product. Job done,” he says.

Mobile wallets are likely to soar in popularity in the coming decade, transforming the checkout experience - Fotolia Mobile wallets are likely to soar in popularity in the coming decade, transforming the checkout experience. – Fotolia

For retailers, the removal of checkouts speeds up the purchase process, allowing greater customer footfall, decreased frustration for shoppers waiting in queues, and decreased staffing costs, with the added benefit that monitoring shoppers throughout their time in store provides a more detailed customer profile.

Adding a gamification element to loyalty programmes is also an increasingly effective mechanism to boost satisfaction and engagement among brands, such as Virgin Red’s 2016 loyalty app treasure hunt.

The campaign sought to encourage customers to seek out digital gold coins scattered across several Virgin brand websites, with larger coin stashes unlocking increasingly more valuable prizes, with the top prize being a trip to Necker Island, a tropical getaway owned by Virgin’s CEO Richard Branson.

In addition to a large number of downloads of Virgin Red, the scheme received huge international media attention.

One downside of creating dedicated apps as a mechanism to build customer loyalty is overcoming consumer reluctance to download the apps.

This, combined with the fact that people are spending a larger amount of time on social media as a proportion of their overall online activity, has led retailers to increasingly seek to build loyalty through channels such as Facebook.

Digital trends

Chatbots are critical to this effort to gather detailed consumer data in order to personalise the shopping experience, offering retailers a cost-effective mechanism to interact with clients providing 100% on-message communications, through social media messaging platforms – the increasingly dominant communications channel.

As Eagle Eye’s Mason points out, brands which fail to make best use of their customer data risk being overtaken by the Internet’s A-list.

“If you think about the world in which we live in, Facebook, Google, and Amazon are absolutely obsessive about getting more and more and more data about you in order to personalise and target what they do for you,” says Mason.

“You can’t leave artificial intelligence and its application to your business to solely be the province of Amazon, Google and Facebook. Otherwise, their business would be more intelligent than yours and that is not a good place to be.”

The ubiquity of connected devices has transformed the purchase journey into something less linear and more parallel - fotolia The ubiquity of connected devices has transformed the purchase journey into something less linear and more parallel – Fotolia

Messaging apps are hugely popular among the public. According to a report by BI Intelligence, the top four messaging apps have a larger combined user base than the top four social networks.

They also provide a convenient means to onboard customers to loyalty programmes, adds Capgemini’s Unadkat.

“For example, you see an advert that says sign up with us, or engage on a topic of interest with us that is aligned to an audience a retailer is looking for,” he says.

“The chatbot can engage in a conversation around your music preferences or ask for access to your Spotify account because it might be able to drive an association between the music you listen to and the fashion you might be interested in,” says Unadkat.

A three-minute chatbot engagement gives retailers around 20 times the data they might get through a traditional approach, says Unadkat, and is less arduous for the consumer than filling out a form.

Loyalty as a new opportunity

 As artificial intelligence-powered chatbots become ever more sophisticated, they will be able to harvest even more metadata from interactions with clients that will inform how they communicate with customers in the future, says Will Young, CEO and co-founder of Rais, a company that develops AI software for e-commerce.

“The AI will break down all the context of that message if you like, learn from that and continue to just optimise and improve delivery of that,” says Young.

“It might be that ultimately the AI can completely create all of that content within the message, not just dragging in images from a website but actually the written content as well.”

Customer loyalty is not dead, but it has shifted dramatically. Adapting to the new era will prove a challenge for many but this tremendous opportunity for companies which get the combination right, says Unadkat.

“The retail market is competitive. There are such profound benefits to creating a successful loyalty programme, and such space in the market to achieve that,” he says.

“It might not exist as a programme that gives you points with a card. It will evolve into being loyalty as an outcome where you are rewarded but in different ways and you are more in control of that.

“I think the key goal is to give your customers great engagement, great experiences and great service, then loyalty is the outcome.

“That is the big shift. It is not a loyalty programme where loyalty is bought, it is about human loyalty, a two-way relationship with mutual benefit.”

Refocusing on the drivers of loyalty

Bhavesh Unadkat Bhavesh Unadkat
Principal consultant, Retail Customer Engagement, Capgemini Consulting – © Capgemini

Retailers recognise that customer loyalty schemes are not giving the returns they used to. When talking to retailers, I hear the same feedback: The schemes are not getting the same level of engagement. They are not getting the same traction as before. They aren’t getting the margins they used to get to make these programmes profitable in themselves.To understand why loyalty programmes aren’t working as well as they used to, you need to start thinking about them from the customer’s perspective. There has been a cultural shift; the younger generation has less of a reason to be loyal if they are not getting exactly what they need.

Talking to consumers, we hear that they feel there is not a lot of differentiation between retailers and that loyalty programmes are a bit “me too” – there is not much to choose among them. They don’t want to hear when their supermarket gives them a 10% discount, and then hear a friend is getting 15% off from the same supermarket.

To bolster loyalty from customers, retailers need to focus on control and transparency. This means thinking about the core drivers of loyalty. There needs to be an element of reciprocity, in the relationship, so both parties need to benefit. It also needs to be one which is long lasting. Retailers can’t just think about the short-term gains. Don’t just think, “Ok, here’s an offer and that will win you over.”

Retailers need to take a good hard look at exactly what their current programme offers and what their customers think and feel about it.

When you analyse the situation, think about why something is failing and what the feedback about improvement might be. Develop a prototype, then see how that works in trials. See what feedback you get and see if it meets your objectives. Once the scheme is refined, make it operational and roll it out across the ecosystem.

If you give the customer a better experience, a better product and service proposition, the outcome is loyalty, human loyalty. With that your customer becomes a brand advocate and will tell friends how great their experience was.

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