Consider Moments-Based Loyalty for Sustainable CX

July 10, 2024

“Looking ahead, the next two decades are expected to shift focus from transactional ease to relationship building and from frictionless to fulfilling experiences. In a future where convenience becomes ubiquitous, consumer spending will increasingly hinge on emotional connections with brands,” says James Riess, SVP, General Manager, CRM & Loyalty Experience at Merkle.

At Merkle, loyalty is defined as the sum of every consumer’s experience with a brand. James believes this aligns with how consumers think of loyalty today. He asserts that siloed, transactional loyalty programs are ineffective in creating emotional connections with consumers. Instead, only fluid, moments-based loyalty, fully integrated into the customer experience strategy and lifestyle, will drive sustainable Human Loyalty®.

James leads Merkle’s CRM & Loyalty capability, collaborating with teams to help clients grow their business by providing exceptional consumer experiences. Throughout his career, he has focused on helping brands grow through data-driven, technology-enabled marketing. As General Manager of Loyalty and CRM, James supports clients in leveraging Merkle’s unique data and experience capabilities to elevate customer experiences and drive business growth.

James talks to CXM Today about the changing definition of loyalty, customer behaviour difference between loyal and non-loyal customers, advancements in AI and machine learning impact CRM strategies, tips and more. He also shares his opinion on generative AI.

Excerpts from the interview:

How do you align loyalty initiatives with overall business objectives?

According to Berkshire Hathaway, customer acquisition costs have risen 60% in the last five years, leaving brands with a $29 loss for every new customer acquired. This underscores the importance for marketers to prioritise growth from their existing customer base. However, brand marketers often face challenges in gaining leadership buy-in for loyalty initiatives due to competing priorities and resource constraints. To overcome these hurdles, marketers must present a compelling business case for loyalty, supported by robust data, customer insights, and alignment with business goals.

We collaborate with our clients to understand their short-term and long-term goals, including revenue growth, customer retention, and brand engagement. Identifying KPIs such as customer lifetime value, repeat purchase rate, average order value, and customer satisfaction is essential, as these metrics directly impact strategic outcomes. We then develop a financial model that quantifies the projected business value of loyalty for their individual business, taking a rigorous approach to testing, learning, and optimising toward that goal while fostering sustainable growth and nurturing deeper customer relationships over time.

Do you think the definition of loyalty is changing in the business industry due to changing customer expectations?

At Merkle we have long defined loyalty as the sum of every experience a consumer has with a brand. I believe that this is very much aligned with how consumers think of loyalty today. Siloed, transactional loyalty programs are not effective in creating emotional connections with consumers. Only fluid, moments-based loyalty that is fully integrated into the customer experience strategy and lifestyle will drive sustainable, Human Loyalty®.

Brands like Starbucks and Sephora were early adopters of this approach and I believe that over the next few years we will see more brands following their lead. In fact, Gartner is predicting that by 2026, customer loyalty programs that offer a mix of transactional and experiential benefits will displace programs that solely focus on just offering customers points. We believe that this is a win for the industry and the consumer.

How does customer behaviour differ between loyal and non-loyal customers?

At Merkle, we believe in the power of Human Loyalty as a brand’s most valuable asset. Our 2024 Loyalty Barometer Report reveals that customers enrolled in loyalty programs, whether paid or free, demonstrate distinct behaviours that distinguish them from non-loyal customers. They make purchases more frequently and with higher average transaction values, showing consistent preference for the brand. These loyal customers also actively engage beyond transactions, participating in promotions, surveys, and social media interactions, especially Millennials. They advocate for the brand by recommending it, leaving positive reviews, and sharing their experiences. This group exhibits higher trust and overall satisfaction with the brand’s products and services, and they are less price-sensitive, prioritising the overall brand experience enough to justify paying a premium.

On the other hand, non-loyal customers purchase less frequently and have lower average transaction values. Their engagement with the brand is minimal, and they are more price-sensitive, frequently switching brands for discounts or better deals, prioritising cost over brand loyalty.

Understanding these behavioural differences is crucial for businesses aiming to convert passive, non-loyal customers into active brand advocates. At Merkle, we leverage our Emotional Measurement methodology to understand a consumer’s emotional attachment to a brand at the individual and segment level and correlate it to ROI and CLV. We then deploy strategies to optimise the relationship (not just the channel) including targeted marketing, improved customer service, and personalised experiences to enhance satisfaction and foster a stronger connection to the brand.

Three tips for a brand leader who wants to enhance customer experience.

