Why (some) loyalty programs fail?

The question of why some loyalty programs fail should be answered by all managers who are working to implement a loyalty program. Transferring mistakes from the market can save new loyalty programs from failure. In fact, there are many variables that determine the success or failure of a loyalty program: unattractive rewards, lack of communication, complicated membership rules and many others. What most often fails, however, is the execution of the loyalty program on the part of the organizer and its partners. A loyalty program that is mediocre in terms of attractiveness or innovation with perfectly run execution will bring much better results than a project that is great in its assumptions, whose execution will be inadequate.  In this article we will present the most common and egregious program execution mistakes.

Employee is not an ambassador of the program

  1. Employee is not an ambassador of the program

Some of the mistakes are due to the specific market in which the loyalty program is available. Other difficulties will be encountered in e-commerce-only programs, and others in programs aimed at stationary stores. In loyalty programs in stationary stores, the role of salespeople is very important. After all, they are the ones who have direct contact with the customer, and whether the customer joins the program and shows the card depends largely on them. Employees must know about the program, understand its rules and preferably like it. That way they will recommend it to consumers on their own initiative and with a clear conscience. And one of the key measures of the success of a loyalty program is the knowledge of the customer resulting from the work of the staff.

The best way to involve employees in promoting a loyalty program is to involve them in the pilot process. If employees can, before the official launch of the project, enjoy the benefits, collect points, receive rewards and in the process learn about the real benefits of membership, they will definitely be more likely to recommend the program to customers.

The loyalty program is not the responsibility of two or three people in the marketing department. Hundreds or even thousands of people are the face of the program, especially those on the front lines – salespeople and consultants in stationary stores – who have direct contact with customers. With comprehensive training and involvement of employees at the pilot stage of the program, they will become its ambassadors.

Poorly established rules for working with the program at the point of sale, franchisee level

Companies often run incentive programs for employees to help them achieve certain sales goals, including those related to loyalty program registrations. These types of activities obviously produce results, but usually in the short term, only for the duration of the incentive. It is important to build a cooperative environment so that everyone cares about the success of the program and, most importantly, not periodically or acutely, but over the long term.

For obvious reasons, it is easier to influence your own outlets. It is much more difficult for franchisees. In this case, it will be most beneficial to secure the presence and support of a loyalty program in the franchise agreement, so that the businessman understands that having employees remind customers of the loyalty card will simply pay off. The easiest way to explain this is through a push & pull strategy. The push element, pushing the franchisee towards working with a loyalty program, is the variable margin, which ensures that when certain assumptions are met, they will get a higher % on store turnover, bonuses, premiums, etc. Pull, on the other hand, is the activities that attract customers towards the brand. If the program has attractive offers and customers see that they actually gain a benefit by showing the card, they will come back, spend more, buy more often and redeem rewards at a given point of sale.

It is also a good idea to show the effects of the program on the basis of stores that are functioning well and working with the program. Such an example best illustrates what benefits a properly implemented and used loyalty program brings to a store.

With such actions, recommendations and referrals to the program, as well as reminders to show the card and assistance in registering for the program will naturally become part of the good practice of each customer’s service process.

Loyalty as (not) a core

The implementation of a loyalty program should be based on an interdisciplinary approach. The entire company should understand the idea of running a loyalty program – from salespeople, to consultants, project managers, developers, administrators, to the board of directors itself. Everyone should work toward a common goal – that the club member should always have a better deal and be treated in a special way.

Loyalty activities must be central to the company’s strategy, and not just one of many projects carried out as part of marketing and sales promotion. A loyalty program improves customer value over time (spends more, comes in more often), so it is essential that all employees are aware of how much the company earns from a loyal customer and how attracting quality clubbers affects meeting sales targets.

It is essential to understand the phases of development and set the goals in the loyalty program relative to the current stage the program is at. In the initial phase, everything must be done to gain clubbers and make the program massive. For only on a sizable base can you create selective promotions and highly personalized offers. Only when you build scale will niche, selective benefits make sense.

Lack of consistent communication about the loyalty program

When preparing the strategy and delivering offers, the team responsible for the loyalty program cannot compete with the sales team. Unfortunately, often, within a single brand, there are offers aimed at all customers, and those available only to clubbers do not stand out. A company that has a loyalty program, on the one hand, encourages customers to sign up for the program with the idea that “the clubber always has it better,” and on the other hand, fails to deliver on that promise, as it makes offers available to all consumers, sometimes even more attractive than the offers in the loyalty program, for fear of lack of interest. A brand that guarantees better offers outside the loyalty program is actually competing with itself.

Consistent communication that always conveys information about the loyalty program is essential if the company really cares about the long-term success of the project. Believing that a loyalty program will promote itself and that customers will inquire about joining and remember to show their card every time is a misconception. Loyalty program information should be readily available to participants. In addition, the lack of consistent communication reminding of the existence of the program and its benefits in all advertising messages of the brand reduces the chances of its success.

In implementing the objectives of the loyalty program, it is necessary to act from the detail at the level of the employee, through each individual point of sale, to the whole, i.e. all departments, management and partners responsible for the implementation of the project. This is the only way to effectively implement the objectives of the loyalty program.

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Customer Segmentation – Three Ways To Make Practical Use Of Data

In the past, the customers relied on a salesperson, for instance the owner of a convenience store, to help them find what they were looking for. Based on their experience, the salespersons were able to quickly find the perfect product for the customer, and often suggested additional items that the customer wouldn’t have even thought of. In the past, the owner of a local store had a few dozen, maybe a few hundred customers, so knowing their needs and treating them in a personalized way was feasible for them. Today, the brands have tens of thousands or even millions of customers who, like customers in the past, expect a personalized approach.

The advances in data collection and analytics make it possible to deliver a similar experience. Using increasingly detailed data, the companies are beginning to create highly personalized offers that direct consumers to the right products or services, at the right price, at the right time and in the right channel. However, treating each individual customer in a personalized way, when you have tens of thousands of customers, is very costly and at the end of the day may not be profitable. The consumer segmentation may help and it will likely provide the greatest value in terms of return on investment.

Nowadays, the machine learning models accurately create groups of the most similar customers, with each group being significantly different from the others. They should be similar in size so that they can be handled as efficiently as possible. The segmentation can take different forms and focus on different aspects due to the needs of the company and the business goals pursued. The article presents three ways to group customers relevant to a loyalty program.

