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Consumers Expect More From Brands to Earn Loyalty

By Jack M. Germain CRM Buyer ECT News Network
Aug 18, 2020 5:00 AM PT

New studies reveal how solidly personalization in marketing drives brand loyalty, but consumers feel brands fail to do enough to recognize them as individuals.

Formation, a company using artificial intelligence to drive loyalty programs for brands like Starbucks and United Airlines, released a report on Wednesday with data that shows that the more personalization tactics a brand uses, the more loyal a consumer is to that brand.

One of the main takeaways from the study is just how significant personalization in marketing has become. For instance, 81 percent of consumers are willing to share basic personal information in exchange for a more personalized experience.

The survey further revealed that 79 percent of the respondents said the brands with which they engage the most recognize them on a one-to-one level; and 73 percent said they are more likely to engage with a brand that offers a loyalty program versus one that does not.

The report by Formation, "Brand Loyalty 2020: The Need for Hyper-Individualization," surveyed 2,000 consumers to find that even though consumers prefer brands with a loyalty program, many companies fail to provide such outlets. Even more significant is that brands are missing opportunities to engage customers with personalization that recognizes them on the one-to-one level that consumers increasingly now prefer.

Consumer loyalty has drastically increased in the last five years. But it has not reached boom status for every brand. Winning consumer loyalty is becoming increasingly difficult, especially with the economic uncertainty brought on by COVID-19, according to Formation co-founder and CEO Christian Selchau-Hansen.

"The need for brands to deliver real value has become more dire as shoppers evaluate purchasing decisions against personal safety and tighter household budgets," he said.

In this COVID-19 era, consumers are making fewer purchases. Brands that aim to engage customers beyond a single purchase need to better understand customers and must adapt offerings to align with changing customer behaviors and priorities in order to create and maintain a loyal customer base, added Robert Fagnani, vice president of Strategy at Formation.

"Regardless of the industry, brands are all competing to stand out in a crowded marketplace, and one-to-one personalization that goes beyond basic segmentation is the most effective way to do so," he told CRM Buyer.

Consumers as Stakeholders

Another study, this one by Gongos, a consultative agency that works with Fortune 500 companies to make customer centricity happen, disclosed that consumers, now more than ever, see themselves as stakeholders in the businesses where they are valued as customers.

During the first half of this year many brands -- whether through products or media messages -- shifted gears toward addressing customers' functional and emotional needs. But pandemic aside, today's customers are calling for more than transactions, according to this survey of 2,700 people across the globe.

The Gongos survey findings include:

  • 81 percent of global consumers believe that businesses see customers as stakeholders, the same percentage that see employees as stakeholders, too.
  • 75 percent of U.S. consumers (68 percent globally) prefer that companies ask them directly for their feedback rather than gather information about them without their knowledge, e.g. transactional and social data.
  • 67 percent of U.S. consumers feel that participating in an invitation-based online community where they engage in discussions related to a category or company's products and services would give them a greater sense of purpose.

"Our survey findings validate recent cues that were surfacing in the marketplace, namely corporations and consumers wanting to realize greater mutuality among each other. The problem is, neither are equipped to do so largely due to a long-standing belief that corporations look to metrics such as Customer Lifetime Value that serve to extract value from consumers," Camille Nicita, Gongos' president and CEO, told CRM Buyer.

Her company plan is to use these survey results to shift the paradigm within organizations to look to different ways to create value for the customer over their lifetime. This begins with treating them as value-added stakeholders to the business, and online customer communities open the door to a type of value exchange that more conventional customer interactions aren't fashioned to forge, she said.

AI Replaces Old Strategies

Targeting customers by age, gender, and location is no longer a differentiator. So brands of all sizes must move beyond basic segmentation to establish meaningful customer relationships that build brand loyalty over time, explained Formation's Fagnani.

Seventy-five percent of consumers said the marketing emails they open frequently contain their name, indicating this stage of personalization is now table stakes. Companies must go further to make consumers feel seen on an individual level, he said, adding that it takes analyzing large volumes of customer data to make one-to-one personalization happen.

"Investments in advanced digital technologies and proprietary data pay off. Brands must make the investment into AI and ML to really master effective individualization and earn greater long-term brand loyalty," he said.

AI's relevance in marketing will only increase over time, so getting a leg up on a competitor now can help build a loyal customer base for later, he noted.

