Every business wants its customers to return – and most of the time, they do. However, there is a difference between a returning customer who is yet to shop elsewhere and a customer who chooses shop from a certain brand or organization over others. Both customer types require proactive management to remain engaged.
Retained customers may require incentives to purchase again, or they may have already decided to purchase or subscribe due to the product, pricing or service proposition on offer. However, a retained customer will still buy elsewhere if and when they find a better deal.
Loyal customers require a deeper connection and recognition that goes beyond what a retained customer would expect. Some organizations deliver this through status accreditation, while some unite their most engaged customers in communities around shared interests that relate to the product. On other occasions, they nurture it through commitments on product quality, staff welfare, ESG and other areas. In response, loyal customers are vocal about their loyalty to the brand or organization.
It sounds clear cut, but loyalty is changing: customers are more focused on convenience and price, and competition is strong. For those in CX, it's getting harder to engage customers and keep their attention.
In this article, we look at our latest research into the Global State of CX to find out how important customer loyalty and retention are to practitioners in 2024, where they’re investing to nurture it and the role that technology is playing.
Loyalty is one of the biggest non-tech trends in CX
CX has been transformed by new technology over recent years – and the pace of change is set to continue. In fact, when we asked practitioners to select the three CX trends that are having the greatest influence on their role at present, eight of the top 10 responses were related to technology.
The two responses that bucked this trend were employee experience (EX) and customer loyalty and retention. With 33 percent of the vote, loyalty and retention was the fourth most selected response.
Despite this, safeguarding retention and nurturing loyalty are not without challenge: 56 percent of respondents strongly agreed that customers will switch brands when unsatisfied.
Sam Phillips-Lord, senior customer insight manager for HastingsDirect, says that to nurture loyalty in 2024, organizations must meet the established customer demand for empathy and humanized interactions, in addition to speed and convenience.
“Through the Covid-19 pandemic, businesses were able to dial up empathy and personalization and since then, it has naturally reverted. But people loved that experience,” he says, referencing how this trend is evidenced in the rise and decline recorded in customer satisfaction and sentiment surveys. “I think businesses are quickly realizing that while AI and automation are key trends, doing those in conjunction with personalization is what’s really going to drive winning experiences,” he adds.
RELATED CONTENT: Five loyalty programs with killer USPs
Growing the customer base is a top strategic aim
With such a strong focus on loyalty and retention as a CX trend, it is little surprise that the top strategic aim for practitioners in 2024 is to serve more customers. When we asked respondents to share their organization’s top three strategic aims for this year, 59 percent selected “growing the customer base”.
Because it costs as much as seven times more to acquire a new customer than it does to retain current customers, organizations must maximize customer lifetime value (CLV).
In this session from All Access: Future of CX 2023, Perla Bloom, connections planning lead at Electronic Arts (EA), explains how to leverage technology to boost CLV.
But "loyalty" is not a top investment priority
During last year’s Global State research, 35 percent of respondents told us customer loyalty and retention was a top-three area for investment. However, in 2024, only four percent of respondents said they planned to directly invest in loyalty software/ apps and customer retention.
This suggests organizations are investing in broader capabilities that deliver on their retention and loyalty claims as part of a wider strategy. For example, the top investment priority among practitioners in 2024 is automation of CX and service functions, with 42 percent of the total vote. Elsewhere in the survey, 50 percent strongly agreed, and a further 37 percent agreed, that automation is critical for delivering CX at scale.
RELATED CONTENT: The rise of the multi-brand loyalty program in the APAC region
Early experimenters are seeing loyalty gains from gen AI
Further to the developments outlined above, our 2024 study was the first to ask practitioners how their use of seven disruptor technologies is driving company profits and customer loyalty.
As demonstrated below, the early experimenters are seeing gains in both areas, however, many are yet to embrace the high-tech future of CX. For example, among those who use journey orchestration, 45 percent reported positive loyalty outcomes and 40 percent reported positive financial outcomes. However, 32 percent are yet to get started with this technology.
Generative AI is driving a positive impact on customer loyalty for 28 percent of respondents, while 39 percent said they had recorded a positive impact on company profits.
The points-based loyalty program might be going out of fashion
Love them or loathe them, points-based loyalty programs pioneered how data can be used to craft and deliver personalized experiences that keep customers returning.
However, the loyalty program has faced much criticism over the years, mostly related to the fact that true loyalty doesn’t require incentives. Shep Hyken says loyalty is built on the consistent delivery of high-quality experiences, and the “confidence and trust that the experience is going to be the one I like every single time”.
He says: “We want to be so good that the emotional connection that a customer has with us is more than a perk. We want them to love our people and love our experience.”
It seems the corporate world has started to follow suit and among our practitioner respondents, only 27 percent said their organization offers a points-based loyalty program at present.
Instead of relying on customers to swipe a card for discounts, organizations can use passive data collection techniques to get to know their customers and tailor and personalize experiences accordingly.
[inlinead-1]