RFM Analysis – The First Step To Customer Segmentation

When you are considering a loyalty program, it is worth including a RFM analysis in pre-implementation activities. Based on the parameters of Recency (the period since the last conversion), Frequency (the frequency of transactions) and Monetary Value (the value of the transactions), you will learn about the behavior of consumers and what their flow looks like over time. The advantage of this approach is, first of all, the simplicity and ease of data interpretation, so you can get to know what percentage of customers generate the turnover, at what time, and what percentage of turnover is generated.

We had the opportunity to lead an interesting project for a certain retail company. The conclusions of the RFM analysis for that company clearly showed that the group of occasional customers, who rarely visited the store and spent medium or low amounts, was massive and thus they represented a significant share of the store’s turnover. The need to engage them in a loyalty program challenged us to develop a creative mechanism that would be attractive from the point of view of both regular and occasional customers, while being feasible for the retailer in terms of the cost and its business. If we hadn’t done the RFM analysis, the proposed standard points and cashback mechanism would actually be unattractive to most customers, i.e. the potential program participants.

We started looking for an alternative. Something to complement the traditional mechanics. A program similar to a family account turned out to be the perfect solution. The elements such as reminders of important events (birthdays, name-days), the option to create gift lists by the account administrator, product recommendations based on the transactions of all account users, and special price offers on recommended products made the occasional customer see that it made sense to join the program. In addition, all transactions credit the joint account with points, so even occasional customers can add their contribution for the benefit of the family. With such benefits, the participation in the program is not just about commercial value, but consists of many emotional connections between the customer and the brand.

Based on customer segmentation, you can develop the most effective loyalty program mechanism ensuring that the customer value will increase and will be maintained over time. After all, it is not difficult to come up with innovative mechanics, attractive for a moment to a few percent of the customer base generating a small portion of sales. The trick is to get to know your customers, understand their needs and engage them for as long as possible.

Not Everyone Is Just Waiting For Promotions

We were faced with another challenge from a fashion company that was building a loyalty program based on the belief that customers only count on discounts and promotions. As the size of the customer base increased, the cost of promotion and direct communication increased faster than the ROI. Moreover, the company collected a very selective set of data on its consumers, concerning only the type of category of the product purchased and the offer it came from (new offer/seasonal promotion). Nonetheless, we were able to divide customers into groups, which drastically changed the perceptions and showed how the consumers differ from one another.

The segmentation proposed was very simple. What was unique was the fact that we were able to create attractive segments from the point of view of the communication, marketing and company business based on such a small range of data. After all, in addition to the customers who were genuinely interested only in the products on promotion, there were several other, equally numerous groups of consumers who had completely different needs. For some customers, a new offer, the highest quality or a specific category often not associated with a discount at all, were more important factors. Among the consumers, we identified the segments that purchased the following product categories, among other things:

  • children’s products
  • products from the new offer,
  • fashion accessories (excluding core products),
  • winter products on sale,
  • high-quality products without regard to promotion.

Thanks to such segmentation, the client knew what products to talk about, when to talk about them and what aspects of the offer should be highlighted in the loyalty program communications, so that the messages were contextual, and tailored to the needs of the program participants. 

The sales are not always driven by the promotions and price offers, but unfortunately some companies mistakenly identify the loyalty program mainly with discounts. A price offer can easily be outbid by competitors, and contextual, inspirational communication and tailored offers are already much harder to copy.

In Search Of The Perfect Customer

When working for a client in the consumer goods industry, we were looking for the holy grail of a segment or set of features representing the ideal customer — willing and able to spend a lot of money. However, the analysis of a very wide spectrum of data: website visits, products viewed, communication interactions, NPS survey results, transactions, returns, complaints and many, many other data, did not have the desired effect. The search for the holy grail has been unsuccessful. What is the reason for this?

In some industries, the customers are activated periodically, which makes finding the ideal customer and their characteristics less important. A customer who behaves inconspicuously can turn into a super-customer. Their interest in a brand changes depending on the consumer’s situation. In this case, it is important to recognize the customer life stages and skillfully anticipate the transition from one stage to another. However, this is not easy to do based on transaction data, as they don’t take into account the social aspect of the customer’s life.

Sociological quantitative and qualitative research came to the rescue, helping to identify behavioral changes related to customers’ lives. This helped us to identify four main patterns of customer behavior:

  • hibernation (no transactions),
  • small projects (small, occasional purchases),
  • medium-sized projects, 
  • large projects (a big change in life, requiring large expenses).

It was difficult to assign customers to the various segments. In this situation, the loyalty program came to the rescue. Thanks to the meticulously collected data, we translated the insights from the analysis into specific customers, which made it possible to identify the customer life stages and forecast the changes and the movement of customers between various stages.

Understanding the customer life stages helps create a personalized approach and find answers on how to treat a particular customer and what to offer them. Knowing that a customer’s behavior indicates that they are likely to spend 50x more than the average customer, you should seize the opportunity and offer them a special customer service process so that they fulfill most of their needs in your store.

Monitoring variables such as website visits, the products viewed, and correlating them with NPS survey results makes it easier to recognize which life stage the customer is moving from or moving to. It also enables proactive action and allows capitalizing on the opportunities the customer brings to the company. Good segmentation provides a basis for prioritizing business strategy: what is the condition of the customer base by specific store, to what extent does an outlet, with its sales goals, need to focus on attracting new customers, and to what extent on improving the customer service?

The customer segmentation models presented in the article are only selected examples from the array of marketing and analytical capabilities available on the market today. While meticulously collected data should be the basis of any segmentation to make the identified segments useful to the business and so that they meet the company’s marketing goals.

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Criteria For a Successful Loyalty Program – Download Free Guide

Loyalty programs enjoy unflagging popularity among both organizers and customers. Their number on the market is constantly growing – they are launched by global corporations, but also by local stores. They all have one goal: to keep the customer for longer.

  • A customer who registers for the program is 60% more likely to make a purchase.
  • A loyal customer usually spends up to 50% more than a new one.

In addition, the pandemic has contributed to a change in brand awareness. Many companies, mainly thanks to their loyal customer base, were able to survive the crisis time. In turn, the announcement of the phasing out of third-party cookies has made brands increasingly understand the need to build their own databases and see the loyalty program as an investment rather than an additional cost.

According to Capgemini’s Reinventing Loyalty Programs for the Digital Age report, 77% of loyalty programs based solely on transactional discounts will not survive more than two years. What makes some loyalty programs successful, while others – seemingly very similar to them – fail?

Learn the 10 criteria for a successful loyalty program.

criteria for loyalty program success

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Launching A Loyalty Program. What Should You Keep In Mind To Be Successful?

A loyalty program is no longer just nice to have, but a must have— even 75% of consumers say they would change to a company with a better loyalty program.

