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Reimagining customer relationships: What is loyalty in an omnichannel world?

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19th Aug 2014
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For retailers, the balancing act between being relevant and being too 'big brother' is becoming ever more precarious.

Customers’ expectations are a moving target and companies’ capabilities are advancing at unprecedented rates. Amid the proliferation of personalisation and CRM technologies, customers have come to expect retailers to know who they are, what they purchased, and their preferences for interaction, but to not go so far as to invade their privacy and sense of security.

Retailers are implementing customer-focused, omnichannel capabilities to meet these evolving expectations, but the transition has revealed a lack of foundational capabilities, siloed data, and complex legacy ecosystems.

Rising bar of shopper expectations

As new customer experiences continue to rise, there is a significant increase in demand for omnichannel services. Customers not only expect to connect with retailers seamlessly across channels, but also expect personalised communications and targeted offers. The 2013 Cognizant Shopper Study revealed the top three personalisation factors that influence purchase behaviour.

  • Special treatment based on loyalty: The top personalisation action rated by consumers in a store is receiving special treatment based on loyalty. This includes exclusive shopping events, pre-sales, and additional discounts.
  • Acknowledgement of status: This can be expressed by dedicated customer service, customer appreciation letters and personalized communication.
  • Personalised offers: Customers are most likely to offer retailers personal information in exchange for loyalty rewards, allowing retailers to deliver offers based on purchase history.

A successful omnichannel loyalty programme has the ability to deliver on all these expectations by breaking down silos across the enterprise. A true omnichannel loyalty programme will engage the customer at the right time, at the right place, through the right channel, with the right message.

The imperatives of omnichannel loyalty

Omnichannel loyalty programmes engage customers with relevant promotions, earning opportunities, offers and communications across every channel throughout the entire shopping experience. A true omnichannel programme delivers everything traditional loyalty programmes promise - behaviour tracking and analysis, improved customer engagement, customer acquisition, larger transactions, repeat purchases - and much more. Additionally, these programmes inspire cross-channel engagement that deepens customer engagement and encourages a broad range of positive behaviours - anywhere and anytime customers want.

When executed correctly, an omnichannel loyalty programme can help identify customers, connect online and offline data to better understand indicators of purchase, deliver timely and relevant experiences, and motivate and reward customers for key behaviours that drive sales. Investing in omnichannel loyalty is crucial for retailers for a variety of reasons.

Firstly, traditional loyalty programmes do not reward loyal behaviours. Most traditional programmes reward “spend” rather than “engagement”, and do not reward behaviours that lead to purchase or influence others to purchase. Secondly, cross-channel engagement leads to sales. Engaged customers are 23% more profitable while actively disengaged consumers cost 13%. Thirdly, customers are loyal to omnichannel retailers. Around 80% of Americans indicate they are more likely to become loyal to retailers who provide a seamless shopping experience across devices. And lastly, omnichannel loyalty programmes drive preference. Many demographic segments indicate that they are more likely to choose a brand because of a robust loyalty programme.

Improving customer experience is at the top of mind for most major retailers. However, in a Forrester study, only 37% of companies listed customer engagement as one of the top business objectives for loyalty campaigns. Moreover, only 42% of the companies polled reported that their loyalty programmes offered an experience-based campaign versus strictly discount-based.

Omnichannel loyalty remedies this problem by placing customer engagement much higher on the priority list. With the current trends in place, this will undoubtedly continue as a response to customer expectations and buying behaviour. Omnichannel loyalty is indeed all about delivering the right message at the right time in the right way across the channels the customer chooses.

Building blocks of an omnichannel loyalty programme

Although it may seem overwhelming to transition a programme to the omnichannel paradigm, building an omnichannel loyalty programme does not require a complete reboot of an existing programme. Incremental adjustments to an existing loyalty programme have the potential to generate substantial gains. In order to enable an omnichannel loyalty programme, retailers should:

  • Enable loyalty functionality such as enrolment, accrual and redemption across all channels.
  • Reward customers for shopper activity that go beyond purchase alone (such as social interactions).
  • Stay connected with customers through social media, local and mobile technologies.
  • Ensure a seamless experience and consistency across all loyalty interactions.
  • Make loyalty offers and communication relevant and compelling through sophisticated use of data.

Throughout the entire process, it is critical to focus on a few factors:

  • Start slow: There is no need to do everything at once. Make incremental changes and build on success.
  • Take advantage of existing data: Use customer data to create relevant experiences and strategies. Track everything and measure all results.
  • Use campaigns to test: Individual omnichannel loyalty campaigns can serve as a testing ground for larger strategies.

The omnichannel view of customer

Retailers must ensure they are focusing on strategic goals when implementing an omnichannel loyalty programme. Although new technology and tactics are required, especially when it comes to the collection and use of data, the fundamental goals and resulting benefits of effective loyalty programmes are unchanged. Through a unified view of the customer, retailers can deliver differentiated messaging in the most cost-effective way, improving profitability and competitiveness.

Shannon Warner is assistant vice president, retail consulting, at Cognizant.

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