Grey HTK Outline
Grey HTK Outline

Loyalty in decline? Why insight is the answer.

Very rarely is there a compelling business case to run a points-based loyalty scheme. 

Loyalty experts will point at the success of airline programs to retain frequent fliers – but that’s a genuine edge-case in the spectrum of program viability.

The emotional connection of a frequent flyer to an airline – where they enjoy perks such as premier lounge access and routine seat upgrades – could more accurately be described as the emotional repulsion to the thought of flying cattle-class economy along with everybody else.

The customer expectations of an economy seat are low, and the perceived benefit (for no additional spend) of the frequent-flyer perks is genuinely significant. If I can retain those perks, simply by staying with the same airline, why not?

And that is why the question is important. Why do people choose to stay with some brands and defect from others? In simple terms, our view is that it comes down to expectations: how well they’re met (or not), and the contextual perception of what an alternative future might look like elsewhere. 

To use an analogy, we can think of customer loyalty as a bank account. Every time my expectations are exceeded, money goes into the account. And conversely, every time my expectations are missed some money comes out. When the account is empty, the loyalty (and likely the customer) is gone.

The size of a deposit or withdrawal will be largely proportionate to the height of emotions evoked at the time – from anger, frustration and anxiety, through to feeling pleased, valued and cared for.

Positive emotions create business value (or in other words,smiles on faces put money in the till).

Going back to the air miles example, it would take a whole heap of flight delays, bad meals and even lost luggage to overcome the enjoyment, relaxation and smug feeling of a free flight upgrade.

Expectations are being set all the time, and the challenge is to keep up.

Loyalty exceeding expectations

Of course, the importance of meeting and exceeding customer expectations isn’t a secret. The journey of customer experience from buzzword to accepted discipline is proof of that.

But there seems to be a disconnect between acceptance and execution. Knowing that CX matters doesn’t automatically equate to great experiences for the customer.

Take the concept of surprise-and-delight, which spiked in popularity a few years back. It’s not a bad idea in itself, but it’s one that is often taken to extremes – more of a pull-out-all-the-stops PR stunt than a long-term commitment to customer experience.

This masks the fact that, for most brands, there are plenty of ways to delight customers on a daily basis, to go above and beyond what the competition does without breaking the bank.

The key lies in recognising each customer as an individual. And using real-time insight about their needs and relationship with your business to truly personalise the experience, meeting and exceeding their expectations in the moments when it really counts.

For illustration, suppose a new online customer has recently bought an expensive pair of shoes, but had to send them back (perhaps because the sizing came up small) and the replacement pair was dispatched more than two days late. What should the business do? 

Here are the facts:

  • First-time customer
  • No accumulated brand loyalty (and we know that first impressions count)
  • Expensive pair of shoes
  • Anticipated lifetime value of approximately 5x the sale price
  • Return process was handled poorly
  • Negative sentiment (bad customer experience)

Arguably, the business should make things right through a value-based apology – free shipping for the next 12 months or a 30% discount on the next pair of shoes purchased, since the customer’s expected lifetime value is high. The level of the response should represent an appropriate investment in the future customer relationship.

Whatever the gesture, it should be made quickly – so it seems that the business is jumping on the issue and genuinely cares for their customers. And it should be easy, requiring zero effort for the customer to benefit.

It’s the kind of gesture that turns a bad experience into a positive one, by making a customer feel truly appreciated. To return to our bank account metaphor – it doesn’t just cancel out the debt of a poor experience, it puts credit into the account.

Tools for a new era

If we’re being honest, the number of times an experience plays out like the one above is negligible. For most customers, it involves chasing the brand for updates, crossing their fingers that the next pair of shoes fits, and wondering whether they should try shopping somewhere else next time around.

At most, they might get an apology email and an invitation to leave their feedback. Not the kind of experience that delights or wows.

So what’s holding brands back? In a world where everyone is talking about the value of delightful customer experiences, why are so few brands pulling it off?

In our view, the reason is customer insight. Or rather, a lack thereof.

And by that, we don’t mean focus groups, surveys and first-party research. Those may be useful tools for big-picture strategy. But for the day-to-day task of delighting customers in the moment, brands need a dynamic, real-time awareness of what those customers are doing, how their relationships are changing and what’s driving them.

And for most brands, that kind of insight is notoriously hard to come by. Fortunately, it doesn’t have to be.

Advancements in machine learning and artificial intelligence technologies – primarily by Amazon, Google and Microsoft as the larger cloud vendors – has introduced new opportunities to:

  • Better understand your customers and their propensity to buy or churn.
  • Engage and satisfy your customers in real time through automation.

The value of AI is that it can create truly unique and individualised interactions at scale, so long as it’s got enough data behind it. Not only can it enable brands to generate the deep customer insights they need, it can also automate the application of those insights to individual conversations.

Let’s go back, for a moment, to our customer with the wrong-sized shoes. With some AI-powered insight and automation in the background, that personalised response to their poor experience could be done automatically.

Negative sentiment, high lifetime value and low loyalty are all insights that can be generated based on streams of customer data. And knowing when and how to respond – in this case, with an email offering an apology and a personalised gesture – is just the sort of thing AI-powered decision making excels at.

And this is where the key opportunity lies. Brands that are able to make good use of emerging technologies – now – to delight and engage their customers will be on the front foot when it comes to customer experience.

What’s ahead…

Ultimately, this is the driving purpose behind our rebrand of the Horizon platform and the new products in our pipeline.

We believe that if brands can utilise machine learning and AI effectively (and responsibly), there’s a great opportunity to revitalise retail, curb the discount-driven shopping culture, and truly improve each customer’s experience – leading to competitive advantage and a sustainable, measurable uplift in business performance.

Our new products are aimed at making this technology accessible – through proprietary models and packaged use cases – to brands of all sizes, without the need for data scientists.

Stay tuned.

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