Some entrepreneurs interpret the loyalty program as a customer base to which they send occasional discounts and information about promotional offers. As a result, there are many loyalty programs in the market that, in reality, are just discount programs. As the popularity of the project increases, the cost of promotion and direct communication can grow faster than the ROI, so practicing this approach, translates into unfavorable financial results for the company. What should you pay your attention to in order to launching a loyalty program successfully, attractive to customers and financially profitable?

Lack Of Preparation Is Also Preparation, But For Failure

The effectiveness of a loyalty program depends on several key factors. Before launching a loyalty program in the market, it is important to ask yourself to whom it will be dedicated and to plan the strategy accordingly, in terms of the activities, attracting program participants, and rewarding them. You should also develop a method of reporting on key aspects of the program already at this stage.

When preparing a program, you should not rely only on your intuition or general trends. Each decision should be well thought out and supported by prior analysis, as there is no one-size-fits-all loyalty program.

Show Us Your Data And We Will Tell You Who Your Customers Are

To create an effective strategy for a loyalty program, you need an in-depth analysis of the available data. You should focus on transaction data, data related to communication interactions, data from the Central Statistical Office, information on the company’s media and advertising spending, as well as competitors and a range of other information from the market environment. It is also important to know your past marketing activities. Analyzing their effects and benchmarking them to market best practices in each category will provide insight into the strengths and weaknesses of the company’s performance in the analyzed area. 

Since the loyalty program is made up of customers, describing their characteristics and segments will identify the growth levers needed to effectively manage the loyalty program. Depending on the brand and industry, you could focus on:

  • increasing the frequency of purchases,
  • motivating to increase the value of the shopping cart,
  • access to limited offerings,
  • recommending to friends,
  • better customer retentions.

The segmentation allows you to determine which customers to target with your loyalty program. It is important to identify customer groups that have potential, and then plan to engage them in a loyalty program.

(Un)intuitive Choice Of Mechanics

The mechanics on which the loyalty program will be based is a key element of the strategy. It is designed to positively influence customer behavior and encourage them to identify themselves. The selection of the optimal solution should be based on an analysis of the company’s characteristics, customer profiles and the constraints it faces.

At the end of last year, the Lagardère Travel Retail group launched a multi-brand loyalty program called Kameleon (in English Chameleon), which included brands such as: Inmedio, Relay, 1Minute, Hubiz, the So!Coffee coffeehouse chain or the airport’s Aelia Duty Free stores. The Kameleon program can be found at train stations, in office buildings, hospitals, shopping malls, the Warsaw underground or Polish airports.

“From the beginning of our work on the program strategy, together with our partner, Loyalty Point, we have been looking for such solutions and mechanisms that would address our biggest challenge, i.e. the diversity and multiplicity of formats, product ranges as well as the expectations and needs of different target groups” noted Magdalena Charczuk, Marketing Director at Lagardère Travel Retail.

As a result, we have offered program participants a simple but attractive mechanism in which they receive money back in the form of vouchers to use for future purchases. The vouchers, can be used at any of the points covered by the program, which provides great freedom in using the program. The cashback, which allows instant refund while still at the store, will make joining the Kameleon program truly profitable for participants. “For the stores at the airport, it’s a gamechanger, and for the stores in the city, a chance to build loyalty and attract customers” emphasizes Magdalena Charczuk.

A program based on the right mechanics will be an investment in customer value over time. Knowing the rules and privileges, a program participant will surely first check out the offerings of the company running the program before going to the competition.

Selection of Rewards

When creating a loyalty program, don’t forget about rewards, an important motivator for using the program’s offerings. The issue, however, is not as trivial as it might seem. On the one hand, the problem lies in an inappropriate selection of rewards to meet the needs and expectations of the program’s target group, and on the other hand, in an unfavorable conversion rate. This means that the value is high in relation to the time spent and expenses incurred by an average customer to obtain the reward. Offering a specific benefit value is the foundation of an effective user reward system.

Increasingly, there is a shift away from in-kind rewards to a benefit in the form of an exclusive privilege, thereby improving the overall customer experience. The program participant deserves an extended return time or a lifetime warranty. These types of activities make customers want to be identified and they are willing to take advantage of offers under the loyalty program.

Schedule Reporting Over Time

The loyalty program should be looked at from a long term point of view. Over time, as the program grows and the number of participants increases, the expenses associated with operating the program also increase. So an unquestionable method for reporting the effects of the loyalty program should be established from the very beginning. Sometimes the program’s effectiveness is either miscalculated or the results are over-interpreted. Therefore, even before starting a project, it is important to determine how you intend to measure its results.

The marketers should be able to prove at any time that the program is earning money and is profitable, and how is the balance of costs incurred against what was earned. This way, you will actually begin to see the costs incurred as an investment. A good method of evaluating the effects of the program is to determine and compare the results of the control group to a typical program participant.

Loyalty Point — Cooperation Methodology

Our 20 years of experience in the industry have allowed us to develop an implementation methodology. On the one hand, it makes possible to get to know the contractor’s business in depth, and on the other hand, enables the client to implement a tailor-made loyalty program matching their business and consumer needs. Our “Raport Otwarcia” allows you to avoid basic mistakes made in intuitive program planning. The process is very methodical and, in addition to analyzing the data available in the organization, it also involves reviewing available IT tools, team structures and processes.

At Loyalty Point, we always take into account the characteristics of the company, the limitations it has, and its customer profile, and we recommend the optimal solution based on in-depth analysis of these factors. Recognizing prospects and identifying barriers is the first step to building a thoughtful loyalty program strategy. One of our effective implementations based on the Opening Report is the Vision Care program of the Vision Express brand.

The loyalty program implementation is a major undertaking requiring a number of strategic decisions, a lot of analysis and the involvement of representatives from several departments. It’s a complex project, so it’s critical to have the support of an experienced partner when implementing it. “Vision Care is a comprehensive eye care program and it reflects Vision Express’s strategy of taking care of Poles’ eyesight. Its success to date makes us plan to build the future of CRM and Customer Experience activities on it”  comments Aneta Pruk, CRM and Loyalty Program Manager.

We have used the Opening Report dozens of times and it has proven effective in many industries: from NGOs through multinational corporations to local businesses operating only in the Polish market.

The Future Of Launching Loyalty Program

The loyalty program market is evolving and customer needs are changing. That is why the companies should have access to a modern IT platform or CRM system that will enable them to manage the program rules in real time.

In an effort to provide our customers with the latest technological solutions, we have implemented the Loyalty Drive Enterprise (LDE) tool. The company’s proprietary CRM system is a software driven by data and artificial intelligence to build long-term relationships with the consumers. It enables efficient implementation and flexible operation of the loyalty program in a highly automated manner. This solution ensures that a personalized and customized customer service model is created. The system contains all the necessary modules, addressing all the processes within the program.

