The 7 Business Benefits of Digital Transformation

Customer Loyalty & Advocacy A Digital Transformation Benefit

Business Benefit #4 of 7 – Customer Loyalty & Advocacy

Welcome back to The 7 Business Benefits of Digital Transformation blog series.

We have covered a lot of important ground in the last three benefit areas – #1 Selling Success, #2 Service Excellence, and #3 Product & Service Innovation. All three of these topics have a critical impact on being a digital leader.

Selling Success – make ongoing, relevant, situationally aware offers through a guided, omnichannel buying process

Service Excellence – empower employees with modern tools and policies, provide easy access to service and accounts, and proactively address service issues before they occur

Product & Service Innovation – match consumers’ ever-rising expectations of value by making offerings smart, connected and continuously improving

One way to think about the distinction between these customer success strategies and the topic of Customer Loyalty & Advocacy is through the event horizon in question. My prior blogs in this series discuss largely singular events – a sales transaction, a problem/inquiry solved or a new product launch.  

In this blog, I’d like you to consider customer loyalty and advocacy as the culmination, or sum, of all sales, service and marketing customer experiences, with different strategies to consider once you have achieved a loyal base of customers.

Customer loyalty and advocacy drives a host of business benefits, including significantly higher revenue at a much lower selling cost. A widely referenced study published in the Harvard Business Review  found that the cost to acquire a new customer is 6–7 times higher than maintaining an existing customer relationship. And a pivotal study by Bain & Co. found that just a 5% percent increase in customer retention yields profit increases of 25% to 95%—a powerful reminder of why customer retention is essential to maximize business value.

Customer loyalty and advocacy drives a host of business benefits, including significantly higher revenue at a much lower selling cost.

I’d like to focus on three topics that are driving customer loyalty and advocacy further in the digital age:

  1. Customer Journey Management
  2. Loyalty Program Modernization
  3. Advocacy Activation

Three Topics of Customer Loyalty

A customer journey represents a sequential set of steps that depict how a customer interacts with a company, including the company’s people, processes, systems, physical objects and places experienced along the way. With today’s digital technology, companies are now able to catalog customer journeys more systematically. Customer journey management helps enterprises understand usage, adoption, channels, interactions and other behaviors that guide individuals to enhanced engagement and better overall outcomes.

In aggregate, customer journey management provides incredible insight into the actions needed to drive new business and customer retention. For example, telecommunications companies now understand that possessing more than one service offering results in a significant reduction in churn risk, thus driving the quad-play bundles we see today.

But the real value in customer journey management comes from individual-level insight and action. Vlocity is at the forefront of bringing this context to frontline employees at key points of interaction. Knowing historical purchases helps identify relevant and welcome follow-on offers.  Knowing a customer’s experience in trying to resolve an issue helps frontline employees empathize with customers, accelerates understanding and improves the likelihood and speed of service resolution. At a leading global insurance provider and Vlocity customer, inquiries are handled upwards of 20% faster because agents have a full view of the customer journey at their fingertips, describing their 360-degree customer console as a “great system,” “easy to navigate,” “user friendly” and offering “multiple ways to get to things.”

Knowing a customer’s experience in trying to resolve an issue helps frontline employees empathize with customers.

Integrating and understanding the customer journey across multiple channels is creating clear advantages for the enterprise, but customer journey management is about to be transformed further with IoT (Internet of Things) technology. “Smart” offerings will be able to create a comprehensive portrait of a customer’s end-to-end experience outside of traditional channels, which is fundamental to understanding customer behavior and driving loyalty and advocacy.

For example, let’s say Susan recently purchased a high-end digital camera to take pictures at her son’s soccer games. She tried the camera a couple of times and found that the lens didn’t fare much better than the camera on her phone, so she stopped bringing her new camera to the games. The digital camera of the future will pick up on these behaviors, triggering a recommendation for a new, more powerful lens to better suit the intended use case. Susan is then offered a new lens at a big discount. She buys it, and her usage of the camera goes up substantially. And here’s where it really gets interesting. Susan, now extremely happy with her camera purchase, tells her friends about the cool experience, highlighting how her camera manufacturer Canon is really enhancing her photography interests by offering smart, personalized offers tailored to her needs. And just like that, through the intelligent management of a customer journey, a brand advocate is born, customer loyalty is activated and free, peer-to-peer marketing activity is set in motion.

“Smart” offerings will be able to create a comprehensive portrait of a customer’s end-to-end experience outside of traditional channels.

Marketers take note. This illustration assumes that Susan has opted-in to this type of device reporting – believing that data sharing is designed to benefit her ownership experience. Companies must remain diligent in upholding the sacred contract between themselves and customers to achieve improved loyalty and advocacy. If customer data is used inappropriately (i.e., excess communication, irrelevant or inappropriate communication), the exact opposite effect of customer retention and advocacy will occur.

