Building lasting customer relationships has never been easy but as competition continues to rise from new digital entrants to all markets and control increasingly shifts to consumers, it is becoming ever-harder for brands to maintain loyalty.
Forrester analyst Emily Collins outlines this shift in her report ‘Be a loyalty company, not a company with a loyalty programme’ where she suggests points-based systems are no longer relevant because they focus too heavily on driving transactions rather than perceptions and habits.
A reward card was once enough to keep people coming back but even Tesco, which has enjoyed considerable success with Clubcard, is now considering ways to refresh its offer. Consumers are starting to see through brands’ attempts to ‘buy’ them with quick gimmicks and points-building schemes. Instead, smart businesses are analysing consumer behaviour to dictate how and when they communicate with customers to keep them fully engaged and prevent them from switching to a competitor.
Forrester’s Collins argues: “Today’s empowered customers are fickle and in control. They are always on, have access to more choices and can switch to other brands on demand with little consequence. Essentially, they have fewer reasons to be loyal than ever before. Many firms try to work around this by using loyalty programmes, but traditional strategies fail to address the rational and emotional complexities of customer loyalty.”
As a result brands need to evolve how they approach loyalty with a more literal interpretation of the word: to drive more meaningful and lasting relationships.
Online bank First Direct is often singled out for its highly personable customer service and the fact it is open 24 hours a day, seven days a week, unlike competitors, which customer services director Karen Walker believes contributes greatly to the “high level of customer retention” it receives.
“It is about having a loyal base of customers rather than using incentives to drive what is probably the wrong behaviour,” she says. “We listen to our customers and treat them as individuals. We talk to them on the telephone, get to know them and build a rapport.”
First Direct also hosts a monthly forum internally called the ‘voice of the customer’ that brings together all the insight it has gained from feedback, in addition to the results of a weekly survey of randomly selected customers.
“If they are dissatisfied we contact them to have a conversation. The insight we get is really valuable to us in terms of making sure we act on customer feedback and continue to treat them as individuals.”
First Direct does offer new customers a £100 bonus if they choose to switch their current account but backs this up by pledging to give customers another £100 if they are not completely satisfied with the service and choose to leave. Walker claims that just 0.01% of customers actually take them up on this satisfaction guarantee.
It is as a result of these measures that First Direct tops Satmetrix’s UK Net Promoter Customer Loyalty Benchmark, which is based on 11,000 consumers’ views of more than 60 brands across nine sectors, including financial services, insurance, TV and mobile. It takes into account ease of use, access to support, company reputation and value for money.
The bank earned a Net Promoter Score of +73, putting it 30 points clear of Nationwide in second place at +43. Freeview and Tesco Mobile are joint-third with a score of +38.
There is a huge gap between the best and worst performing consumer banks, with the Royal Bank of Scotland earning the lowest loyalty score of -19. A separate study by Aimia, owner of the Nectar loyalty brand, reveals that banks still need to do more to win customers’ loyalty, particularly following the introduction of the Current Account Switch Guarantee in September 2013, which has made changing bank possible within seven days.
Aimia’s Loyalty Lens research finds that just 5% of people stay with their bank because it understands what they need, only 11% believe communication from their bank is relevant to their interests and just 6% remain with their bank because they feel they are being rewarded for their loyalty.
These findings are supported by the Payment Council’s latest figures, which show a 22% rise in the number of people switching their bank provider between January and February, and a 27% increase from February and March. While Walker says First Direct “hasn’t been caught up” in the rise of consumers switching, the fact it is now easier to do so should act as a caution to banks that don’t focus on satisfying customers.
Like banks, competition in the mobile market means operators experience a similar lack of commitment from customers who tend to choose the network provider that offers the most minutes and data for the cheapest price.
In addition to offering Priority, which is more of a traditional loyalty building product, O2 has focused on building relationships with customers based on the interactions they have with the brand.
“As a digital services company we have an awful lot of data but that doesn’t mean it’s actionable, so we’ve invested a lot of money to have the right places to put that data, to allow us to derive insight from it,” says James Breeze, head of marketing operations – digital excellence at O2.
The mobile operator has been working with VCCP’s customer engagement arm VCCPme to join up all customer service interactions in every channel, so customers have a fluid and informed conversation no matter how they get in touch with the brand.
“We use all the business intelligence we have about customers to understand what the next conversation should be and what areas of content we should be looking to present to them,” adds Breeze.
Initially focusing on inbound channels, O2 combined real-time customer data with its Vision tool to provide personalised customer interactions and offers (see case study below), which Breeze says helped it to better understand and therefore serve customers.
Tony Preedy, marketing director at kitchen retailer Lakeland, agrees that brands today need to have loyalty built into their DNA rather than relying on points-based offers.
“Customers will return if they have a good experience so we are dedicated to keeping our customers happy,” he says. “Ultimately happy customers come back and they are essential for the long-term health of the business. We think that service proposition is more important than a transactional loyalty scheme.”
Lakeland has been working with web platform Hybris to improve customer engagement online by using more personalisation and joining up different sales channels. However Preedy believes that, if anything, the growth of ecommerce is acting to diminish loyalty.
“That’s because the ease of a transaction online makes ordering so simple,” he says. “Search functionality is now very good and the barriers to purchase are very low. In practice consumers are buying smaller amounts more frequently, so transaction values are smaller than they used to be so I wouldn’t necessarily say that investing in web platforms has improved loyalty. What it has done is improve customer acquisition and the quality of the customer experience so we can grow our total sales.”
As Forrester’s Collins concludes in her report “loyalty is both behavioural and emotional, and companies that really want to compete for their customers’ loyalty need an evolved approach that extends beyond a loyalty programme designed around points and rewards,” so businesses need to respond accordingly.
O2 uses real-time personalisation to boost customer loyalty
O2 has strengthened customer relationships by joining up all consumer touchpoints in real time to deliver personalised and consistent messages.
Research revealed that customers were confused by the mobile operator’s expanding range of phone tariffs and were frustrated about having to repeat themselves, particularly when in-store staff had no record of previous phone conversations and vice versa.
Starting with inbound channels, O2 began by linking customer data with its Vision tool, which is designed to drive personalised recommendations for customers.
“If there’s a piece of insight that suggests a certain segment of customers responds well to newsletters then we can pull the relevant offers into that newsletter but if they ring the call centre or log into myO2 they will still get the same offers,” says James Breeze, head of marketing operations – digital excellence at O2.
Working with agency VCCP’s customer engagement division, O2 has created a ‘modelling datamart’ of more than 1,000 pieces of information put into a set of 150 core variables that identify key products and offers for consumers.
The model also includes ‘dynamic behavioural triggers’, such as when a customer calls a competitor’s number, to ensure the operator is timely and relevant with its messages.
In order to do this, the system updates in real time so if someone responds to a particular message online and then rings the call centre, recorded messages and the conversation they have with the operative will reflect that online interaction.
Additionally, the offer takes customer behaviour and needs into account, including the type of person they are; the device they own; their tariff and length of custom; how they use calls, texts and data; usage triggers; and how they have responded to campaigns and offers in the past.
Using this data, 31% of all contacts were served with an offer, and of those 69% were accepted. Over a year-long period as a result of the move O2 generated £187m in incremental revenue from the products and services promoted.
“We’ve got the cold, hard numbers of it delivering commercial benefit, but the feedback from our customer service agents is that it is a more fluid conversation as they are able to deal with the primary reason for the customer calling with a lot more confidence,” adds Breeze.
“Customers’ loyalty can’t be bought, you’ve got to understand the full value proposition and Vision plays an important part in letting us do that.”