When deciding to implement a loyalty program, consider working with a specialized agency. This will greatly reduce the risk of making any of the mistakes. When choosing an agency, you should look at the projects it has completed to date as they say the most about its effectiveness.

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Trends In Loyalty Programs For 2022 You Need To Know

„Be a Loyalty Company, not a Company that has a Loyalty Program”. This is a maxim that should guide any company investing in loyalty these days. Having a traditional loyalty program is no longer enough to boast loyal customers. What trends in loyalty programs will take hold this year?

Over the past two years, customers have been discovering new sales channels and new brands. It turns out that up to 75% of consumers demonstrated new shopping behavior, including interacting with new stores, companies and sales channels.  After the pandemic, many consumers will be left with their new – acquired during the pandemic – shopping habits. Understanding how the crisis affects customer needs and expectations is crucial to building a loyalty strategy for the future. What trends in loyalty programs will dominate the market?

Recognition of well-designed digital solutions

The pandemic has increased appreciation for well-designed technologies – according to the Global Marketing Trends 2022 report, more than 60% of consumers will continue to be keen on using digital solutions, even long after the pandemic has subsided. Experts estimate that these changes are irreversible. This confronts companies with the need to make strategic decisions as to their further development. Especially in the area of sales. This also applies to the relationship marketing industry. Traditional loyalty programs based on collecting stamps on plastic cards are migrating faster and faster to an online form. On the market the new ones that appear are increasingly functioning only in electronic form. In addition, younger generations are far more likely than older ones to make purchases via social media or voice assistants. Making well-designed technologies today not a possible option, but a necessity.

Subscription loyalty programs

Paid loyalty programs are not entirely new, but they are still in the vast minority. Last year, Amazon Prime appeared in Poland. The domestic market already has such paid loyalty programs as Allegro Smart, Empik Premium and Wizz Discount Club. Their loyalty model is based on providing additional services after paying for a subscription. Recently, however, there has been a shift toward subscription-based loyalty programs, in which participants pay a subscription for access to benefits that offer real value.

Consumers are becoming more aware and selective about sharing their data with companies as part of a loyalty program. What does this mean for brands that want to develop such a loyalty model in 2022? On the one hand, the audience for the paid model will be more selective. On the other hand, it will enable the company to personalize its services more and provide more quality customers.

It turns out that members of paid loyalty programs are up to 60% more likely to spend more money on a brand after signing up for its paid program. Due to paid membership, they are more likely to purchase and remember to take advantage of available benefits.

Cookie-less world

The use of cookies for marketing purposes has been the standard for years to ensure efficient targeting of campaigns. Segmentation, based on data other than one’s own, will be virtually impossible in the new reality.  Ultimately, third-party cookies are set to disappear in 2023. However, fast-growing brands are taking the lead in the face of this change and are already opting for a self-serve data strategy. It will be crucial for marketers to prepare a holistic approach to the change.

2022 is the last moment to find new solutions for a cookie-free world. One way to deal with the new reality will certainly be loyalty programs. They can become the main tool for collecting zero-party cookies. Companies should already be building their own databases to help them connect with their customers. With the announced changes in customer data acquisition, there are growing cyber security challenges. Brands that demonstrate transparency should not be afraid of this. With their clarity in how they acquire and use data, they can expect up to 2.5 times more engagement from customers, including to hand over their personal information.

Commitment to social issues

Corporate social responsibility (CSR) is an element that an increasing number of companies are interested in. There is a growing number of brands on the Polish market that consciously engage in social issues. Clothing companies are promoting the idea of second-hand and second-hand clothes, and the banking sector is calling for environmental protection. It turns out that nearly 95% of Generation Z expect companies to take a stand on important social issues. In turn, 9 out of 10 customers say they are more likely to buy products they consider useful to society. Consumers are more loyal to brands that engage with the environment and address social inequalities. Although CSR activities usually do not increase sales, they significantly influence positive brand perceptions.

Technological transformation of loyalty

In a rapidly evolving digital world, companies are facing more pressure than ever to respond more quickly to market changes, shopping trends and customer expectations. Brands are changing their approach to implementing loyalty programs. They are showing particular interest toward solutions based on the latest technologies. The new reality also means new challenges, requiring faster decisions, faster reactions, faster changes. A fundamental step in building a competitive advantage is therefore to invest in technology.

With the increasing amount of data and new points of contact between consumers and brands, there is a wide scope for personalization of services. It’s no longer just access to real-time analytics that counts. But also the ability to further differentiate loyalty activities, with matching scenarios to sales performance and even – to the needs and behavior of a specific user. In order to make the workflow between the specialists of each department responsible for the loyalty program as easy as possible, it is worth paying attention to innovative low-code loyalty program management solutions. Low-code systems use a graphical interface and allow, without writing intricate scripts, to define offers and rules in the program.

Technological advances are fostering even better, more precise alignment of loyalty mechanisms with business strategies. The best-performing companies are tackling the entire customer experience comprehensively – from activating engagement to rebuilding customer data strategies. This requires collaboration across all departments of the organization. Leaders work together to create a 360-degree engagement that includes customers, data and customer experience. Agility, readiness to embrace new technologies and channels, and a strong data-driven consumer approach are key trends in loyalty programs for 2022.

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5 Mistakes to Avoid in Loyalty Program Implementation

Loyalty programs are now everywhere and in every industry – from restaurants to retail to travel companies to B2B projects. Their number is growing steadily. A loyalty program is no longer just a nice to have, but a must have – up to 75% of consumers say they would switch to a company with a better loyalty program.

The effectiveness of a long-term investment like a loyalty program depends on many factors. However, there are issues that cannot be overlooked if you want the program to work and grow over time. Here is our subjective list of the five most common mistakes we warn customers against in order to make their loyalty programs as effective as possible.

1. Intuitive mechanics selection

Firstly, we have to know that mechanics are designed to positively influence consumer behavior and encourage identification, so it is important to choose their form in relation to the expectations of the participants, but also the capabilities of the company. It happens that contractors come to the agency with an idea for a particular mechanic. They base their opinion on their own preferences or the programs of their competitors. When a company focuses on one mechanic, it sees only its benefits, usefulness and rightness of application. With only a hammer, all problems look like nails.

At Loyalty Point, we always take into account the characteristics of the company, the constraints present in the company, the profile of the customers. Based on an in-depth analysis, we recommend the selection of the optimal solution. In this way, the mechanics will provide a good experience for program participants, and on the other hand, will not be problematic for employees to use.  A program based on the right mechanics will be an investment in customer value over time. The customer, knowing the rules of the program, will certainly first check the offer of the company where he is a club member before going to the competition.