Loyalty programs are undergoing a resurgence in the digital age. When I was younger, I remember licking a lot of reward stamps to earn a free CD at my local Atlanta music store, Turtle’s Music. The basic program worked well enough back in the day (at least for me), but digital technologies now allow companies to answer important questions that were simply not answerable in the past:

  1. How many people were engaged in the program?
  2. What percent of people exposed to the program decided to participate?
  3. How often were customers entering the store?
  4. How many customers began participating in the program, but later abandoned it?
  5. Did any customers tell their friends about the program?
  6. What is the revenue difference between loyal customers and non-loyal customers?

Loyalty programs are undergoing a resurgence in the digital age.

Digital leaders are embracing a variety of new technologies and methods to make customer loyalty programs more informed, easy, fun, and, well, rewarding – for both customers and companies.

Informed – Track activity across multiple channels and integrate new usage and location data to provide a rich data set for mined insights and insights into improved customer-focused initiatives.

Easy – Offer easy access to loyalty programs by providing mobile-responsive purchase and activity data points and multichannel access to any loyalty-based info. As an example, Disney recently launched, “Magic Band,” enabling easy payments and a way to track usage patterns in the park. These technologies allow loyalty programs anywhere to sense both purchases and activities, and understand the relationship between them.

Fun – Modern loyalty programs embrace concepts of gamification—the application of game-thinking in non-game contexts—to encourage more active participation with increasing rewards at different tier levels. By 2020, the evolution of emerging technologies combined with smart psychological components will further enable the adoption of gamification as a way to make loyalty programs more engaging, accessible and a win for the consumer and the enterprise.  

By 2020, the evolution of emerging technologies combined with smart psychological components will further enable the adoption of gamification.

After customer loyalty is secured, advocacy activation is any company’s next step. If you are a customer loyalty leader, you now have a large cadre of active, committed and happy customer advocates.  No level of marketing investment can match the personal recommendations and reviews of your customer advocates. When marketing becomes an organic phenomenon, it is always more effective than messaging initiated by the enterprise. According to the Nielsen Consumer Trust Index, 92 percent of consumers trust organic, user-generated content (UGC) more than they trust traditional advertising. When compared to other forms of advertising, word of mouth marketing (WOM) has been found to be more advantageous in drawing new customers. McKinsey suggests that WOM can actually generate twice as much sales than other forms of marketing for products as diverse as skincare and mobile phones. The key is to digitally evangelize existing customers, turning them into brand advocates who will do the marketing for you.

Activating your loyal customer base starts with identifying customers who are spreading the most positive messages about your brand—the “passion communities” whose interactions occur on a on a deeper, more consistent and enthusiastic level. It’s they who will provide the “social proof.” Take time to understand the frequency and conviction of the positive messages they are conveying about your brand. Bring these advocates closer to your brand by integrating them closer to your business operations. With the right incentives and a more personalized style of communication, you will begin to foster “brand champions” who will only be too happy to conduct word-of mouth-marketing for your enterprise. And this notion is particularly critical to the B2B tech sector: Google research reports that 60 percent of business technology customers search for peer testimonials during the decision-making process.

Activating your loyal customer base starts with identifying customers who are spreading the most positive messages about your brand.

To be clear, we are no longer in a loyalty incentive game when discussing customer advocacy.  Give passionate advocates the respect and admiration they deserve to proclaim opinions and discuss where to take their brand further. Establish forums to gauge where the brand needs to go next, and provide non-monetary perks that deliver insights to new product development and new customer initiatives that only current employees (and customer advocates) are able to see. In doing so, you begin to make the entire brand communication process unique, personalized and truly experiential. This is the ultimate form of company and customer symbiosis, transcending historical, arm’s-length methods such as focus groups to establish real-world access to sentiments from the most valued customers that companies must hear to improve their business.

I hope you enjoyed this latest installment of The 7 Business Benefits of Digital Transformation, and I welcome your feedback. Our next installment focuses on the often forgotten, but nevertheless vital functions that enable world-class customer experiences. Business Benefit # 5 of 7 is Outstanding Operations, driving productivity, speed and agility in the digital age and making every company function an engine for customer success.

Mark Stevens

Vice President Customer Strategy

At Vlocity, Mark leads the company’s global Customer Strategy team, focused on helping enterprises define their digital strategies and realize maximum value from digital technology investments.  With more than two decades of CRM experience, Mark has helped hundreds of customers transform their business with innovative, customer-centric approaches that incorporate the latest digital trends and technologies.  Prior to Vlocity, Mark was Vice President & Head of Global Value Services at Oracle.  He has also held leadership positions at Siebel Systems, iXL Enterprises (now part of SapientRazorfish), and AT&T.