Customer loyalty and communities: the full picture

In our in-depth introduction to online and social communities, we mentioned customer loyalty as one of the many possible goals of community efforts.  It’s no secret that customer loyalty is changing in several industries and even in general. One of the many reasons: the increased expectations of an omnichannel or channel-agnostic consumer. In fact, loyalty as such is ommnichannel as you can read here.

The link between customer loyalty and connected customer experiences is clear. In the end, it’s partially what integrated marketing across a connected buyer’s journey is about too.
The benefits and role of loyalty are not new and well-documented in a social context.

Still, if we look at content marketing, for instance, we see that most efforts go to the top of the proverbial funnel. Reach, acquisition, conversion, you know the stages Jim Sterne described across the customer life cycle. At the end (well, it’s more a loop in fact) of that customer life cycle model; being retention and loyalty we see far less efforts happening. It’s not a new challenge nor just one in content marketing.

The customer life cycle hasn’t changed that much but the ways to achieve reach, acquisition, conversion, retention, loyalty, advocacy have. There are more options for both customers and marketers. And at the same time more challenges. The same goes for the measurement of the customer lifetime value.

There are different sorts of loyalty programs of course but social and online communities can certainly play a role. Below is an overview of how communities and customer loyalty can work together and – at least as important – how thinking beyond the traditional definitions of customers and loyalty can help you improve overall marketing, content and so much more.

We wrote about some of the traditional customer loyalty “rules” below before so you could find parts elsewhere. That’s what happens when an article that originallty carried your name was migrated by the people who published it and in the process they “forgot” the author’s name (and don’t respond to earlier requests to adapt it). Well, that’s life. And, anyway, it’s the out of the box stuff we added that – hopefully – will help you make a real difference.

Customer loyalty as a community (marketing) goal

When starting a community program, most businesses focus on one or more of the following six main goals:

  1. Enhancing brand awareness & reputation by a more human, interactive and transparent approach.
  2. Creating and sharing content for all the purpose and goals we can also define in a content marketing strategy.
  3. Listening to what is being said about the brand, products/services, competitors and market from the reputation perspective and to act upon those insights to improve other marketing efforts such as identifying content gaps.
  4. Influencer identification, blogger outreach, word-of-mouth and influencer marketing purposes in general.
  5. Increasing the number of interaction channels and opportunities for customer service, communication and marketing, for instance to offer choice and/or increase touchpoints.
  6. Soliciting feedback and input to gain insights and improve efficiency, involvement, customer-centricity and other goals.

Focus on customer loyalty

Most of these goals directly or indirectly aim to get more customers and business: acquisition. An often overlooked aspect is that of customer retention and customer loyalty. However, there are far more important reasons to focus on customer loyalty in social media and community. Providing great customer experience across all channels is the basis of customer retention and customer loyalty (and reducing churn, up-selling, you name it), for starters. But there’s more as you’ll discover.

In these connected times, there is an increasing focus on customer loyalty and the next stage, advocacy or evangelism, drivers of social proof, recommendations, word-of-mouth and thus new business. Developing and strengthening personal relationships and having a human and transparent approach are determining factors to achieve this. And still, that’s just the tip of the iceberg when we look at customers in the strict sense.

The experience begins before someone is actually a customer and so does loyalty. It starts by offering the right answers to the right questions people want when trying to find out more about a product, a service and a business.

Moving beyond the traditional customer and customer loyalty views

Customer loyalty was traditionally defined from the perspective of purchasing intensity and the ‘rate’ of usage’. It segments loyal customers as heavy, medium or light users.
The – adapted version of the Pareto principle, a.k.a. 80-20 rule, says 20% of customers are responsible for 80% of profit. In practice, the real percentage depends on many parameters and typically varies between 20 and 40%. However, it’s clear loyalty in the sense of buying behavior and usage intensity is important.

There is also a very strong emotional aspect regarding customer loyalty. Opinion Research calculated that 90% of customers who love a company will repeat but only 30% of customers who like it will do the same. While you can segment your customers according to repeat buys and customer satisfaction levels, it can be worthwhile to also segment your satisfied and loyal customers from this emotional perspective to identify potential brand ‘lovers’ and advocates to build communities that are designed to improve loyalty.

The business impact is obvious: Reichheld and Sasser calculated that a reduction of 5% of defective customers may result in 80% increase in profitability. Furthermore, an augmentation of loyalty levels and brand advocates leads to undeniable scale effects. Finally, true brand loyalty can lead to average higher revenues through up-selling but also the willingness to pay more for higher levels of service.

How much profit customers generate over time - the classic view of Reichheld and Sasser - via Forbes
How much profit customers generate over time – a classic by Reichheld and Sasser – via Forbes

Planning a loyalty program: steps

On the emotional level, loyalty is related to trust, perceived value, feeling of status, satisfaction, degree of personal attention, sense of exclusivity and credibility, to name just a few. These same emotional dimensions play a key role in word-of-mouth and in community marketing as described earlier.

