Mar 11, 2015 | Customer Loyalty Research

The Current State Of Customer Engagement Strategies

Kane Russell — Marketing at Thanx by Kane Russell — Marketing at Thanx

Yesterday, we watched the Colloquy Loyalty Census Webinar to figure out the current state of customer engagement strategies. Here's what we learned.

customer-engagement-strategies

The COLLOQUY Loyalty Census sets out to deliver insights and trends on customer engagement strategies – specifically everything related to loyalty, retention, and rewards. Key topics include: the number of loyalty memberships in the U.S., what types of campaigns companies have in place, what's working, and what's not. The following are direct quotes from the online conversation and what they mean for businesses and merchants looking to improve their consumer engagement. 

"We're almost at the point of crisis with regard to consumer engagement."

Take a look at this graph: 

were-almost-at-the-point-of-crisis-with-regard-to-consumer-engagement

Here's what's clear: while the number of total household loyalty memberships continues to grow, the number of active household loyalty memberships does not. Though consumers continue to search for engagement from the companies they care about, they find that the engagement programs do not provide sufficient value. So they opt out. That's wasted dollars for merchants, and more promiscuity from customers

Thus – the impending "point of crisis." The only engagement programs that work are the ones that introduce as little hassle and complexity as possible. Engagement programs on average have to deliver a better experience than they do today. It's up to merchants to find the best loyalty software vendors and make the best decision for their business (here's a guide to do just that). 

"We all know from business school 101 marketing class that it costs 10-15x more to get a new customer than to keep one. But yet we spend far more of our budgets on acquisition.”

Here's something to do with your friends if you ever start talking about what it would be like to own a small/medium-sized business. Ask them – what would you rather have: a new customer who paid you $10 today, or a repeat customer who paid you $10 today? 

What you'll find: most people will argue that a new customer is better. Since you already have a repeat customer, it follows that getting them to pay you $10 isn't worth more than a brand new customer who pays you $10. However, we all know that the actual answer is: "doesn't matter!" - $10 is $10, no matter where it comes from. 

What IS important, however: what happens once that customer leaves the store. You need them to come back, i.e. – without question – the most important job of a business once a customer enters the store. That's why allocating budget to customer retention marketing matters so much for a business's long-term success. 

“Most companies are marketing to [consumers] in mass and providing them with largely irrelevant information”

In the age of smartphones, consumers demand personalization. Think about our own experience as consumers – anything that's not meant for a customer specifically immediately gets cut out by our (call it a) noise collander. There's just too much information out there – consumers have to ignore some. 

So, the best way to market to consumers is proprietary data (e.g. shoe size matters much more to a shoe retailer than a haircutter). With proprietary data to target customers as individuals, businesses can build customer engagement strategies that actually work.

"Most programs are structured in a way where your best customers are subsidizing your worst customers – need to think about how we are segmenting our customers in a more meaningful way”

As we all know (now), two-thirds of revenue comes from the top 25% of customers; less than 15% of revenue comes from the bottom 50% of customers. Failing to segment customers means that a business completely ignores this fact. Not a good sign. 

Here's what to do instead: create a VIP program specifically targeted for the top tier spenders. Design incentives to make sure customers come back (instead of attracting bargain hunters in the store every time they feel like saving money - those customers are not valuable). 

“Mobile should be part of the underpinnings of any consumer experience otherwise you’ll find yourself playing catch up in five years”

Many businesses assume that email should be the primary focus for customer engagement – to be honest, this assumption is based on a historical status quo rather than forward-looking innovation. Email-centric customer engagement doens't provide the same value as mobile.

According to Epsilon, email engagement rates dropped to 4% in 2014 (down 20% from a few years ago) while MailChimp shows restaurant/retail email clickthrough rates to be even lower at just 1.7%. Email marketing has matured and formerly advanced features such as subject line A/B testing are now “table stakes” for any email service provider.

Businesses should instead make mobile the primary method of communication and use email as a complement. Those that do now will be much better positioned long term. 

"If your program doesn’t represent 40% of total sales, you don’t have enough scale to maximize the value of your program – though at the end of the day that could be just 10-15% of customers"

We discussed this already. The most successful customer engagement strategies are those that focus on retaining a company's best customers. 

 

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