In a world of ever-increasing customer expectations, brands have to provide a truly customer-centric, one-to-one experience that anticipates—and adapts to—each individual customer if they expect to build long-term loyalty.
Brands need to change their mindset
Marketers understand that the customer experience is critical in building relationships with consumers. Yet they still rely on traditional product-centric strategies and promotional offers to drive purchases. Rather than generating loyalty and increasing the lifetime value of a customer, these types of transactional offers tend to create short-term vs. long-term customer relationships.
By putting transactional relationships at the center of their strategies, brands are leaving a lot of money on the table. McKinsey estimates that companies could improve revenue and customer retention by 10%-30% through personalizing customer journeys and building a more loyal customer base.
Product-based marketing models also drive marketers to focus most of their budgets on customer acquisition. But acquiring customers is more expensive and yields less profit than retaining existing ones. Loyal customers are also more likely to try new products and outspend their newly acquired counterparts. Consider that more than 40% of an online retailer’s revenue is generated by just 8% of their customers.
Personalizing a customer’s experience also increases their lifetime value (LTV) by giving them continuous reasons to purchase. Statistics show loyal customers are worth 10x more to brands than their initial purchase, and every 5% increase in loyalty can increase the average profit per customer by 25%-100%.
The message here is clear: to encourage repeat business and build lasting relationships with customers, brands need to personalize every aspect of the customer experience, from offers to proactive service to loyalty programs built around each individual’s needs. This may sound daunting, but with the right tools and a shift in strategy, it’s something your company can achieve.
When trying to build a customer-centric marketing plan, marketers often focus on segmenting their audience by categories like demographics, psychographics, lifestyle and habits. But this type of segmentation doesn’t create a tailored experience on an individual level.
Instead, marketers should focus on using customer data to build a single view of each customer, then finding the right solutions to turn that data into a fully personalized customer experience (also known as 1:1 personalization).
With all the new privacy regulations being passed, collecting customer data may sound like a complex challenge, but in reality it can be very simple. That’s because many of your customers will opt in to have their personal data collected.
Why would they do that voluntarily in this era of privacy panic? 76% of customers expect companies to understand their needs and expectations, and that’s not possible without data. If you can demonstrate that you’re using their data to truly improve customer experience, customers are usually more than willing to opt in.
A great example of this is Amazon. We all know the company collects a ton of data on its customers, but in return, it delivers a buying experience customers clearly prefer. Amazon’s personalized product recommendations, subscription value-adds, delivery offerings and checkout settings all create the impression that the eCommerce giant cares about each customer’s needs. This is vital for building trust, and 95% of customers say they’re more likely to be loyal to a company they trust.
Customer loyalty programs are ideal for gaining your customers’ consent to collect and use their data, because they deliver tangible benefits for opting in, like rewards points, discounts and exclusive offers. Marketers are also rewarded with detailed individual data. Not only do loyalty programs turn anonymous users into known customers, they also reveal a customer’s purchasing behavior, earning/redemption behavior and coupon use, along with providing third party data on their social activity.
Most importantly, your customer loyalty program gives your brand a clear avenue to fully personalize your customer experience.
Now that you have a wealth of data, what do you do with it? Some companies use it to group their customers into microsegments—but like standard segmentation, this can only personalize to a segment or group of people.
To achieve true 1:1 personalization, brands must create and use a single-view of the customer to better understand what motivates them to act. That information is used to create personalized offers designed to drive engagement. Increased engagement will improve brand loyalty and therefore increase the lifetime value of the customer.
If this sounds like more than your marketing department can handle, the good news is that there are machine learning (ML) and AI solutions that can handle it for you. These technologies continuously analyze each customer’s changing behavior and fine tune the offers. This approach enables offers to become smarter and more effective with each customer interaction, resulting in a better experience, while driving significant increases in incremental revenue and customer lifetime value.
In the context of your customer loyalty program, an AI and ML solution can develop unique offers for each individual customer, and continue to scale automatically as your brand grows. Target’s new Circle loyalty program is a good example of this; according to a company spokesperson, “As guests shop, Target leverages information about their shopping behaviors and purchases to share relevant offers that create an even more personalized, seamless shopping experience.”
Customer expectations are at an all-time high, so a personalized customer experience is a must for every company. But you don’t have to be a global retailer like Target and Amazon to implement one successfully. The right technology can help any company transform their customer experience with 1:1 personalization.
Learn why segmentation alone can never deliver a 1:1 personalized experience in our latest white paper, “Where Segmentation Falls Short.”
Learn more about the Formation hyper personalization platform
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