Over the past decade, experience transformation has prioritised convenience, leveraging technology to streamline everyday tasks and personalise interactions. Terms like “frictionless experience” emerged to describe the seamless removal of barriers, particularly accelerated during the pandemic to enhance contactless buying.

Looking ahead, the next two decades are expected to shift focus from transactional ease to relationship building and from frictionless to fulfilling experiences. In a future where convenience becomes ubiquitous, consumer spending will increasingly hinge on emotional connections with brands.

To foster deeper relationships with consumers, consider these three strategies:

Evolve Your Value Proposition Alongside Relationships:

Develop a dynamic value proposition that grows as customer relationships deepen. Offer evolving benefits such as exclusive access, personalised experiences, and increasing value over time. Continuously adapting your value proposition keeps long-term customers engaged and appreciated.

Create Personal Moments, Not Just Personalisation:

Move beyond basic personalisation to create meaningful, contextually relevant experiences aligned with each customer’s unique aspirations. Tailor interactions to support personal growth and satisfaction, fostering deeper loyalty and trust.

Appeal to Both the Head and the Heart:

Balance behavioural loyalty (driven by convenience and transactional benefits) with emotional loyalty (built on trust and genuine connections). Engage customers on both rational and emotional levels to build resilient relationships and encourage advocacy.

By implementing these approaches, brands can forge lasting connections that transcend convenience, driving sustained loyalty and value in a competitive market.

How will advancements in AI and machine learning impact CRM strategies?

Our vision is to move our clients CRM from siloed campaigns to contextual conversations that acknowledge prior interactions, purchase history, preferences, and relationship status.

Advancements in AI and machine are central to accelerating this approach. These technologies can sift through huge amounts of data to uncover patterns and insights that humans might miss. This means businesses can understand customer behaviours and preferences much better, allowing for more accurate targeting and predictive analytics to anticipate future needs. AI also makes personalisation incredibly precise. Instead of just basic segmentation, AI can tailor recommendations and communications to each individual, creating unique interactions that boost customer satisfaction and loyalty.

Finally, AI-powered chat experiences and virtual assistants can handle customer inquiries quickly and efficiently, providing instant support. Our latest solution, Intelligent Messaging, helps brands seamlessly and efficiently move consumers through every stage in the journey with a single consumer-directed conversation that improves the experience and shortens the path-to-purchase.

How does Merkle approach CRM evaluation to create a seamless and efficient business ecosystem?

Traditional CRM/Messaging approaches often result in disjointed customer interactions, where each touchpoint is treated as a separate event rather than part of a cohesive dialogue. The lack of integration across various channels and customer interaction points leads to inconsistent and disconnected experiences and missed opportunities for deeper engagement. In addition, these approaches fail to leverage the cumulative insights that connected conversations provide, which are essential for understanding the full context of the customer journey and delivering personalised experiences that drive loyalty and growth.

At Merkle we believe that effective journey management and customer-centricity starts with holistic audience planning and optimisation. Our approach to CRM evaluation reflects this, building a bridge between media and CRM to deliver unified brand experiences and superior outcomes:

Integrated Loyalty Assessment: We begin by conducting an integrated loyalty assessment. This rapid engagement covers essential aspects needed for delivering connected consumer experiences and sets the foundation for aligning media and CRM strategies.
Identity: Identity is at the core of our approach. By transforming anonymous data into known profiles, Merkle’s Merkury ag enables precise targeting. Marketers can engage with their audience more effectively, leading to improved performance.
Data Integration: Integrating data across media and CRM informs acquisition and loyalty strategies. By leveraging this data, brands can boost return on ad spend (ROAS) and drive growth from their customer base by fostering cross-channel loyalty.

The impact of this approach is significant, with brands experiencing a significant improvement in ROAS, a marked increase in conversion rates, improved media efficiency, and boost in lifetime value.

Your genAI prediction for the next five years.

Over the next five years, AI will revolutionise how businesses approach marketing and customer engagement. At Merkle, we’re at the forefront of this transformation with GenCX, which harnesses AI in groundbreaking ways to deepen our understanding of customers. GenCX uses AI to analyse extensive datasets, uncovering insights into customer behaviours and preferences. Allowing brands to refine messaging, tailor products, and create personal customer experiences that drive conversions.

What excites me most about AI is its ability to amplify marketing strategies. By integrating AI, we can provide businesses with quick, reliable insights to enhance customer engagement and optimise marketing efforts. As AI continues to evolve, it will play a pivotal role in helping businesses innovate and succeed in the digital landscape.