AIRLINES & ALLIANCES

SAP Emarsys Customer Retention & Loyalty in 2024

In the last five years, “customer acquisition costs have increased nearly 60%,” and today’s merchants, on average, now “lose $29 for every new customer acquired.”

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SAP

Latest article from Emarsys dives into customer retention. 

Read in full here

According to Emarsys, “Customer retention refers to the strategies and actions a business takes to maintain and increase the number of its existing customers”. 

This involves ensuring customer satisfaction, fostering loyalty, and creating long-term relationships, so that customers continue to purchase from the business rather than switching to competitors. 

Effective customer retention results in repeat sales and increased customer lifetime value, but it goes beyond this. True customer retention is about empowering your customers to be ambassadors to your brand and driving positive word-of-mouth referrals, which are crucial for a business’s long-term success and profitability.

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Source: Emarsys

Seven key emerging trends are reshaping strategies for customer retention, offering a roadmap for businesses aiming to cultivate deeper customer loyalty and sustainable growth:

1. Omnichannel engagement: The traditional linear funnel approach is no longer effective, as customers engage with brands across various platforms such as social media, websites, emails, and in-store. Integrating these channels is crucial to providing a seamless customer experience.

2. Customer obsession: With customers having access to abundant information and touchpoints, businesses aiming to drive retention and loyalty must adopt a “customer-obsessed” approach. This involves placing customers at the core of all decisions and operations, enabling companies to adapt to changing customer expectations.

3. Sustainability and social responsibility: Consumer choices are increasingly influenced by a brand’s environmental and social impact. Companies demonstrating a genuine commitment to sustainability and ethical practices are likely to experience higher customer loyalty.

4. Subscription-based models: The subscription economy, projected to reach $1.5 trillion by 2025, provides a clear and simple way for customers to reorder favorite products. For brands, offering subscriptions serves as a seamless tactic for driving retention and Customer Lifetime Value.

5. AI chatbots and customer support: To meet rising customer expectations for instant solutions, leveraging AI for customer support through chatbots and virtual assistants ensures quicker and more efficient issue resolution, enhancing overall customer satisfaction.

6. Next-level loyalty programs: Traditional loyalty programs are evolving beyond simple transaction-based rewards. The focus is now on more engaging, value-added experiences, including personalized incentives and branded experiences.

7. Educational content marketing: Beyond bottom-of-funnel marketing, businesses are providing educational content through post-purchase email automations, blog posts, and short-form vertical videos. This approach helps customers maximize their purchases and fully understand the benefits of buying from a particular brand.

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Source: Emarsys

Retention efforts are increasingly being shaped by advanced metrics and technologies as customer behavior undergoes constant change in today’s rapidly evolving marketing landscape. Innovations such as predictive analytics and artificial intelligence are playing a crucial role in providing valuable insights for businesses aiming to formulate effective strategies for customer engagement.

To remain competitive and foster strong customer relationships, it is imperative for companies to understand and harness these tools and metrics:

1. Predictive analytics: By employing machine learning and data mining, predictive analytics can anticipate future customer behaviors based on historical data. This proactive approach allows businesses to identify potential churn or defection early on, providing an opportunity to implement lifecycle strategies that encourage continued patronage.

2. Cross-channel personalization: Forward-thinking brands are leveraging AI technology to implement highly personalized customer experiences on a large scale. Whether through personalized product recommendations or tailored email engagements, AI marketing tools enable the customization of experiences based on individual customer preferences and cross-channel behavior. Creating a sense of being seen and understood enhances the likelihood of customer retention.

3. Voice of the Customer (VoC) programs: Advanced VoC programs make use of technologies such as sentiment analysis and natural language processing to collect and analyze customer feedback across diverse channels. This comprehensive approach offers businesses deeper insights into customer satisfaction levels and identifies areas for improvement.

4. Customer Engagement Platforms (CEP): Platforms like SAP Emarsys serve as a centralized system, unifying data and marketing channels. This integration enables more cohesive and connected customer experiences. For brands operating across multiple channels and touchpoints, a CEP is instrumental in managing and analyzing the impact of marketing engagements.

