“Better targeting” is not the panacea to customer loyalty

Trending worldwide on Twitter right now: “Two ways to fix customer loyalty programs.”

The lede:

Consumers aren’t as loyal to loyalty programs as they used to be.

Since 2008, the number of consumers who feel that such initiatives don’t offer any real value jumped by 50%,according to a study by Forrester Research. The same study also found that almost one-third of consumers say that loyalty programs don’t influence their purchase — that’s up from 22% in 2008.

Why the dissatisfaction? Let’s call it the Groupon factor. Since 2008, there have been a flood of daily dealmerchants, like Groupon and LivingSocial, that have filled customers inboxes with irrelevant offers. (Groupon itself has recently employed a Pandora-like “thumbs up, thumbs down” rating system to tackle this problem, which is best illustrated by the example of middle-aged men getting offers for bikini waxes.)”

The answers they propose are crap, however. The answer is not “better targeting” of customers. The answer is not “mobile payments.”

The answer is making the customer a full participant in the process. Start here.

The Relationship Funnel


In many marketing organizations, the steps in the interaction between an organization and its customers have traditionally followed a predictable sequence, starting with “awareness” and culminating in some form of “action” on the part of the customer. It usually looks something like this:

  • Unaware: The customer does not know of the company and/or its offerings
  • Awareness: The customer has become aware of the company/offering
  • Consideration: The customer is considering the company as a potential solution to one of the customer’s current needs
  • Intent: The customer intends to purchase from the company
  • Action: The customer acts on the intention, and makes a purchase from the company

(Note the “action” might not always be a purchase, per se, but may be some other point-in-time interaction with the company, such as attending an event or downloading a whitepaper.)

There are a wide variety of situations where the model above accurately represents the sequence of events leading up to an individual transaction, from the company’s point of view. While the model above is well-understood and relevant in the transactional world, a social and relationship-driven world requires a complementary way of thinking.

When building a business relationship, the sequence similarly starts with “awareness” (since one can not have a true relationship without being aware of the other party), and progresses until a “strong tie” is built between the two parties. The progression on the relationship side of the world looks something like this:

  • Unaware: The customer does not know of the company
  • Awareness: The customer has become aware of the company
  • Weak tie: The customer and company have developed a basic awareness of each other, and feel mild affinity toward each other
  • Building: Subsequent interactions mutually strengthen the relationship between the two parties
  • Strong tie: Both parties feel a strong affinity, and perhaps even a level of responsibility, toward each other

In building these relationships, we create a base from which activities can be launched. In doing so, we evolve from a campaign-based model to one that is “always on.” Visually, it looks something like the image below.

So, what’s the take-away? The key thing to note is that both types of interactions are needed in order to effectively compete. Campaigns are still needed in many cases, especially around point-in-time activities such as events and product launches. That said, having a strong set of relationship ties with customers can make those same campaigns even more effective, building upon the existing relationships to increase their reach and impact. Relationships become the base upon which campaigns become more effective.

The recent report, From Stretched to Strenghened, states that “the vast majority of [midmarket] CMOs believe there are three key imperatives that will enable them to respond to the marketing challenges in today’s complex world. They must understand and deliver value to empowered customers; create lasting relationships with those customers; and measure marketing’s contribution to the business in relevant, quantifiable terms.”

To this end, there are three things you can do today to begin to create lasting relationships with customers and expand the “base” illustrated above:

  1.  Identify your top twenty individual customers
  2. Connect with them either on a community that your organization has set up, or on public sites such as LinkedIn, Facebook or Twitter
  3. Read their contributions on a daily basis (it will only take a few minutes) and join in the conversation if appropriate

By taking the three steps above, you will invariably find that you will begin to build that base of relationships that will increase the effectiveness of all of your other customer-facing activities.

Sponsored post disclosure: This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet

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