Customer Experience and the Cost of Loyalty Conundrum

Customer-Loyalty-ProgramsWhile I deeply believe in the importance and bottom line value of investing in the customer experience, a conversation I had with a marketing executive this week made me stop and think.

He was talking about the inherent challenge of some of his high-end customer loyalty programs.  The benefits the customer receives from these programs are costly to his company when the customer takes advantage of them, and that customer’s additional spending may not come close to covering the cost at least in the short term.  When he wears his customer experience hat, he wants the loyal customers to take full advantage of the opportunities so they engage more deeply and enjoy the experience of being part of the company’s community of customers.  But when he sits in the CFO’s office, he knows there is not enough positive return in a short term measurable time frame to justify his desire for great participation on the part of his loyal customers.

So what does that mean for companies – especially those b-to-b companies with large scale relationships looking to invest in the customer experience and build loyalty in a way that makes sense?  Are these kinds of programs inherently hard to balance between the experience and the bottom line?

Here are a few things to consider as you examine and assess the way you invest in creating the experience for your more loyal customer base.

  • Find out from customers what they really value – We recently helped a b-to-b client reexamine and redefine a key client benefit program they had developed. The company had an array of offerings included in the program, some more complex and resource intensive then others. We found from talking to a set of those strategic clients that they really only cared about a couple aspects of the program; the rest were superfluous to making them feel special and connected.
  • Analyze the data to see what has an impact, and what doesn’tThe explosion of data and tools has allowed companies to get a clearer view to the customers’ actual actions and behaviors and what affects their choices, which may or may not be linked to what they tell you matters to them. One company recently analyzed their loyalty card customers to see if they could influence loyalty card users to buy more and buy differently. They found the offers they were testing were falling on very deaf ears when it came to their most loyal buyers and money was being wasted trying to get them to change. (They also found some unexpected opportunities to reallocate those resources.)
  • Prioritize those core things that matterThe lessons of “less is more” and “focus on what matters most” will help reduce cost and complexity, provide more flexibility to invest in loyalty programs, and streamline your ability to manage them.   The uptick in use, combined with the reduction in confusion and complexity that resulted from the redefined key client benefit program mentioned earlier, created a significant impact on the nature of those relationships and ultimately on their buying habits.
  • Keep a line of sight into how customers are using the programs – Ongoing and systematic check-ins are important for staying relevant to changing customer needs, assessing the results, and swapping out activities that are more effective. Creating a program for your most loyal customers is not a static effort. An evolving and growing effort will help balance the short and longer term opportunities for value on both sides.

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