July 5, 2017 by NKD
In Conversation with…
Sam has been a member of the Innovation team at NKD for 2 years. He has an uncompromising belief that the success of a business is in its people. With experience in retail, telecommunications and logistics, he thrives when solving the challenges faced across a range of industries.
‘The bottom line is how the customer feels. Where previously customers felt entitled, they now want to feel appreciated.’
NKD: How are relationships between customers and their favourite brands changing?
Sam Lawton: Over the last 10 years, the value of the relationship between customer and brand has sky-rocketed. It’s now one of the most important aspects of a brand’s valuation, and contributes to almost 20% of enterprise value today. If you look back to 2004, it only contributed 6%.
This means that businesses now need a laser sharp focus on their current customers. They’re worth more to them in cross-selling and up-selling opportunities than acquiring completely new customers. Consumers are getting used to demanding more, expecting more, and complaining more when things aren’t right for them. So, they’ve got the power, and brands are having to adapt to this shift. These relationships have never been as important or valuable to a brand – the power dynamic is shifting.
NKD: So, what might this look like in reality?
SL: It can be a big or small shift. An example in the UK is Asda. After running two really successful Black Friday promotions, they made a shock-decision to not run the same thing in 2015. Customer feedback was telling them that customers felt they were being ‘held hostage’ over sales. So, instead, Asda opted to run a range of promotions over the holiday period. They’ve since developed a program called ‘Pulse of the Nation’, which is a panel of 22,000 customers. This now helps inform all their key decisions and campaigns.
NKD: Do you think this is now changing how businesses think about ‘loyalty’?
SL: Businesses can gain so much from loyal customers – and always have. Through loyalty, they gain customers that cost less to serve and are less sensitive to – or more forgiving of – price changes. But, more importantly, those customers act as brand ambassadors who are going to provide you with honest, high-quality feedback.
What’s changed is that businesses need to respond to their customers’ needs in an instant – they need to be agile and adaptive, which is now the key differentiator. Yes, discounts are still important, but they also can be perceived as de-valuing your product. You can reward loyalty, but don’t expect it just because you offer discounts. It’s been proven that traditional, transactional-based programs often actually cost, rather than make, businesses money. Businesses need to re-focus and consider loyalty as a gift and opportunity to improve – to be better for their customers every day, and always be one step ahead of their competition. The bottom line is how the customer feels. Previously, customers felt entitled, but now they want to feel appreciated.
NKD: How have businesses shown this ‘appreciation’?
SL: Appreciation can take many forms. It can be reacting to customers’ needs or desires – appreciation is when a company shapes itself on the customer rather than on board room needs.
It could also be simple, non-financial rewards like the free coffee scheme at Waitrose. Things like this show the customer that the business is on their side. It also builds trust and puts the business into a customer’s routine – how many people now shop at Waitrose just for the free coffee?
NKD: How could this work in the digital world, where you might not have in-store experiences?
SL: The digital world offers endless possibilities. We have the chance to connect with people around the globe, search out the best deal, compare reviews in an instant. But, in this immediate world, it’s a question of how do you stand out, and keep standing out? Often, this is through value-added services. The little things that matter, that make the customer feel appreciated.
The most obvious examples are in the leisure industry. Airlines all have unique perks that encourage customers to spend their money with them, that get better and better each time. Emirates is a good example. On the first tier, you get lounge access in Dubai, their hub airport. Next tier up, this access extends across the network. Finally, that access extends throughout the network for both you and a guest. This sits along other perks dependent on the more you spend – the more loyal you are – like faster baggage delivery, priority service through their call centres. This model tries to smooth over all the pain points of the customer experience, ultimately rewarding loyalty by offering a better, smoother, experience.
NKD: It seems like companies use these human experiences to embed themselves in customers’ lives.
SL: Yes. They do this by understanding how human beings think and feel.
Our unconscious mind is able to process 500,000 times more information per second than the conscious mind. This means that brands have to be completely embedded in people’s lives. More often than not, it’s our unconscious mind that will guide purchasing decisions – although consumers don’t always know that.
So, how do brands ensure they are central to people’s lives? How do they ensure that it is an unconscious thought that drives their customers to them rather than a conscious decision – or even worse, a conscious decision to avoid them? Well, it’s about offering the ‘always-on’ loyalty proposition. Accessible anywhere, adapting to where the customer is, or even predicting what they may want. It could be about creating loyalty through routine – becoming indispensable in their customer’s life.
Starbucks does this well. I’ve got their app on my phone, it tracks everything I buy and where I am. If I’m close to a Starbucks it will appear as a suggested app to open. If it’s a hot day I’ll get a notification that there is an offer on iced drinks. I get offers to try new products first, to skip the queue. I feel appreciated. And that is what I want to feel. That makes me loyal. Thinking about routine, Waitrose wins out again. I love my free coffee, I’ll go out of my way to get it. People will go to Waitrose every morning for their free coffee. It’s a habit. They aren’t asking for anything in return. They just feel appreciated. More often than not, that free coffee very quickly turns into picking up a ‘few’ bits of shopping.
NKD: Businesses are always trying to understand their customers – often by studying different demographics or segments. How do you inspire loyalty amongst millennials? Are they different to other customers?
SL: Simply put, no. We are all human. We all want and feel the same desires – like being appreciated. However, what has changed is ‘how’ and ‘what’. The top three drivers for loyalty in Millennials are quality of product, recognition of brand, and trust in the business. As a reward for their loyalty, millennials look for discounts – but also status. They are more likely to be influenced by status-based rewards than any other generational cohort.
This means that businesses need to shift their model for attracting their customer-base. They need to reconsider how their loyalty programs address those three drivers. Millennials are more transient – 69% say they will change where they shop if the rewards are better. So, it is not just about that initial attraction. It’s about keeping momentum, keeping them excited, and engaging them at every single opportunity.
One channel is not enough, omni-channel isn’t enough, it has to be opti-channel. Knowing exactly where your customer needs you and when. And then, knowing isn’t enough. They want a two-way dialogue – they want to connect with the brands they love.
Starbucks is, again, a great example of this. They don’t devalue their brand by offering discounts, they enhance it by offering perks based on status, or tier levels. They also harness the power of social media, and word of mouth advertising offering hidden perks to their most loyal customers. Search social media for #starbucksgoldcard for an example. These customers feel special, appreciated – they enjoy that and want to shout about it.
NKD: Social media is revolutionising the customer experience. How should brands tackle this phenomenon?
SL: Social media is literally rewiring our brain. Science has proven our attention span has dropped from 12 seconds in 2000 to 8 seconds today – and it’s still declining. This, combined with the fact the average consumer is exposed to up to 10,000 brand messages a day means that it’s more important than ever to review, refine, and execute a refreshed loyalty strategy. With only 8 seconds of attention, any campaign needs to be short, snappy and to the point. It has to convey the key messages, refresh the reader on your unique brand offer, and convince them to remain loyal.
But, I think our attention spans are limitless – we just need to remain engaged. Harness the power of social media, make something memorable and worth sharing. Look to influencers and blogs for ideas – they’ve become experts in engaging this distracted generation. But, above all, remember that making it personal goes a really long way. Create a voice and use it consistently. Tailor every part of your loyalty program. It should focus on making your customer feel appreciated, as an individual, not as part of a whole. But, as before, ensure it is delivered at the right time in the right place.
Customers want to remain loyal. Don’t give them a reason not to.