Service
TCS Interactive
Humanizing Technology to Create Iconic Experiences
Highlights
- In the experience economy, customers want more than just the products or services they are investing in.
- They want meaningful experiences that stay with them during and even well after the buying journey ends.
- These kinds of engagements build brand loyalty largely because they inspire emotional connections with customers and have a big influence on how customer loyalty programs are perceived.
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Strategy for loyalty
For many years customer loyalty strategies have been transactional and relied on programs based on coupons, rewards, or incentives to increase customer retention.
Focusing on customer retention, repeat purchases, and a steady stream of activities has traditionally worked well for loyalty programs. They have also benefited from third-party cookies. But these tactics no longer translate to brand commitment in these changing times. Also, unlike brand strategies, which have evolved extensively over the last decade, loyalty programs have been left behind. Today, brand strategy is focused on putting the customer at the center—connecting with them through personalized, relevant experiences exactly when they want them—and differentiating the brand from competitors. Loyalty programs need to catch up.
They need to evolve into purpose-led programs centered on what customers want. Enterprises must reimagine them so they can gather rich insights from customers. They also need to be more seamlessly integrated with the customer’s shopping experience (for instance, delivering benefits just when customers need them) and be better aligned with current brand strategies. The programs should focus on delivering meaningful services to not only boost customer retention but also build brand value. Building emotional commitment to the brand is key here. Figure 1 shows a loyalty maturity model that illustrates emotional loyalty as a journey comprising four stages—transactional, aspirational, belonging, and purpose. At the lowest level, or the transactional level, programs provide traditional incentives. As loyalty programs are modernized to deliver more value, they become intrinsically tied to purpose.
Figure 1
Customer loyalty and the value ladder
Figure 1
Connecting core values
An ideal loyalty program should resonate with a brand’s values and align the program strategy with the brand's mission.
This is especially true because nowadays, customers are more inclined to choose a brand with values that matter to them. According to this report, the majority (88-93%) of global consumers chose three factors as important to their loyalty decisions: products that fit their needs, good customer service, and competitive price.
Of the less conventional factors, the three that rose to the top include alignment with who they are, personalized experiences, and helping them to connect with others. When the study was done, just 13% of consumers globally chose the feeling of being emotionally or personally connected to the brand as the meaning of loyalty.
The concept of purpose-driven loyalty is more strategic and long-term than transactional loyalty. It is no longer just about customer retention but about inspiring customers to choose one brand over all others. We believe there are four pivotal elements to a modern customer loyalty program. These are incorporating a long-term strategy and vision aligned with an organization’s strategy; designing an experience framework that enables the enterprise to execute its newly defined strategy and vision; customer data and technology; and implementing processes and technologies that enable it to collect data and better understand its customers.
Renewed loyalty program
We believe there are four pivotal elements to a modern customer loyalty program.
Here’s a closer look at the four elements companies can leverage to reenergize their loyalty programs and climb the value ladder:
- Define your customer loyalty strategy and vision. Companies need to focus on:
- Alignment with brand strategy: Loyalty programs are a natural extension of the brand strategy. It is imperative that the loyalty strategy be drawn from the brand and marketing strategies to provide a coherent and consistent customer experience.
- Knowing where you want to play on the value ladder: Understanding at which stages in the value chain you want to connect with customers will help develop more meaningful, authentic loyalty programs that are more about trust than customer retention.
- Going beyond boundaries: Don’t let the old ways of doing things stop progress. Build in rigor and flexibility that enable new ways of driving loyalty as more customers look for borderless, omnichannel interactions. Brands need to keep in mind that customers will opt for a one-stop solution to their needs instead of a disjointed journey.
- Engaging through hyper-personalization: Mobile should be at the heart of organizations’ customer loyalty strategy. It is high on engagement and fast becoming a preferred channel for loyalty.
2. Create a framework to deliver experiences. To deliver experiences that build lasting connections, brands need to:
- Create a marketplace: Imagine a loyalty ecosystem that works like a marketplace, allowing partners to collaborate and bid on customers’ wish lists. This ecosystem would be powered by insights from data collated across network partner journeys.