Understanding Customer Loyalty:

Customer loyalty, in its simplest form, refers to a customer’s willingness to regularly engage with a brand and its products. This commitment extends beyond mere interaction and involves repeated purchases, a preference for the brand over competitors, and loyalty even in the face of price changes or market fluctuations. Establishing customer loyalty requires positive interactions, trust in the brand’s quality and reliability, and often involves emotional connections fostered by the company’s values, customer service, and engagement strategies. Loyal customers not only contribute to consistent revenue but also serve as brand ambassadors, recommending products and services, thereby amplifying the brand’s reach and reputation.

Five Types of Customer Loyalty:

Customer loyalty is not a one-size-fits-all concept and can be categorized into five distinct types:

1. Incentivized Loyalty: Cultivated through incentives like discounts and rewards, this form is influenced by price and can be easily swayed by competitors offering better deals.

2. Inherited Loyalty: Rooted in a brand’s long-standing heritage and trusted reputation, but it can lose relevance as customer demands evolve.

3. Ethical Loyalty: Customers stay loyal due to a brand’s environmental, sustainability, and social policies. This loyalty is powerful but challenging to control as a marketer.

4. Silent Loyalty: Occurs when customers regularly shop with a brand but do not publicly endorse it. This loyalty is hard to measure and understand.

5. True Loyalty: The most challenging type to foster, it comes from earning absolute love and trust from customers, creating a deep, unshakeable connection.

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Measuring Customer Loyalty:

To gauge customer loyalty, businesses can incorporate the following metrics into their marketing analytics:

1. Net Promoter Score: Measures customer satisfaction and their likelihood to recommend the brand publicly.

2. Repeat Purchase Rate: Indicates how often customers return to make additional purchases, signaling trust and value in the products.

3. Customer Lifetime Value (CLTV): Tracks the revenue impact of loyalty strategies over time, with a rising CLTV indicating growing loyalty.

4. Customer Engagement Metrics: While tricky to directly correlate with loyalty, increased engagement across marketing channels suggests a positive direction in loyalty strategies.

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Source: Emarsys

Differentiating Customer Retention and Loyalty:

Customer retention and loyalty, although often used interchangeably, have distinct meanings:

• Customer Retention: Focuses on a company’s ability to keep its customers over time, often driven by rational factors like cost, convenience, or necessity.

• Customer Loyalty: Goes beyond repeat purchases and is rooted in emotional connections and positive experiences with the brand. Loyal customers are more likely to recommend the brand, provide positive reviews, and have a strong attachment beyond transactions.

Strategies for Retention and Loyalty in 2024:

To enhance customer relationships and drive repeat revenue, businesses can adopt the following strategies:

1. Unify Data and Channels: Use a Customer Engagement Platform to break down data silos, gaining a clear understanding of customers and delivering personalized content across key touchpoints.

2. Gain Insights Through Analysis: Review customer journeys, utilize heatmaps, gather feedback, and launch exit-intent surveys to understand and optimize existing engagements.

3. Build Personalized Experiences: Leverage unified data to create and deliver personalized, cross-channel experiences that show customers their preferences are understood.

4. Automate Customer Journeys: Use marketing automation to send tailored content to customers at the right time, ensuring personalized experiences across their journey with the brand.

5. Measure Results: Demonstrate the revenue impact of retention and loyalty efforts by using metrics like Net Promoter Score, Repeat Purchase Rate, CLTV, and customer engagement metrics. Adapt strategies based on key performance insights.

Combining Retention and Loyalty for Sustainable Success:

In the current market, addressing retention and loyalty separately is no longer effective. Taking a holistic approach and viewing retention and loyalty as interconnected elements is crucial. A Customer Engagement Platform helps integrate data and marketing channels, enabling businesses to drive acquisition, increase customer retention, and build lasting loyalty in a customer-centric landscape.

Source: Emarsys