The retail industry, particularly e-commerce, is expansive, constantly evolving, and dynamic. The primary challenge for retailers lies in retaining existing customers amidst competition and the rising cost of acquiring new customers. The 2023 State of Customer Messaging Report highlights the significance of customer retention, with 95 percent of professionals emphasizing its importance.
Effective customer retention extends beyond product or service quality, emphasizing ongoing customer engagement post-purchase. While subscription models play a role, a crucial strategy involves identifying customer interests.
Influencing Customers Through Loyalty Programs
Loyalty is evolving. Today, consumers crave seamless, personalized experiences and trust. Limited and isolated experiences are no longer sufficient. To succeed, loyalty programs must transition from isolated approaches to interconnected offerings. This is where loyalty ecosystems play a pivotal role. An effective strategy in ensuring customer loyalty is identifying relevant adjacencies to the product or services, and fostering an ecosystem that offers customers a curated journey, introducing them to additional products or services aligned with their interests. This personalized approach transcends mere transactions, fostering a robust bond that significantly boosts customer loyalty.
According to a McKinsey & Company survey, loyalty programs exert a significantly positive influence on customer behavior, impacting aspects such as purchase frequency, brand affinity and basket size. The survey reveals that members of loyalty programs are 43 percent more likely to make weekly purchases, 59 percent more likely to choose a brand over competitors, and 62 percent more likely to increase their spending on a brand’s products or services. Many loyalty programs operate on a point-based system where customers accumulate points, enabling them to redeem perks such as discounts, gifts and early access to sales. Loyalty programs are also transforming into a subscription model where the organization can offer multitudes of surrounding or adjacent offerings bundled into the core product being subscribed to.
In 2013, Jeff Raider and Andy Katz-Mayfield disrupted the shaving market with Harry’s, a subscription service built on a revolutionary foundation: community. Their secret weapon? A genius referral program. This program, before Harry’s razor even touched a face, sparked grassroots buzz and landed a whopping 100,000 signups.
Today, Harry’s isn’t just a global online powerhouse, it’s a testament to the power of loyalty. Its subscription model delivers quality products while rewarding repeat customers with exciting perks and exclusive offers. This creates a cycle of retention and delight, giving Harry’s a captive audience for innovative new products.
But the magic truly lies in Harry’s referral program. It’s cost effective, leveraging social media and unique referral links to reach new customers. For existing customers, it’s a chance to earn Harry’s goodies and feel part of something bigger. It’s a win-win, expanding the brand while rewarding its most loyal advocates.
Navigating the Dynamic CX Ecosystem
Loyalty ecosystems go beyond the usual purchase cycle, amplifying member interactions. By linking co-branded card partners with airlines, ridesharing or shopping platforms, a seamless customer journey unfolds across various digital touchpoints.
For example, credit card companies often collaborate with organizers to provide cardholders with exclusive access or privileges at concerts or cultural gatherings. By associating the brand with memorable experiences, customers are more likely to remain loyal, viewing the company as an enabler of their preferred lifestyle.
For example, Dunkin’ unveiled an expanded partnership with Shell’s Fuel Rewards Network. This collaboration allows Dunkin’ Rewards members to earn fuel rewards on top of their Dunkin’ Rewards points. The loyalty program links millions of consumers with national and regional brands, providing them with opportunities to accumulate savings in cents-per-gallon at the fuel pump.
American Express offers an extensive range of events for cardholders, with premium, invitation-only options. Without an invitation, you can still purchase tickets for various events, from Broadway shows like Hamilton in New York to concerts like Katy Perry in Las Vegas.
Harnessing Technology for Customer Engagement
The role technology plays in retail can help create a partnering ecosystem though application programming interfaces (APIs) and retain the loyalty of the customer beyond quality, price and availability. APIs facilitate seamless and real-time integration and data exchange, allowing retailers to enhance customer experiences, optimize operations, and adapt swiftly to evolving market demands.
Nike harnesses the full potential of its APIs to drive dynamic customer engagement. Within the Nike Run Club app, the API seamlessly integrates, connecting users to smart wearables for comprehensive run tracking, personalized training plans, and friendly competition. With Nike By You, the API empowers users to personalize their shoes and apparel, creating a unique and creative experience. Nike’s Shop the Look feature employs APIs to analyze images on its website and social media platforms. By identifying products showcased in these visuals, Nike streamlines the shopping experience by offering direct purchase options. This strategic use of APIs leverages visual inspiration, providing a seamless and engaging pathway for customers to explore and acquire Nike products.
Data analytics enables businesses to delve into customer preferences and interests. Credit card companies exemplify this by leveraging data to offer preferred seats at concerts or sporting events to customers with specific interests, creating an added layer of value beyond financial transactions.
According to a 2023 Statista report, the predictive analytics software market, valued at $5.29 billion in 2020, is projected to reach $41.52 billion by 2028.
One of Starbucks’ standout customer retention strategies was the introduction of the Mobile Order & Pay feature in its app. The innovative feature allows customers to place their coffee orders ahead of their visit to the store, enhancing convenience and streamlining the overall experience.
Artificial intelligence and generative AI are also being leveraged to help craft personalized customer experiences that cater to the unique needs and tastes of each client. The technology effortlessly analyses customer data points, including purchase history, browsing behavior and social media interactions. For instance, a business might leverage AI to suggest products aligning with the interests of individual customers like what Walmart did. The retailer acquired Zeekit, a virtual clothing try-on startup that uses AI. The technology from Zeekit is now being integrated into Walmart.com and its mobile app to offer a new “Choose My Model” feature in beta. This feature lets users pick from 50 diverse models that closely match their appearance and body type, enhancing the online shopping experience by allowing users to see how clothes will look on them based on factors like skin tone, height and body shape.
Businesses secure customer loyalty and become integral to their lifestyles by acknowledging and embracing their diverse interests. Creating a tailored ecosystem around customer interests exemplifies a dynamic approach to securing loyalty, going beyond mere transactions to forge lasting connections aligned with diverse customer passions. In doing so, businesses not only cater to the immediate needs of their clientele, but also become an indispensable part of their customers’ lives.
Vijay Iyer is the president of the Americas at Mastek, a trusted digital engineering and cloud transformation partner.
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