Will Social Networking Transform Customer Loyalty?

IBA Group
Mark Hillary

In my last blog, I mentioned that social networking technologies are changing how many companies use CRM. Opportunities are created to have a much deeper relationship with customers than was ever possible before and this goes far beyond just CRM alone.

But what is it that any company really wants? Why do they invest in all these technologies in the first place? There are many reasons, such as improving the customer experience, but possibly the most important is to generate customer loyalty. It costs far more to attract new customers to your business than to just keep the existing ones happy, so managing loyalty is important.

And as customers we all know about loyalty schemes. You probably have loyalty cards for your favourite hotel chain, airline, coffee store, bookstore, and supermarket. Every type of business tries giving away points and prizes to encourage loyalty.

The problem is that academics now believe that our present focus on loyalty through loyalty programmes doesn’t work very well. Take airlines for example. There are really only three major airline alliances, Star Alliance, One World, and SkyTeam. Serious business travellers just take a membership with all of them so they always collect points regardless of the airline used.

Most people use the supermarket that is closest to their home rather than travelling much further because they have a loyalty card from another store. Most of the time these loyalty cards don’t really create very much brand loyalty.

Smart companies today are looking at their CRM data and using a ‘buzz monitoring’ platform to analyse the social networks and then interacting with customers based on the information they can glean from the customer behaviour data. In effect, what is happening is that companies who know their customers well are able to use the data to create customer loyalty gifts and rewards that are targeted at the individual customer – not just points that every customer earns.

This is a big change in behaviour for many companies and it will be the back office technology that drives the information for this to work, but it is a natural shift. Customers have greater expectations on brands today and the first time a brand responds and rewards you in a unique and individual way will create a ‘wow’ moment for many customers.

It is these interactions based on data that will drive customer loyalty in future, not loyalty cards. Has any major brand ever rewarded you based on their knowledge of behaviour and how did that make you feel?

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