Published: September 11, 2023 | Reading Time: 6 minutes
Topics: Loyalty program design, Loyalty program strategy, Customer retention
When marketers are considering their approach to building direct customer relationships, they often look at CRM and loyalty initiatives as separate disciplines, with their own teams, tools and technologies. In the best consumer-centric organizations, however, CRM and loyalty work in concert to engage a broad range of consumers and develop deep relationships.
It's impossible for businesses to attract all their customers into their loyalty program. Customers are only active in 7 loyalty programs, on average; they are selective and only commit to engage with the brands they love the most (according to Statista data on average number of loyalty programs US consumers belong to).
CRM plays a critical role by allowing businesses to develop a quick relationship with customers by delivering value through relevant communications and offers.
Loyalty builds on the relationship initiated through CRM strategies and creates a deeper connection with your most valuable customers.
When considering CRM and loyalty, this article focuses on 6 key attributes that define how each approach contributes to customer relationships:
CRM is frequently used as a high-volume customer acquisition tool, as it collects email addresses from interested buyers to create a list of pre-qualified leads that can be incented to first purchase with rich acquisition offers such as "20% off your first order" or similar.
A loyalty program can attract discerning and high-value prospects to your brand. The value of the loyalty program is in its ability to engage and grow target customers (i.e., increase desired behaviors, retain these customers over time). While CRM is focused more on customer communications, loyalty can go beyond the screen to create personalized experiences, which can be leveraged as an acquisition tool, for customers looking for more ways to engage with a brand.
CRM attracts many customers into the door, while loyalty is more likely to attract those most likely to become highest value members.
There's a lower implied value exchange within a CRM program than loyalty, as it often offers surface-level incentives that incorporate basic personalization. In most cases, CRM only requires customer contact information (i.e. email) in exchange for an expectation of ongoing communication and non-exclusive offers and discounts, making the threshold to join lower and easier for most customers.
Loyalty members have the expectation of a more explicit value exchange – sharing more personal information, such as:
In exchange, they receive:
Leverage CRM to draw in a larger audience through high-volume email capture and use loyalty's high value exchange to activate and engage (i.e., earn incremental purchases) and retain your customers.
When it comes to data capture, CRM can be used to enable a deeper understanding of customers' interests (i.e., what subject headline gets them to click/open). This captured information can be used to gain initial insight into preferences and early emotional drivers.
Loyalty initiatives offer a greater opportunity and expectation for data capture in that they collect data into a rich customer profile and attributes interactions across all touchpoints to a single customer in order to drive incremental purchases. Marketers can identify key behaviors through these profiles, such as:
This enables brands to uncover emotional drivers that contribute to brand loyalty; making personalization easier, more effective and affordable.
With CRM and loyalty, brands can understand what drives interest, intent and action to engage and purchase. Using this data, brands can further personalize to drive spend.
CRM increases engagement through scheduled, recurring and triggered communications across multiple channels. However, this is primarily an outbound marketing relationship based largely on transactional data.
The stored value of loyalty currency earned through profitable behavior creates a strong bond between a brand and a consumer. Because of this, loyalty programs offer the substantial ability to influence customer engagement and form a long-term, two-way relationship.
CRM is a "low hurdle" data capture tool. It's easy to get customers to "commit" to joining a CRM program. Loyalty allows customers who want to make a "bigger" (for lack of a better word) commitment provide enriched data to do so. The captured data should inform CRM and loyalty initiatives, communications and the value proposition customers experience to drive higher customer engagement.
In terms of driving spend, CRM leverages non-exclusive discount offers and promotions as the key drivers. It features an ability to segment members based on transaction history and RFM value if direct transaction data is available (e.g., ecommerce).
Loyalty uses multiple tools to drive spend including:
With the ability to segment members by:
Customers receive the right offer at the right time.
See "Personalization" section below.
Personalization within CRM is based on:
Loyalty moves this engagement further by also acting on:
CRM and loyalty are both levers in driving incremental spend. In order to effectively increase customer spend, both CRM and loyalty initiatives should implement a personalized approach and only send customers communications, campaigns, etc. that are relevant to them.
CRM and loyalty marketing can be used together to create deeper connections with your customers. Instead of viewing them as an either/or, or viewing them as separate strategies, view them as partners working toward the same goal: building authentic relationships.
The two partners excel in different attributes:
CRM creates breadth – cast a wide net to reach a large quantity of customers.
Loyalty creates depth – dive deeper into relationships with customers who are committed to creating deeper connections with you.
Together, the two allow you to build connections that:
Kognitiv provides AI/ML-powered solutions for customer loyalty and engagement, including:
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