Building Personalization with AI

In an era of brands touting endless AI capabilities, marketers need to understand exactly what AI is and is not, according to Fagnani. Many marketing platforms claim to use AI, but in reality AI can vary from a simple algorithm, search capability, or chatbot, to something more sophisticated and powerful.

Personalized offers, chatbots, content marketing and social advertising are all areas of marketing that can be enhanced through AI, he said. In addition to having an understanding of AI, it is equally important for marketers to have a clear set of use cases that will generate value for their business and customers.

"Identifying and mapping use cases to the solution sets of AI technologies helps prioritize the importance of specific features and needs, ultimately making purchase decisions more efficient," Fagnani advised.

Loyalty Programs Must Be Outstanding

The majority of respondents (63 percent) only belong to between one and three loyalty programs. This shows marketers that a program must deliver exceptional experiences to make the cut.

Additionally, 77 percent of consumers feel brands could be doing more to earn their loyalty. The data, collected just prior to the declaration of the COVID-19 pandemic, has become more resonant in recent months, according to Formation survey analysis.

"The bar for creating consumer relevance has risen dramatically as tech giants like Netflix, Amazon, and Spotify deliver increasingly personalized user experiences," Selchau-Hansen said.

"Consumer expectations for individualized experiences are rising, and the pandemic is accelerating that. If brands want to foster loyalty from today's consumer, they must deliver experiences and communications so tailored they feel as if they've been crafted for just that one person," he added.

The Phases of Personalization

Marketers have numerous ways to approach personalization. But the best ways involve understanding the behaviors and psychographics of customers, according to Nick Swekosky, founder of Market Metrics. Even smaller organizations can implement personalization tactics in their marketing programs.

"Use automation to prescribe information or features to help increase awareness, engagement, or further actions. Evaluate customer problems, goals, and focuses over time in order to define intent. Based on responses, leverage easy automation like drip campaigns and webinars to provide a more personalized experience," he told CRM Buyer.

Other approaches include implementing email drip campaigns with services like Mailchimp. Organizations can also implement webinars with solutions like Eventbrite and Zoom, he added.

Artificial intelligence can also play a role in improving loyalty programs. For instance, AI clustering can help identify common user characteristics relative to user actions. Better correlating user characteristics to actions will help to create automation like drip campaigns that suggest information for users to become more educated and operate more efficiently, explained Swekosky.

In addition, AI prediction can be used to better understand when users will take specific actions; and to help decide how, or when, to augment their service. This provides automated informational resources that could help customers make more informed decisions before they take action.

Tap Into Psychographics

Product marketers can take personalization efforts one step further using psychographics, suggested Aadith Moorthy, founder & CEO of Radial, which provides AI-driven personalization services.

Psychographics are the personalities, values, and lifestyles of individuals. They are the most fundamental predictors of customer behavior.

"E-commerce giants like Amazon and Walmart have already accomplished this at scale, and other companies are currently playing catch up. In fact, psychographics is considered the Holy Grail of marketing," he told CRM Buyer.

Small- and medium-sized companies can find it difficult to have the data and resources to develop psychographics. This is one unique area where AI could play a huge role in generating these levels of details and to scale this across all customers, even for small companies.

Radial's says that its "plug-and-play solution" for this is platform agnostic and can integrate with any CRM, without the need to bring in any data or engineer's time.

The platform uses extensive deep learning generated data on the personalities of those who visit an e-commerce site. Radial then suggests the best products for them with AI. This leads to 20 percent plus average increases in sales and significantly reduced churn, according to Moorthy.

Personalization Tips

Personalization is critical to earn trust and loyalty. It should go well beyond just "Hi, first name" to be effective, Heather Wilkerson, vice president of marketing at Registria, told CRM Buyer.

She offered these keys to personalization success for a company of any size:

  • Invest in understanding the customer base and what is of value to those consumers to motivate them to provide the information a company needs to deliver a personalized experience. Motivators are loyalty program status, better service/care, exclusive offers.
  • Capture self-reported data by the customer including, product(s) owned, date purchased, and place of purchase (if not direct). Use those motivators above to encourage customers to first act.
  • Provide opt-ins to specific channels to truly serve a personalized customer experience.

"From there, it is using the combination of the self-reported data, channels, and value drivers and making it frictionless to engage in a two-way conversation that delivers valuable information (status, progress to tiers, exclusive promos) that build trust over time," added Wilkerson.


Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.


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