2. Ignorance of customers’ needs

As can be seen a loyalty program is not just a large customer base to which we send occasional discounts. As the size of the base increases, the cost of promotion and direct communication increases faster than the ROI. Practicing this approach, translates into unfavorable financial results for the company. By understanding a brand’s customer characteristics and segments, you can identify the growth levers necessary to effectively manage your loyalty program, and thus plan a strategy that will work in your case. Depending on the brand and industry, this may include a focus on:

  • increasing purchase frequency,
  • incentivizing an increase in basket value,
  • access to limited-edition offers,
  • referrals to friends
  • or better retention.

Segmentation helps determine which customers to target with a loyalty program. It is important to identify the customers or customer groups that have the potential to be involved in a loyalty program and tailor it to their needs.

3. Unattractive rewards

When creating a loyalty program, one cannot forget about rewards, the main motivator for registering new club members. In this case, on the one hand, the problem is the inappropriate selection of rewards to meet the needs and expectations of the program’s target group. On the other hand, the unfavorable conversion rate – that is, the value in the sense of how much time and expense the average customer must incur to obtain the reward. What we offer as a benefit should have a value relevant to what the club member is expected to receive in return for his or her commitment. This is why there is an increasing shift away from material rewards to a benefit in the form of an exclusive privilege, thereby improving the overall customer experience.

A good example of a reward is also cashback in the form of a discount on subsequent purchases, which encourages repeat visits to the store within a certain period of time. However, be sure to adjust the timing accordingly. If our store has a low shopping frequency, a cashback valid for a week will not motivate the consumer to make more purchases. On the other hand, if a customer shops with us several times a week, a cashback for subsequent purchases valid for 6 months will not trigger an increase in the frequency of transactions, since the customer would probably return even without this motivator.

4. Member first, meaning the club member always has it better

Loyal customers buy more often and spend more. So a company should reward them for their loyalty every step of the way. It’s not just a benefit in the form of a reward or personalized offer, but the entire service process. A clubber deserves an extended return time or a lifetime warranty. These types of activities make customers want to be identified and eager to take advantage of offers within the loyalty program. Ideally, all special offers and discounts should be available only to club members.

However, if the club does not have such a sizable base of club members, it is still necessary to keep in mind that the club’s offers are far more favorable than those available to all consumers. Interoperable implementation is important. The program must work in the minds of everyone – sales, IT, marketing, customer care. So that when implementing individual projects, everyone has the club member, their needs and rewards in mind.

5. No activities showing positive long-term impact

Over time, as the program grows and the number of club members increases, so do the expenses associated with operating the program. That’s why it’s a good idea to establish an irrefutable method for reporting loyalty program profits at the very beginning. Marketers should be able to prove at any time that the program is earning and making a profit. It is also important to analyze the balance of costs incurred against what has been earned. It helps to turn this incurred cost into thinking of it as an investment.

Loyalty programs are a long-term investment that takes time in terms of ROI. Unfortunately, some companies don’t study control groups, and as a result are unable to demonstrate the positive impact and real financial growth for the organization. Important, it is also important to promote the program within the organization. Employees should know how the loyalty program is evolving over time: how many new customers have joined the program and what financial benefits this has brought, so that the rising costs from maintaining the program minimize in much faster growing profits.

A loyalty program is an investment in a regular customer who feels the need to interact with the brand – to buy, to use services, to recommend to friends. Its implementation should be properly planned and supported by in-depth analysis. Proper preparation for implementation will ensure success and effectiveness. By eliminating the above mistakes, we will certainly increase the effectiveness of the loyalty program.

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Customer Loyalty As a Cure for All Evil

“May you live in interesting times” says the English saying, which is supposed to translate as a traditional Chinese curse. Although ostensibly a blessing, it is usually used ironically. Life turns out to be better in the ‘uninteresting times’ of peace than in the ‘interesting times’, which are periods of trouble.

Unfortunately, this wisdom spells the end of the economy as we know it. Production bottlenecks, shop closures and openings, stock shortages, unavailability of components, and rising gas, coal and energy prices do not inspire optimism for the future. Moreover, the pandemic has proved a challenge to global corporations and ordinary customers, whose frustration is beginning to reach its zenith. Planned renovation? The new kitchen your wife has been asking for months? Or the child you promised would buy a new bike? Which shopping plans have youbeen thwarted by a pandemic?

Companies nevertheless strive to give their customers the best possible experience. A loyalty customer program can help with this, with brands knowing up to 70% of their customers and nearly 80% of transactions no longer anonymous to them. Thanks to this, marketers can react to customers’ needs in real-time. It is possible to inform them about emerging changes and new solutions, and use the collected data to build even better experiences. The question is, how to do it well?

Bad news is better than no news

Nobody likes bad news, but the lack of communication can be even worse for many people. People react badly to uncertainty – lack of information or unclear messages. Brands wanted to reassure their customers and stay in constant contact with them. So it’s hard to disagree that one of the most valuable commodities today is efficiently structured and quickly delivered information. Emails, text messages, and push notifications have proven to be effective during lockdowns to communicate to customers about changing situations. A long-term loyalty program strategy enables brands to collect the contact details of their loyal customers so they can reach them immediately and effectively with the necessary information.

Many decisions were made very dynamically during the pandemic, leaving consumers lost in the information chaos. During the most challenging periods of shop closures and openings, with the help of Loyalty Point, our customers managed to send more than 100 million messages to several million club members. These concerning:

  • changes in the functioning of shopping malls,
  • the number of people who can be in a shop simultaneously,
  • the extended period for returning purchased goods.

We encouraged people not to give up shopping and to visit the brands’ websites in the messages. Through communication, we were able to redirect traffic to the site. Although the e-commerce market experienced significant growth in the past months anyway, contextual text messages and emails to club members meant that website activity, as a direct result of communication, increased by up to 50% and the number of people with a purchase by nearly 60%. This is the best proof that long-term loyalty-building pays off.

80% of sales come from 20% of customers

In marketing, the Pareto principle works – 20% of customers are responsible for 80% of sales. Small items, which usually end up in our shopping carts anyway, don’t need sales support – if they don’t work, the customer won’t buy them next time, but this won’t weigh in the context: “lose” or “gain” a loyal customer. The situation is the opposite about items and relatively expensive services, where the purchase decision is preceded by more extended thought. In this case, the support of a consultant is irreplaceable. We have in mind products such as e.g. a bicycle, a pram or kitchen planning services, which are not replaced every month or even every year.