When planning loyalty programs following steps are necessary:

  1. Identify what leads to higher loyalty by tracking customer behavior, conducting surveys and having personal interactions.
  2. Define the different segments of loyal customers and analyze their specific needs and ways to take them to the next level.
  3. Detect segments that might be undetected potential loyal customers, passing under the radar of your teams. Build more personal programs to identify untapped potential.
  4. Analyze media consumption patterns and content/information needs of all segments to feed your loyalty-oriented and/or community-driven content marketing strategy.
  5. Plan for loyalty. List what you need to be able to build a relationship culture across your organization and within the departments that come into contact with loyals. Make sure your collaborators understand the importance, train, develop different strategies per segment and prepare.
  6. Define the right mix per segment and identify potential sub-segments based on behavioral analysis and other patterns such as which channels are preferred. This mix can consist of tactics such as community marketing, but also email marketing, content marketing, offline programs, etc.

Loyal customers: segmenting the loyals

When taking both purchase behavior and emotional attachment factors into account, traditionally we identified some general segments of loyal customers.

  • The high or hard-core loyals: they purchase regularly and feel a strong emotional bond and sense of value. This is the 20% of customers responsible for 80% of the business (again, this percentage can vary). They can easily be turned into advocates and evangelists and are your closest circle of influence and trust. Your goal is strengthening relationships by making them feel more part of the ‘family’ and involving them in your business and marketing, while finding new ways to offer value.
  • The spurious loyals: they are loyal but often because they have no choice, for instance when you are alone in a specific market or the obvious leader. Emotional bonds tend to be low. Removing the sense of ‘must’ and working towards closer emotional connections and personal relationships is your goal.
  • The undetected loyals: these are satisfied and even loyal customers, but you don’t really know why and haven’t identified latent opportunities yet. Identify their needs and work towards more personal relationships to make them high hard-core loyals.
  • The split loyals: they have a multiple vendor or brand approach. This can be for strategic, personal or historical reasons. Identify these reasons and help them see the benefits of single supplier sourcing. Educate them, identify why they are split and discover what you need to turn them into real loyals.
  • The low loyals: try to analyze whether they are undetected loyals. If they are not, focus on customer satisfaction and providing valuable customer experiences as is the case with all customers.

60% to 80% of the customers that used to trust you with their most precious token of trust – their business – and now have gone, once were satisfied. So, it makes more than common sense to grow your loyalty efforts and, for instance, look more at content marketing down the funnel and certainly after the commercial relationship is established. Involve them, turning them into loyal customers and eventually advocates. Communities are great ways to achieve it and by segmenting the target audience of your community, you can prioritize before you start.

Beyond the obvious: redefine the customer and customer-centricity

Today, it’s easy to step out of the traditionel views of loyal customers as buyers. A few examples.

Loyal influencers

Let’s start with content marketing as an example again. If you’re involved in setting up a content marketing strategy and have to segment your audiences, using personas or whatever other form of segmentation, you’ll often notice that many of the people you want to reach, look for information among influencers in their industry. This is especially the case in B2B industries. Building relationships with those influencers can then turn out to be very valuable when you want to get on the radar of your target audiences where they are today – and if possible by offering the kind of information they seek in a very customer-centric way.

We often repeated that it’s important to redefine what a customer really is. It’s anyone in the ecosystem of your business, including these influencers, your employees and many others. This idea is not new by the way. It stems from the end of the nineties. When building influencer relationships, loyalty – even if you maybe don’t want to call it that way – and community can easily be used as well.

Loyalty in the broader ecosystem

Another example of taking customer loyalty – and advocacy – to the next level can be found in channel marketing with different layers and chains of customers. In fact, as mentioned earlier in a text about social media, connected marketing and value chains, in a sense the whole idea of social media marketing and even content marketing is so much easier to improve when realizing that today all marketing is channel marketing. You need to understand the customers of your customers. You could, for instance, reward channel partners – such as resellers – by treating and categorizing them in traditional loyalty models but not (just) for the cash they bring in.

You need testimonials, you need to understand their customers, you need to involve them in becoming part of your team by helping them sell and be relevant for their customers, you need to reward them for introducing you and today more than ever the content you create and can co-create with them on a scale or in a targeted way you couldn’t probably achieve yourself.

From the marketing perspective it’s what Brian Solis calls talking to and through your audience. From a customer intelligence perspective, needed to improve your content and other customer-facing tactics and operations, it’s about motivating them to feed you with their insights and questions and even those of the customers of their customers. Reward them for that.

These are just a few examples of how you can combine the power of loyalty, community, content and so much more in an integrated marketing perspective. A customer that provides good feedback that helps you improve what you do and/or helps you being on the radar of influencers or audiences you would only reach through very high efforts, is a darn loyal customer too, even if he just makes a tiny impact of your direct bottom line.

It’s one of the reasons we don’t buy the traditional definition of customer-centricity anymore as you can read in our customer-centric content marketing manifesto.

Think out of the box! And in the end it’s all about communities and relationships.