Defining Customer Loyalty and Driving Retention
Posted by Alex Samuely on Feb 28, 2024
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Establishing long-term customer loyalty is at the top of every retailer’s wish list. To achieve this, retailers should segment their customer relationship management frameworks by regional audience and pinpoint what their loyalty objectives are trying to solve for. Not only will this help them stand out in the competitive marketplace, but it will also drive greater customer retention.
Gianfranco Cuzziol, International CRM and Personalization Lead for Natura & Co’s Avon brand until February 2024 (and current Business Lead at Dr. Martens), recently discussed the thought process behind developing a global customer relationship management (CRM) framework during an Endless Aisle podcast episode with Marcus LaRobardiere, NewStore’s Vice President of Marketing. Gianfranco and Marcus also defined various types of customer loyalty – including advocacy and retention loyalty – and addressed how those impact consumers’ long-term relationships with brands.
Read below for several key takeaways from Marcus and Gianfranco’s conversation, and click here to listen to the full podcast episode.
As the global marketplace grows more crowded, retailers must evolve their CRM frameworks to better reach audiences around the world. According to Gianfranco, retailers should begin this process by developing a common framework and then allowing teams in regional markets to adapt the framework according to their specific needs.
“There is often a need to say, ‘Look, let’s draw a line under this,’” Gianfranco said. “Let’s create this common framework across the globe so we’re protecting the brand. Then, we’ll bring you all up to a certain degree of maturity [to] understand the way we do CRM, automation, personalization…
“That allows you to have some flexibility within the framework to deliver to your requirements, because you have your own objectives, depending on the business unit or the market you’re sitting in.”
This results in retailers needing to create segmentation models based on how customers in various parts of the world prefer to shop.
“We created this segmentation model and a customer lifetime value model for the globe,” Gianfranco said. “But it became apparent that having a global customer lifetime value model didn’t really work.
“The way that customers transacted and shopped in the far east was completely different to how they transacted in Australia. We then had to drill down and provide a segmentation model that was fit for purpose for each of the four regions.”
A key piece of developing a strong CRM framework stems from incorporating cultural nuances and ensuring that regional teams understand the rationale behind all decisions.
“Part of the new tech vision data implementation also involved a certain amount of cultural work,” Gianfranco said. “We needed to make sure that we took the regional retail and marketing teams – and digital teams – along the journey, and make sure they were fully bought into that vision.
“We had consultants in store who were slightly reticent about collecting customer information,” he continued. “So we needed to go through a training exercise to prove to them that there was value in collecting a customer email address and name.”
If sales associates understand the objective behind each step of the framework – and how it impacts them personally – they will be much more likely to develop better customer relationships, which in turn will drive stronger customer loyalty to the brand.
“The welcome journey we implemented was from the store you made your first purchase in,” Gianfranco said. “We want you to have that relationship with the store, if not the consultant as well.
“You spent that time converting that prospect into a customer, and we want to reward you by making sure the customer comes back to you. We did the very simple thing of saying, ‘We can prove to you that for a customer for whom we have an email address, here’s the incremental value it brings back to the business, and hence to your store, by you collecting that.’ And so there was part of that cultural education piece we needed to deliver.”
In addition to developing adaptable CRM frameworks, retailers seeking to prioritize retention should focus on fostering long-term customer loyalty. Part of this strategy includes defining the end goal of driving customer loyalty – whether it’s trying to increase customers’ average basket size, creating brand advocates that will spread the word among friends and family, or retaining existing customers with retail promotion strategies.
“[There are] many definitions of what loyalty is,” Gianfranco said. “It doesn’t matter which organization you work in – try and work out what you mean by loyalty and identify what loyalty means to your customer. [As an example], there’s behavioral loyalty. I shop every day at my local mini-mart. I’m not necessarily loyal to them; it’s just that they happen to be about 50 yards from my house.
“And then you’ve got advocacy loyalty,” he continued. “If you come up to me and say, ‘Would you recommend a BMW as a car,’ I would say yes. I don’t own a BMW, but I have owned [a] BMW, and it’s an amazing driving experience.
“And then there’s retention loyalty [where] lots of freebies come my way. You need to make sure you think about loyalty, what it means, and whether you’re trying to drive loyalty, [or] whether in reality what you’re trying to drive is more frequent purchase.”
Gianfranco also noted that developing customer personas yields better personalization opportunities. A customer persona refers to an archetypal profile of a target customer, complete with behaviors, needs, and motivations.
“I think personas have their place and often [are] the starting point to more refined personalization,” Gianfranco said. “For example, when a customer first comes to your website, you know nothing about that customer. You might know where they’ve come from because you’ve tracked where they’ve clicked in from. You start to understand the product they’re looking at.
“But as you start to acquire data points about that customer, as they spend time on that website, as they perhaps register [for] a newsletter or talk to your agent online – that’s when you can start moving into more sophisticated, relevant conversations with that customer,” he continued.
“[For example], in the beauty space, you’ve bought a cleanser and a toner. Here’s the hydrator that goes along with that. You need to make sure the information you’re giving a customer is relevant to that particular product – how to use it; when you should be replenishing that product; what’s an alternative if it’s not right for you.”
While customer personalization is key to attaining and retaining shoppers, it’s also imperative to keep in mind that privacy is a top concern for many individuals, especially as AI in retail continues gaining momentum. Therefore, retailers must be forthcoming about their privacy policies and remain compliant with them in order to maintain customers’ trust.
“There’s this privacy personalization paradox – customers want a personalized, relevant, connected experience, but they also want you to be mindful of their privacy,” Gianfranco said.
“What I found is that upfront, if you can be as transparent and honest as possible with customers, they’re more likely to trust you with their data. Be consistent with the way you apply that – don’t all of a sudden change the way you use the data without having talked to the customer.”
Gianfranco also discussed the components of an ideal shopping experience, which hinge on retailers’ understanding that all customers begin their journeys with a specific mission in mind.
“With all this data and technology around at the moment, we have to remember that customers are on a mission,” Gianfranco said. “It could be, ‘I want to buy something really quickly. I’m going to do some research. I want to provide some feedback.’ So that’s the core piece we need to think about. What is the customer trying to do, and then how do we spin out the technology data and experience to deliver on that in the way the customer wants?
“I often talk about the ideal shopping experience…I call it CAR,” he continued. “It needs to be Connected, Adaptive, and Relevant. Because the customer’s trying to get from A to B, and that’s what CAR is there for us to do. You have to adapt that experience to meet [their] need.”
Once retailers determine the type of customer loyalty they’re aiming for, they should then brainstorm strategies to prioritize customer retention. While reaching new audiences should always be a priority, the benefits of fostering long-term relationships with consumers can’t be overstated.
“We should be thinking about retaining customers more – treating our customers better,” Gianfranco said. “There are lots of numbers around how much more expensive it is to acquire new customers than retain an existing one. The one thing to bear in mind is that good acquisition makes good retention.
“If you nail [retention loyalty], [it] then reduces your advertising costs, acquisition costs,” he continued. “And by nailing that and understanding what makes a good customer, it allows you to be smart in the acquisition space. You spend all that time and effort getting a new customer on board…don’t lose them.”
Interested in learning how your business can foster stronger customer loyalty and drive retention? Speak to one of our experts today.