Moreover if a customer leaves unsatisfied, they will probably never come back. During the pandemic, the challenge has been to enable consumers to have the support of a consultant when shopping online. The online experience does not differ from the one they are used to in stationery shops.

Support online sales with customer loyalty

For one of our contractors, we launched and developed a platform offering remote support for the purchase process of a top product. We eliminated a bottleneck in the purchasing process – queues to consultants when shops were open. Still, many people could enter them or the inability to consult when outlets were closed entirely. We convinced customers that they could make a purchase differently, better and, most importantly, without even leaving their homes. Changing the stationary purchase path established over the years is a big challenge in the minds of customers and the company itself. Therefore, a unique system was made available for customers to arrange a videoconference with a consultant.

With the help of a loyalty program, we managed the information and dynamics of the events as best we could. The service was made available to registered users on the website. This gave us accountability and traceability so we could manage the whole purchasing process accordingly. Despite the lockdowns, we managed to keep total 2020 sales of the service for which the online consultation was dedicated at 2019 levels. This represents an increase of 244% in sales generated by online services. In addition, we generated 10% incremental growth for our client in this way.

How close to the purchase is customer?

A loyalty program is not just a customer database with phone numbers and e-mail addresses. Instead, it’s a treasure trove of knowledge about club members’ preferences, how and when they shop, what changes are taking place in their lives, and what interests them. Because we know customers “by the name” and can link their transactions and online behavior, we can accurately determine how close they are to purchasing.

The data we collect about customer behavior on the website changes the process of planning and implementing brand campaigns. By analyzing knowledge about customers using the website, we identify groups interested in buying a given product range. Thanks to data analytics tools, we build a scoring of a given product group we have in the campaign and move on to implementation. Analysis of the effectiveness of one of the projects carried out showed that in the group covered by the communication, we recorded a significant increase in sales of the promoted assortment – for some categories, it was an increase of up to 50%. The offer allowed to increase the number of transactions and their value. The average value of the product sold was over 40% higher than the average value of a product outside the offer.

Thanks to such actions, we maximize the potential of the loyalty program’s customer base. In addition, we reduce the costs of running the promotional campaign by narrowing the group and conducting highly targeted communication.

How to deal with limitations?

The base of club members is, however, limited in some way. We know only a fraction of customers who may be interested in the offer we are promoting because some of them may not know our shop at all or have not shopped with us before. Is it possible to reach people we do not understand with the promoted assortment? Searching for “statistical twins” allows us to extend the campaign’s reach beyond the customer’s ecosystem. By enriching profiles with look-a-likes, we look for people whose online behavior is similar to specific groups of our club members, thanks to which we gain even a 10-fold increase in campaign reach beyond the brand’s website.

Engaging communication, online sales support, and contextualized campaigns tailored to the customer allow us to maximize our loyalty program’s effects and even beyond. Data, or rather the knowledge of customer behavior that we draw from it, will enable us to minimize costs and maximize our actions’ effects, even in these “interesting times”.

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Communication In Loyalty Programs. How To Talk To Participants So That They Want To Listen?

Building a lasting relationship with club members is not just about offering ever-higher discounts and better promotional deals. Many companies see the loyalty program only as a contact base – a communication engine – and forget, or fail to see, the valuable potential that comes from running a loyalty program. Our experience shows that contextual communication in a loyalty program can generate up to 10% of a company’s total turnover. How do you achieve this?

Customers transfer the best experiences between industries and build their expectations based on positive experiences with the best brands, regardless of the industry. Suppose a consumer is served very well, quickly and effectively in an online shop and receives contextual and inspiring communication. In that case, they expect the same manner and level of service offered to them by suppliers in other industries, whether it be a competitor brand, a mobile operator or a coffee shop. Getting to know each other by collecting data, analyzing and then being sensitive to the signals generated and building relationships brings real value. It is misleading to think that only material rewards will win consumer loyalty. Focusing on mass communication, the marketer sees only temporary benefits, while a broader view of the loyalty program will allow a much higher and more practical value to be seen.

Evolving Customer Needs

The relationship marketing market is evolving. The focus has shifted from transactions to interactions, so what the customer wants to buy is more important than what you have to sell. Unfortunately, as this year’s ‘State of Marketing report shows, nearly 60% of marketing professionals admit that customer expectations will be more demanding than before the pandemic – if only because of more sensible spending planning. Added to this are changes in the ability to process personal data. There is a growing concern among clubbers about inappropriate use of data, and, as a result, we are seeing a general decline in the number of contact consents. In addition, communication channels are changing due to the emergence of generation Z, who are digitized and accustomed to interactive communication, for whom email or text messages are no longer attractive enough. Finally, generation Z is growing up in a period of rapid technological progress and therefore expects more innovation. So how do we meet these challenges?

Marketing is All about Data

Modern relationship marketing requires a thoughtful and data-driven strategy. The scale of information we can work with is genuinely substantial, looking at what we had access to just a few years ago. SalesForce analysis shows that by 2021, companies are using an average of 10 sources of customer information. Daily data from transactions (online and offline), SMS and email campaigns, push notifications, NPS satisfaction surveys, complaints and returns are used to plan only the communication strategy in the loyalty program. The criteria for selecting customers for subsequent communication campaigns are often spending and the number of purchases from the previous year. There are also external sources: demographic, statistical or geo-location data. The average number of available customer information sources is forecast to increase by half next year. Data management becomes more complex as the sources multiply. Still, we see this as an opportunity rather than an obstacle – other sources of information provide an even better, more complete and truthful picture of the customer, enabling us to build an even more engaging relationship.

The Beginning is the Most Important Part

One of the key elements of a loyalty program strategy is communication. Whether building a relationship with another person in real life or as a brand with a new clubber, getting to know each other is extremely important. At the beginning of the relationship, the clubber is more open and willing to share information about themselves, browse the website more often and look at the mobile app. On selected projects, the average Open Rate is then in the region of 40%.

The high rate of interaction with the brand allows us to know the customer and his preferences. For a marketer, this is a key period in building relationships and identifying typical behavior. Over time, customer engagement gradually decreases. Typically, 12 months after registration, we observe a drop in engagement by as much as a dozen or so percent, so getting to know the customer at the beginning of their customer journey is so valuable. The information gained during this time, the marketer will be able to use at a later to build an inspiring relationship for years to come, which will undoubtedly result in keeping the level of interaction with communication at an optimal level. This translates into better opportunities to reach out with a contextual message. If a high level of interaction can be maintained long-term, the financial return will ultimately be better than that achieved by spamming customers with further discounts.

