The majority of organisations do not understand what is driving customer loyalty, and are therefore putting customer relationships and profitability at risk, said a recent study conducted by Forrester Consulting on behalf of Collinson, a player in loyalty and benefits. The research found that two thirds (65%) of those surveyed markets in APAC do not understand why their customers are loyal to their organisations.
Almost 7 out of 10 (67%) reported that they do not have a proper framework in place to measure loyalty in the context of overall business performance. Remarkably, the research also found a misalignment between the loyalty objectives and the measurement criteria used to determine the effectiveness of their loyalty success. Surveying decision-makers in organisations with revenue exceeding US$300 million, respondents graded their programmes based on a series of measures and also shared their key goals and challenges.
Three reasons why organisations may be struggling with customer loyalty
- Loyalty strategy without clearly defined business objectives and appropriate metrics
Loyalty success is led by a holistic loyalty strategy with clear defined goals and measurement framework which needs to be embedded consistently across an organisation. Less than half (49%) of the APAC respondents have clearly defined business goals and objectives to define their loyalty proposition, where Hong Kong and Japan have the highest percentage (55%) compared with 39% of respondents in Singapore. Only 40% have cohesive customer loyalty strategy that spans multiple functions and is a top strategic initiative with C-level support.
The research highlighted that there is a clear discrepancy between what people are trying to achieve through their loyalty programmes and the KPIs in places to measure the performance in relation to their objectives. The key loyalty objectives and performance metrics shared by our respondents for their customer loyalty programme in APAC are misaligned as shown below:
|Key loyalty objectives||The metrics for measurement|
|1||Acquiring new customers (53%)||Customer satisfaction (62%)|
|2||Retaining existing customer (47%)||Customer engagement (59%)|
|3||Enriching customer relationships (46%)||Customer retention rate (57%)|
|4||Improving the customer experience (37%)||Loyalty programme enrolments (57%)|
|5||Increase customer advocacy (35%)||Sales & revenue (57%)|
Without appropriate metrics, it could be difficult to know which areas need improvement and understand the impact of customer loyalty on overall business performance.
- Without a single customer view to harness data potential
To appeal to the modern, choice-rich consumers, it is important to engage them at an individual level which means collecting all appropriate data across the customer journey.
The research found that three-fifths (60%) of respondents in APAC do not have centralised business rules to incorporate all sources of customer data into a single customer view. Less than a half (48%) collect a wide enough range of customer data to run deep analyses, where only 26% of them automate advanced data analytics to optimise their customer strategy, and 35% would use predictive modelling to identify the right existing dynamic content based on customer behaviour.
Predictive modelling enables brands to make better decisions and run more effective programmes where China has the highest percentage (47%) compared with the rest of respondents in Asia Pacific to harness the value of data for providing personalised offers for each member. It is vital to recognise each customer preference and behaviour to provide a personalised experience that stands out from the competition. This can only be done when brands continuously collect the right information about their customers and using it effectively, to understand what makes them tick.
- Competitive differentiation
Loyalty programmes with reward, point and VIP schemes have been pervasive for years. These tactics are still frequently employed, but the effectiveness is uncertain when they are deployed without a sound loyalty strategy. Brands continue to see competitive differentiation as being vital, with two thirds (66%) of loyalty practitioners in APAC reporting that is a critical or high priority. 72% in Asia Pacific, 78% in Hong Kong, Indonesia and Korea respondents planned to increase funding for developing new loyalty programme benefits and rewards.
Embracing partnerships with like-minded brands, who can offer unique experiences and access to their customer base, will enhance and strengthen the member’s engagement. It enables partner brands to expand their knowledge of the customer through an integrated cross analysis of buyer behaviour and preferences for personalised, curated communications to increases sales leveraged through the partnership.
Mary English, EVP, APAC of Collinson, said having a clearly defined loyalty strategy provides the foundation to design a proposition for continuous engagement with your customers in a relevant and meaningful way.
“Data is the fuel for ongoing loyalty to a brand with heavy weighting on a well-structured single customer view to capture, measure, gain insights, and personalise the dialogue with their customers. Organisations need to put loyalty back on track by becoming better aligned in terms of their objectives, what they measure, and how to differentiate their programmes. There is really no ‘one size fits all’ approach and each organisation must identify their brand’s unique, valuable assets in formulating a strategy that is regularly reviewed and updated to the changing behaviours of their customers,” she added.
She added that creating formalised processes and employing dedicated resources can be a valuable investment and demonstrate a company’s commitment to loyalty. “It is logical for companies to consider ‘connected loyalty’ as a goal of their strategy. Customers who feel connected to the organisation become fans, not just purchasers of their products and services. The latter may simply be shopping out of habit or convenience, whereas fans will go out of their way for the brands they love.”
The study surveyed and compared the results for a multitude of countries and regions in Asia Pacific (APAC), including Hong Kong, mainland China, Singapore, Indonesia, Japan, Korea and Australia.