A Blog by Jonathan Low

 

Jul 28, 2016

How Has Customer Loyalty Changed In the Digital Era?

Consumers appear to believe that the plethora of offers for their personal information in return for services constitutes a kind of market in which they are free - or obligated, depending on your point of view - to negotiate the best deal they can find from whoever they can get it.

Loyalty increasingly depends not just on rewards, but on quality of service across multiple platforms, making it as much operational as financial. JL 

Jess Wells reports in Genesys:

In a world where disruptive offerings and the constantly morphing mobile platform are proving a challenge to all businesses, relationships are becoming increasingly thin and fragmented. Data (from financial services) shows that since 2010, customers expanded the number of firms they use by one-third or more, putting significant pressure on profitability
Starbucks acknowledged that it has changed its points program from one that rewarded frequent shoppers – “designed to show our appreciation simply for stopping by” – to one that rewards customers based on the amount they spend. In other words, a complex five dollar coffee earns more points than a simple black drip coffee, even if the latter customer comes back four times a week. This means that the points program is now not really about customer loyalty, which is dedication by a customer to a specific vendor, but more of a cash-back program. United Airlines and Delta Airlines have also changed their rewards programs, giving points based on how much a customer spends on airfare. The frequent flyer “mile” is no longer directly related to distance traveled. High-spending corporate travelers receive more rewards than bargain hunters. American Airlines will make a similar change in July, the Times says.
This is just the latest change affecting customer loyalty in the travel industry. Aggregators like Expedia, Orbitz, and CheapTickets have eroded the connection between the customer and the airline. Credit card companies now provide points that can be used for travel, which reduces the uniqueness of the airline programs. In response, airlines are expanding their programs to allow passengers to pay for food, beverages, and entertainment with award credit.
And, in all industries, loyalty can be solidified when vendors meet the customer’s expectation to be always available, any time, anywhere, on any platform throughout the customer journey. In the competition to secure loyalty, providers will need to be able to address the customer’s desire to “know me” and “know my journey” regardless of channels, device, or touchpoint across time.

In a world where disruptive offerings and the constantly morphing mobile platform are proving a challenge to all businesses, financial institutions have taken the lead in using technology to solve the loyalty problem. Bankers acknowledge that the laser-focus on loyalty is being adopted to battle churn and commoditization.
“Across financial services, relationships are becoming increasingly thin and fragmented,” the CEB Group says in the opening salvo of its conference website. “In fact, our data shows that since 2010, customers expanded the number of firms they use by one-third or more, putting significant pressure on profitability… Technology is a significant driver of this fragmentation… and must also be at the heart of the solution.

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