It seems like common sense: good customer experience (CX) leads to positive business outcomes, including improved customer loyalty. And in most cases, that conventional wisdom holds true: Forrester finds that improvement in CX leads to growth in total revenue, much as increasing customer retention through loyalty initiatives can improve profitability fivefold or more. There are natural conceptual similarities between loyalty and CX as well. At their core, both are about making brand interactions positive enough to retain valuable customers and attract new ones. Yet many companies continue to think about loyalty and CX independently, as distinct undertakings, when a more holistic, comprehensive approach would have a significant multiplier effect on both CX and loyalty initiatives.
CX in decline?
Indeed, a new approach may be needed sooner rather than later. A different Forrester report predicts that in 2018, 30 percent of companies will see further declines in CX performance, and those declines will translate directly into a net loss of a point of growth. This reflects the belief that the easiest improvements to CX have already been realized and that, without more structural changes, the gains reaped from CX enhancements will taper off.
Companies may be able to mitigate this decline by better integrating their CX initiatives with their loyalty programs. Though they seem like a natural fit, many brands operate their loyalty programs as discrete earn-and-reward entities, unconnected (or loosely connected) to the overall customer experience. This is short sighted for many reasons, not the least of which is that it ignores the power of the data that lies at the heart of most loyalty programs.
Using loyalty data to build a tailored experience
Loyalty programs are effectively data collection vehicles that provide insights into member (or customer) behavior. This data, analyzed and actioned correctly, can inform so many CX improvements, from identifying customers’ positions in the purchase cycle, to contextually relevant messaging, to preventing drop-out at perceived pain points.
Most importantly, loyalty data can be used to create personalized experiences. Truly effective CX is fueled by data to personalize interactions in a way that engenders a desire to re-engage. This involves understanding where a customer is in the purchase and loyalty cycle and using that data, coupled with personally identifiable information, to orchestrate a tailored experience. This combination of customer intelligence and the ability to customize/personalize the point of interaction is only possible with a robust data set that is effectively shared and accessible to both CX and loyalty systems.
An integrated, data-rich loyalty program will be able to identify customers, what lifecycle stage they’re in, their spending history in terms of dollars and purchase frequency within a timeframe, and their preferred purchasing channel (in-store or online). With this information, companies don’t have to lean quite so heavily on attribute profiles or proxies to inform CX decisions. Instead, they can focus on providing personalized experiences to their customers.
Differentiated experiences are the ultimate non-transactional rewards
Of course, the benefits of a combined loyalty and CX approach don’t just accrue to the CX side; loyalty programs can also be improved by enhanced CX. Loyalty program members’ experiences – the earning and redemption process, omni-channel promotion and management options, the dialogue that occurs through notifications and social media – should be analyzed and executed within a CX framework. This is, in essence, just good loyalty program hygiene.
From a slightly different perspective, customer experience can itself be an integral cog to a loyalty scheme. Take, for instance, rewards for non-transactional activities such as signing up, writing an online review, posting on social media, or sharing a wish list. These are all “experiences” in the CX sense, and rewarding loyalty members for undertaking them is just as important for program engagement and can be as meaningful to the customer as any transactional reward. When these types of non-transactional rewards are structured correctly, personalized to deliver continuous value, and designed to create experiences that stand out as relevant and memorable, they can deliver a brand relationship that goes beyond transactions.
CX and loyalty: A marriage of more than convenience
Traditionally, loyalty and CX may have enjoyed a logical link, but in practice have been treated as standalone exercises and disciplines. But it shouldn’t be this way – by leveraging loyalty data effectively, incorporating CX principles into loyalty program initiatives, and focusing on the experiential aspects of earning and rewards, loyalty and CX can complement one another and deliver tremendous combined value. To achieve this, companies need to reexamine their approaches to both key areas and seek out the right technologies and partners to make the marriage of CX and loyalty work in harmony.
Does your company effectively integrate loyalty and CX? Merkle can help you reap the benefits of a comprehensive approach.