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All Change: The Emerging Opportunity in Emotional Loyalty

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Social and digital media have forced marketers to completely re-evaluate the way in which they approach communicating their clients' messages. The amount of data available today has created an unprecedented amount of information about consumers. The key to maintaining a sustainable competitive advantage in today's marketplace goes beyond combining large amounts of data from multiple sources - it's about understanding which data will provide the most relevant insight about consumers: Who they are, what they've done in the past and what they intend to do in the future.

Every brand campaign needs to factor in consumers' instant and direct access to more information, more channels and more choice than ever before. Today the fight for customer loyalty is the new frontline in the marketing battle. The successful CMO is the one who appreciates that marketing is no longer a one dimensional discipline, and understands that the traditional approach to customer loyalty is dead.

So what is customer loyalty today? Do digital relationships on sites like Facebook now act as the main touchpoint between a brand and a consumer, as opposed to traditional methods such as loyalty cards? France, for example, has a history of high loyalty card usage across the country. The 2011 COLLOQUY Loyalty Census estimated that the average French household held 18 brand loyalty cards at any given time, indicating a high level of interaction. But do these schemes deliver the business goals for companies as needed in the 21st Century?

Consumers' relationships with loyalty cards have changed as their interactions with brands have evolved from transactional to emotional. Traditional loyalty programmes reward the frequency of visits and amount spent by consumer; the relationship between the brand and the consumer is anchored in a cycle of supply and demand. In France, this has led to most of the popular programmes rewarding loyal customers with gifts or cashback. However the success of these schemes has also been their undoing - how can French consumers form anything other than a fickle, purely transactional relationship with a brand when so many are competing for a share of the buying power? What drives a consumer to choose one brand or loyalty scheme over another?

Supermarkets have become the experts in loyalty programmes, coupling their CRM expertise with increasingly sophisticated customer profiling. Checkout staff in outlets such as Monoprix are incentivised to ask customers if they are members of the store's loyalty scheme while benefits include free home delivery, cashback and shop-wide discounts on the basket of goods.

These kinds of loyalty schemes are, however, fundamentally limited as consumers' interaction with the brand soon becomes mechanical. The relationship quickly morphs from an active cycle to a passive, short-term transaction. Customers no longer frequent a brand because of emotional attachment, but for grabbing an attractive discount or cashback offer. Indeed, consumers are trained to become penny-watchers. They will switch from one brand in favour of another who offers them greater discounts or other direct monetary advantage. So the challenge for brands now is to transform these transactional loyalty schemes into an emotional relationship with customers.

Having feelings for your brands There are three key reasons why brands should seek to add an emotive element to an otherwise transactional loyalty programme:
  • To create a one-to-one relationship with the consumer
  • To help create constructive word of mouth and positive brand sentiment
  • To retain long term loyalty
The idea is not for brands to discard the transactional side of the consumer relationship for an emotional one, but instead to seek ways to bridge the gap between the two. How they do this will define how successful a brand is at retaining customers in the future. Brands such as Apple are demonstrating how companies are starting to build this bridge and move beyond the traditional customer loyalty programme.

Apple has helped revolutionise point of sale across the world. Its unique approach to stores which showcase its products rather than overtly sell them has turned shopping from a transactional experience into a leisure pursuit. Even the sales process has been designed to replace the traditional customer loyalty schemes. When a customer makes their first purchase with Apple, their email address and credit card details are recorded and stored securely to ensure subsequent purchases (and marketing communications) are as painless as possible.

It is important to note here that Apple's strategy is by no means the absolute rule. Different brands will have different consumers driven by different desires and goals. Successful CMOs use new media and technology to construct and maintain an emotional, one-to-one relationship with a brand. Perhaps the best example of this today is the Hilton HHonors scheme which has built a successful customer experience for more than 25 million people to date. The loyalty scheme has its roots in email marketing but has grown to encompass an impressive set of tools, including branding, strategy, CRM, segmentation and personalised marketing. The result is an average sign-up rate of 34% for new members and 8.5 million active customers. The scheme has also generated an additional $8.5 billion in revenue for Hilton over the last 12 years.

Each consumer will seek a different emotional fulfillment from each brand. Effective consumer engagement therefore starts with the foundation of rich data. Trust and positive emotional bonds will be created by successfully mining the cross-channel data held about customers. How best to transform this massive amount of data into actionable insight is the challenge. Using the insights gained from that data will ultimately enable a business to understand what consumers want from its brand, and how best to connect with them in an omnichannel future.

Invigorating interactions

Brands today also need to be innovative about the ways in which they interact and communicate with their customers if they are to successfully retain them. As much as data has become the foundation for a new wave of engagement models, it has also now become fundamental to the development of the customer experience. Making sense of complex data and delivering brand relevance is the greatest challenge for today's marketers. When deployed correctly, it can not only deliver a measurable impact on the top and bottom line for businesses, it can also fundamentally inform the way a brand's relationship with a consumer develops.

Burberry recently demonstrated an innovative example of this with the launch of their new London store. The fashion brand revamped its flagship shop to transform it into a "walk-in website" which mirrors the label's suite of digital properties. The shop contains a 22ft digital screen, 500 speakers, and RFID chips in some clothes that when worn in front of a special screen will show the wearer a virtual catwalk. Point of sale is also connected to digital screens to give shoppers more information about the product, embodying Burberry's promise to design an experience where "the digital world meets the physical".

Often when customers get excited by interacting with a brand, their emotional attachment adds depth. Gamification is a powerful, relationship-building approach because it not only allows brands to transform the data they harvest from customers into added value, but also introduce an emotional dimension to the brand/consumer interaction.

A recent ad campaign by Thalys demonstrates this well. The railway brand saw the opportunity to help alleviate passengers' boredom during their traveling time on the trains through social networks and apps. It launched a campaign that illustrated what social networks and games such as Angry Birds a traveler could play on an average journey.

In the US beverage giant Pepsico has leveraged the rising popularity of smartphones to launch Pepsi Loot. This app allows users to "check-in" to locations serving Pepsi products and claim free rewards such as music downloads. Meanwhile AMEX recently used Twitter to award customers discounts for tweets. Cardholders sync their card with their Twitter account and when they tweet a special offer hashtag (such as #amexWholeFoods), savings are added to their card. Whilst this is fundamentally a financial reward, the scheme still generates a strong, emotive bonding element.

Brands and retailers who succeed in building, maintaining and growing emotional loyalty are those that invest in listening to and understanding their customers, and are prepared be agile in their decisions to meet their customers' evolving needs and expectations. When they keep pace with customers, plenty of ideas and opportunities to nurture a solid bond other will surface.