- Expand the program’s footprint: Loyalty programs can look beyond the boundaries of the current brand offering through complementary partnerships, thereby serving a customer’s journey in its entirety. An example of this is when a grocer leverages partnerships to add new products, such as insurance, to its portfolio.
- Inspire through experiences: With experiences that create memories, bring meaning, and inspire people to act, a brand becomes integral through association.
- Infuse purpose: Demonstrating the brand’s commitment to its stated purpose through practices that can be evidenced will resonate with customers.
Figure 2
Four keys to climb the customer loyalty value ladd
Figure 2
3. Leverage data and technology. Brands can use data to make personalized rewards for their customers. The challenge is breaking down the data silos that often exist in enterprises. As data is critical to creating meaningful offers and choices for customers, having a good, robust customer data platform is instrumental in building a successful loyalty program.
By leveraging zero-party data (that a customer intentionally and proactively shares with a brand) and first-party data (information collected when customers interact with a site or marketing, or when they make a purchase) about customer behavior and preferences, brands will have insights to guide their customer loyalty strategies and ultimately have meaningful, deeper engagements with customers. This data can also help reinforce a brand’s purpose.
Tracking and measuring loyalty—specifically attitude and behavior—and assessing the stability of the customer base will help inform strategies to target different customer segments, from those who are truly loyal to those who are at a high risk of leaving. By closely analyzing the data, brands will be able to better distinguish between those two extremes. They will be able to discover customers whose loyalty is more superficial and driven by transactional aspects like accessibility or convenience rather than any emotional ties with the brand and strategize accordingly. Brands could use generative AI (GenAI) to create loyalty programs that are customized, contextual, and delivered at the right time. That could mean, for example, rewarding a shopper who has bought children’s clothes for toddlers with loyalty points around the holidays, specifically for young children’s toys.
4. Build organizational capabilities. Successful loyalty programs rely on creative and intelligent cross-functional teams. Organizations have to break down silos and enable the flow of data and information to harness the power of insights. They need to have the capability to use tools to collect rich customer data and analyze it quickly, perform customer segmentation and profiling, and even collaborate with relevant brands to create more meaningful experiences for customers. Building an organizational culture of collaboration and innovation is also crucial. Managers need to focus on employee experience by improving internal communications, giving them the right tools to act on real-time insights, empowering them to make decisions, and providing training to help them cultivate the right mindset and skills. All of this can add up to delivering a better customer experience and, in turn, drive brand loyalty.
Modern loyalty programs should incorporate all these elements and orchestrate them harmoniously. By aligning strategy with the technology systems that manage processes and data and harmonizing all this with the stories that bring the brand to life, companies can create memorable experiences and build customer loyalty.
Modern loyalty program in action
Many successful brands are already using their customer loyalty programs to build deeper connections with customers.
For example, the marketplace for a leading international hotelier’s loyalty program has a collection of hyper-personalized products, services, and experiences that cater to its customers’ travel needs. Using deep contextual knowledge combined with GenAI, the hotelier can expand beyond simple lodging and offer information about must-see attractions, custom turndown services, and other experiences.
Another leading international hotel strategically leverages its deep contextual knowledge of its customers to help with their travel plans and make their visit memorable. For example, its online app gives options for exclusive personalized services, ranging from toiletries to room essentials, based on the customer’s previous track record and preferences. Not only does the hotelier mine customer data to better understand customer preferences, it also correlates that data with notable events that might entice customers to book rooms. When booking rooms around the time of the events, there are special discounts planned for them. The online app can also act as a networking platform, connecting guests interested in certain events.
In the context of a global retailer, loyalty is furthered by catering to its niche customer segments. The brand invites customers for engaging experiences based on themes they are already inclined to—inclusivity, eco-consciousness, or minimalism. This way, the brand is able to show customers that it values them for who they are while also offering them a chance to connect with other similar-minded individuals.
To broaden the horizon of customer engagement, brands need to develop an ecosystem of products, services, and experiences that encourages behaviors leading to sustainable outcomes. By leveraging zero- and first-party data to create hyper-personalized experiences and building strategic partnerships with various brands, they can offer customers more relevant experiences and services, creating new touchpoints and building lasting relationships.