Communications Channels

In loyalty programs, we continue to see that the leading communication channels are email and text messages and contact from call centers. We are also seeing significant growth in mobile apps and their push notifications. A traditional text message is still only 160 characters – not enough to convey engaging content. The text message is treated more like a reminder, so marketers need new solutions. One of the more unique and exciting trends in marketing communication is WhatsApp. We can send a graphic, a video, a registration form, or encourage a clubber to interact with the brand more engagingly. WhatsApp is gaining popularity in Europe and, thus, in Poland. Although it may seem like just another messaging service at first glance, tools built into the app are great for maintaining strong customer relationships and generating leads.

Stand Out or Die… are You Sure?

In addition to the appropriate channel, attention must be paid to the content, form, and frequency of communication. On average, we receive more than 20 advertising messages a day, most of which we do not even open. Many companies send the same mailing to all club members, yet each of us is different, interested in other things, and has recently bought something different in a shop. Marketers even flood clubbers with messages without the slightest context. To break through the mass of other news, they “shout” with bright graphics or controversial statements. And yet, for the clubber, tailored content is still more important than form.

A contextual message sent to a specific clubber attracts his attention. The sending of triggers confirms this. We record significantly better results on indicators such as Open Rate, Conversion Rate, and Click Through Rate than newsletters or traditional mailing. The CTR of a trigger-based message is usually twice as high as that of regular email campaigns. This is because triggers are more personalized to the specific actions of the club member. Such methods also result in greater customer satisfaction in the purchase process, and service requests – quick and precise reaction to a customer’s action makes them feel appreciated and noticed.

Summary – Communication in Loyalty Programs

Communication is one of the essential elements of a loyalty program strategy. The communication determines consumer interest in the offer, reminders about abandoned shopping carts or available discounts. Personalizing the message doesn’t just mean including the person’s name in the news is sent in an e-mail or SMS message. Personalization of the offer and communication, and ultimately the entire service process, can significantly improve the quality of a loyalty program. Indeed, an individual approach, modern technologies and a variety of communication channels can help build an engaging loyalty program.

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How Has the Pandemic Affected Consumer Behavior in Loyalty Programs?

How Has the Pandemic Affected Consumer Behavior in Loyalty Programs?
The epidemiological situation stabilizes, and marketing normality is slowly returning to the old tracks. Some customers are reacquainting themselves with stationary shopping and are more willing to interact with in-store consultants. What challenges do marketers face in the post-pandemic reality? Will the position of the online channel last, while the offline channel will be irretrievably lost? How will post-pandemic customer behavior evolve?

Conversion to loyalty programs – an upward trend

At Loyalty Point, we support more than a dozen leading loyalty programs in the retail category. This enables us to observe changes and quickly react to emerging trends efficiently. Loyalty programs are used as sales support also in crises – that’s why their position has strengthened during the pandemic. As shown by most projects we work on, the number of registrations for loyalty programs is steadily growing. New people are eager to join more loyalty programs with the mindset of ‘nothing to lose but to gain.’ Last year we saw between 15 and 20% growth in registrations.

The digital transformation in the area of loyalty is a fact. We move away from paper form and stamp card programs to more digital solutions. Nevertheless, in-store registrations with the help of a salesperson or consultant are still very popular among many customers. Therefore, the loyalty program market is still developing in two directions when it comes to the registration process. Most companies offer the possibility of registering for the program both offline, which we understand as registering in a stationary store, and online, through a mobile app or a form on a website. Brands whose primary source of club members was online or mobile registration could sleep well. As a result, there was an additional increase in program registrations among their customers relative to 2019. In contrast, the low (compared to online) number of in-store registrations remained stable.

Online registrations – an excellent addition or a necessity?

During the pandemic, enabling online registrations became a necessary alternative for brands that previously operated primarily in traditional ways. The spread of this opportunity allowed marketers to recruit new clubbers during the pandemic period while stationary stores were closed. As a result, the number of clubbers recruited online was up to 200% higher than through the same channel in the corresponding periods before the pandemic.

However, the changes in consumer behavior did not prove to be a permanent trend. They resulted from necessity. Now that it seems that the pandemic and the worst is behind us, customers are eager to return to their habits. In-store registrations are once again returning the favor. What is essential, therefore, is that the emergence of the online channel among brands that have so far relied on attracting new clubbers in the stationary store has not entirely displaced this method. Instead, it has opened the door to attracting new customers with different preferences. The position of the online channel is now stable, so marketers need not worry that their investments were short-term, only for lockdowns.

Increased participation among young, unstable among old

Increased participation among young, unstable among elder
It turns out that turning online and promoting this channel over traditional loyalty programs has changed a lot. Young customers, especially those in the 18-24 age group, have adapted to the new reality and are more likely to register for loyalty programs than before the pandemic. Digital solutions are more intuitive and attractive for this segment of the population. As a result their share of registrations, especially for traditional loyalty programs, has increased thanks to the new registration option. An analysis of selected projects shows that we could observe between a 30 and 50% increase in the participation of the youngest age group.

People in the 25-34 age group are the most likely to register for loyalty programs, both before, during and after the pandemic. Based on the projects we run, we observe that they account for more than 30% of all people joining loyalty programs. So it’s not without reason that this is the target group for many brands.

Accepting the new reality and new opportunities, on the other hand, proved to be more burdensome for older age groups. For example, people 55-64 and 65+ have significantly withdrawn from joining loyalty programs during periods of hard lockdown. The significant reduction has influenced this in in-store registration opportunities caused by store and mall closures. Marketers are therefore faced with the challenge of simplifying the online channel so that it is intuitive and accessible to those who are not fluent in this type of functionality daily.

Offline? Online? Omnichannel!

After the pandemic, planning activities that cover all channels and brand-consumer touchpoints proves crucial. This will give customers the freedom to choose the best option relative to their preferences. In addition, by balancing the distribution of your loyalty program across offline and online channels, you can provide a similar experience tailored to user preferences.
Turning online has its advantages, but unfortunately, also its disadvantages. Competition on the Internet is fierce, and before buying something, a potential customer wanders between websites searching for the best product. Convincing them to a particular offer is more complicated than you might think, so many loyalty program sign-ups don’t follow through with a transaction. Customers sign up to stay up to date with discounts, follow offers and get information about promotions, so they are more likely to agree to communications. Marketers should therefore focus on encouraging transactions in this case. The quality of contact information (email/sms consent) is higher for online registered customers than for offline registered customers.

Registered. And what’s next?

