The Loyalty Paradox

AUGUST 2014 INFOGRAPHIC the futures company THE Loyalty PARADOX CUSTOMER LOYALTY: Taking loyalty from transactional engagement to emotional connection THE LIKELIHOOD OF PREVIOUS CUSTOMERS CONTINUING TO BUY FROM A SPECIFIC ORGANIZATION 55% SAY ON AVERAGE, LOYAL CUSTOMERS ARE WORTH UP TO I0X AS MUCH AS THEIR FIRST PURCHASE THERE IS AT LEAST ONE BRAND THAT THEY Z FEEL A STRONG, POSITIVE EMOTIONAL CONNECTION WITH 10X (Zunch, inc.) BUT!K The average household has enrolled in 18 loyalty programs, and is only active in less than half of these (Neolane) RETENTION IS LESS EXPENSIVE THAN RECRUITMENT, BUT CUSTOMERS HAVE HIGH EXPECTATIONS IT IS 700% OF BUYING EXPERIENCES ARE BASED ON HOW THE CUSTOMER FEELS HE OR SHE IS BEING TREATED 6-7 12 (MCKinsey) MORE EXPENSIVE TO ACQUIRE A NEW CUSTOMER THAN IT IS TO KEEP A CURRENT ONE The # of positive experiences it takes to make up for ONE UNRESOLVED NEGATIVE EXPERIENCE (Helpscout) (Bain & Company) WHAT'S the problem Loyalty initiatives typically use one of three transactional methods to engage customers And rewards are given based on answers to one of three business questions 1. A LOYALTY DISCOUNT, EITHER AS A FLAT RATE OR ON SELECT PURCHASES (typical supermarket model) 1. DO I HAVE SPARE CAPACITY THAT I CAN AFFORD TO GIVE AWAY? A REWARD AFTER A NUMBER OF REPEAT PURCHASES (classic coffee shop model) 2. HOW MUCH MARGIN CAN I AFFORD TO GIVE AWAY? 3. A LOYALTY BONUS OR STATUS UPGRADE HOW CAN I FIND SUBSIDY TO J. REWARD MY CUSTOMERS? (airlines and hotel upgrades) * * * O O Loyalty programs need to break out of the "me too" space They need to be as differentiated as the brand they are designed to support HOW TO build true loyalty ADD EMOTIONAL ASPECTS TO YOUR LOYALTY EFFORTS Top 5 attributes in determining where I shop: 84 78 72 72 48 HAS REASONABLE PRICES HAS OUTSTANDING CUSTOMER SERVICE CONSISTENTLY OFFERS THE LOWEST PRICES AROUND MAKES IT QUICK AND EASY TO SHOP OFFERS REWARD/ LOYALTY PROGRAM ) ESTABLISH KINSHIP 2. WITH CUSTOMERS * DEMONSTRATE YOUR • HUMANITY There is a brand that has 74% MOST COMPANIES TODAY ARE BECOMING TOO INHUMAN AND IMPERSONAL WHEN IT COMES TO CONNECTING WITH THEIR 67% delighted me so much that I will always buy the brand even if it costs more AGREE AGREE CUSTOMERS FACILITATE EXPERIENCES, 4. NOT JUST TRANSACTIONS 5. 5 CONNECT WITH YOUR CONSUMERS' VALUES I AM MORE LIKELY TO CHOOSE A BRAND IF IT EXPOSES ME TO NEW SENSATIONS OR EXPERIENCES Companies that make 73% sincere efforts to be a part of or invest in my community deserve my loyalty 55% AGREE AGREE the Created by The Futures Company futures www.thefuturescompany.com company souURCE: The Futures Company. All sources 2013 U.S. Yankelovich MONITOR except where noted. http://thefuturescompany.com/free-thinking/beyond-the-loyalty-paradox/