However, it should not be forgotten that offline registrations have an advantage – a customer in a store is more motivated to purchase a person comparing offers of different online stores, which should be kept in mind, especially by salespeople and consultants in stores to invite a customer to a loyalty program and encourage them to agree to communication. Then, such registration combined with a transaction may be the most qualitative.

Loyalty program registration, however, is only the beginning of the journey in building loyalty. Even more critical are transactions and data that customers leave behind. Consent for SMS or email communication and the ability to profile content according to customer preferences are key factors that can determine the success of a loyalty program. Typically, more than 80% of those who join a loyalty program via a website or mobile app consent to email or text message communication. When registering in a stationary store, the same consents are left by less than 50% of registrants.

Unfortunately, we have recently seen a significant decline in SMS and email communication consent. As a result, we are seeing increased consumer concerns about protecting their privacy. This is true for all age groups. Consumers’ comfort level with allowing brands to use personal data has decreased across all data types, making it even more important to reassure consumers about data security and illustrate how each consumer’s experience will be improved by sharing their data. It must be clear to consumers how their experience with a loyalty program will be enhanced if they provide personal data. Brands must therefore ensure that data is secure and transparent about how it is used.

Summary – Pandemic and Loyalty Programs

Loyalty programs are still very popular. Loyalty can save a brand, especially in difficult times, as we experienced during the pandemic. However, the mere fact of popularity of a program, having a card or an application does not determine the success of a project. The key is the level of engagement of club members. Pandemic changed business priorities and accelerated digital transformation in loyalty programs. In doing so, it has opened up a new field for action and work in the area of loyalty. In the post-covid era, there will be some changes in relationship marketing – the priority for companies will not be to acquire new customers but to retain existing ones, to ensure that the data they acquire is secure and that they are engaged in more transactions with the brand, and to engage older age groups in digital experiences.

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How To Measure Customer Experience In The Age Of Artificial Intelligence?

New technologies are revolutionising the way customers interact with brands. Virtual assistants, chatbots, speech processing, personalized offer in real time are just some of the possible uses of Artificial Intelligence that change the quality of customer experience. However, many companies are afraid of the costs associated with the implementation of new technologies, and these fears are reinforced by the possibility of failure or lack of interest in the novelties on the part of customers.

Customer Experiences in the Age of Artificial Intelligence researcher

A novel approach to understanding how the integration of AI-based services can impact the customer experience is described in the article “Customer Experiences in the Age of Artificial Intelligence”. Researchers from Royal Holloway, University of London decided to break apart the customer experience into its constituent parts. The study used an analysis of nearly 450 customers of one beauty company. The beauty company provided its customers with technology that allowed them to select cosmetics based on the customer’s beauty type. This was the first step towards the current trend of technological revolution. The virtual assistant compares the customer’s selfie with a database of clinically evaluated photos and accurately classifies the signs of skin aging, selects the color of foundation or the most suitable shade of lipstick – and does so with up to 95% efficiency. The resulting customer experience data was validated using structural equation modeling. Based on trust and commitment theory, they measured how AI service quality, including convenience and personalization, affects customer experience, highlighting the importance of trust, commitment, and some customer churn as mediating elements.

Measuring the impact of AI on customer experience

The key to success in AI business is to understand the mechanisms in the minds of customers and design the buying process according to their preferences. Within a single brand, even individual customer segments can differ significantly from each other. The same service based on AI will be perceived differently by young consumers and differently by the 60+ segment. Therefore, the starting point should be the customer and their needs. Once customers have their first experience with a brand, their commitment to maintain an ongoing relationship has a positive impact on the quality of the experience. However, it is not enough to implement AI to generate additional profits. So the question is, how to do it effectively?

The proposed model illustrates the relationships between the components of Customer Experience – it shows how the individual factors influence each other, highlighting the role of trust and the necessary cancellations of customers (sacrifices). The results of the study show that trust plays a key role in AI-enabled experiences.

Key elements

From a consumer perspective, earning trust is a major challenge in AI-based services. Consequently, a higher level of trust in the brand and their technology improves the customer experience. It is important for vendors to clearly communicate their achievements and subsequent security certifications to customers. The more convinced the customer is, the more willing they are to commit to a long-term relationship with the brand. Because of the sensitivity of handling customer data, the relationship between brand trust and customer experience is particularly prevalent just in the context of digital experiences.

Trust in a brand, the technologies and processes it uses, and the purpose for which it collects and analyzes customer data increases when the service is more convenient in terms of time and location and offers better quality in terms of interface design, customer service reliability, and security. In this case, the convenience of the service indicates time and effort savings. An additional convenience is its ubiquitous availability from anywhere on earth. These advantages can prove to be significant to encourage customers to use the service. Convenience has been identified as a key advantage of AI-based solutions. It is important, however, for vendors to understand that increased convenience alone is not enough to overcome the sacrifices that customers must make to use the service.

Marketer challenges

Retail for the third decade of the 21st century must include the customer in the creative process. Customers expect this because the result is personalized service and a more relevant product. Personalization is important in building a positive customer experience. In the context of the customer experience with a personalized service, consumers may feel less sensitive about what they are giving up (sacrificing), plus they are more likely to engage in interactions with the brand. The relationship engagement achieved through personalized experiences leads customers to believe that there are no alternative brands that provide similar benefits.

However, solutions based on Artificial Intelligence involve a high degree of automation in the customer service process. For the customer, this means no contact with a real consultant, which can prove to be a big obstacle, especially for customers who have not used new technologies so far. Retailers should strive for a balanced approach to human interaction, for example through carefully personalized experiences accompanied by a well-trained customer service team. This will increase engagement with the customer, which the study found has a significant impact on how consumers view their AI experience. Additionally, the number of steps a customer must go through during their shopping journey is determined by the requirements of the technology, not the needs of the user – this comes with some imposed limitations. In order to make a purchase, the customer gives up something else to use the service (sacrifices something), such as having to share more data about themselves, feeling a loss of control, loss of privacy, or lack of human interaction. Each subsequent opt-out or limitation on the part of the consumer, can result in a weaker experience.


Customer experience is recognized as a way to differentiate a company from its competitors. Unlike price, quality or product availability, which are increasingly undifferentiated in the marketplace, customer experience creates strong, lasting relationships.  The ability to diagnose the key parameters influencing the purchase experience and then understand and skillfully leverage them contributes to maximizing company profits.

The study demonstrates an innovative perspective on customer experience. It contributes to a better understanding of customer behavior related to AI. Taking trust and other modifiers into account, through the above analysis, a beauty brand could assess which metrics it should improve to optimize the customer experience by as much as a few to several percent.

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LOYALTY POINT is implementing a project with Contribution from European Funds. Learn more