I feel, therefore I am. How the emotional customer is changing the way retailers approach loyalty

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As customers get more comfortable with sharing their personal data with organisations, they expect this data to be used in a way that benefits them.

In 1994, Portuguese – American neuro scientist Antonio Damasio made the landmark discovery that emotions do in fact play a crucial part in human decision making. Until then they had been ignored by biologists as fleeting and irrelevant. This thinking challenged the centuries old belief that human beings are purely rational creatures. Damansio’s work proved that how we ‘feel’ does in fact impact the choices we make every day.

Balancing rational and emotional loyalty

Findings from a recent Capgemini research report titled ‘Loyalty Deciphered—How Emotions Drive Genuine Engagement’, shows that consumers appear to agree with Dr. Damansio and are changing the way they engage with retailers.

No one can dispute that the ‘rational’ loyalty index (made up of elements such as price, promotions and customer service) will always be relevant to a repeat purchase or recommendation. However, the research found that emotions toward a brand (such as honesty and trustworthiness) are found to have a greater correlation to loyalty.

Back in 2014 we saw this in the impact on Tesco following their accounting scandal. Despite having one of the most established loyalty programmes of all the big grocers, they lost market share and sales driven by the eroded customer trust.

The real test of customer loyalty should be how they react when things go wrong – do they stick by you, or do they take their shopping elsewhere? As Tesco CEO Dave Lewis put it; “the thing to remember about Tesco is that people didn’t stop shopping with us, they reduced their frequency”. This suggested that reward points and vouchers do not make a loyal customer. Rational drivers in a crowded retail market, certainly increase the chance of featuring in the options a customer considers, but it is emotional attachment that increases the chance of a retailer being chosen.

Understanding the emotional connection

As customers get more comfortable with sharing their personal data with organisations, they expect this data to be used in a way that benefits them. Personalised marketing and loyalty rewards, access to communities of like-minded people, priority access to products and services. Customers want to be recognised for their loyalty and rewarded even when not part of a formal programme – even if they haven’t made a purchase recently! Customers want retailers to know who they are, and what they stand for.

Customers do not want to have one great date or event and to never hear from the retailer again, unless the retailer wants something… Often this is a comms message sent in the wee hours, through an automated generic sale announcement that they know is being sent to everyone in their contact list.

So, how can retailers forge more meaningful relationships with their customers?

Building a meaningful relationship

There are 4 components we at Capgemini have identified as key for retailers to build a meaningful relationship with customers in order to capture their loyalty:

1)  Respect: This is about retailers respecting their customers, rather than the respect customers may have for a brand’s competence, values, or similar. A customer is more likely to shop at a retailer that they believe to be reliable and transparent – an organisation that does what they say they will do and who respects the customer’s data, time and money.

Tesco’s Food Love Stories is an excellent example of a retailer putting the consumer at the heart of their strategy by sharing their recipes and stories. Tesco demonstrated the provenance and quality of their products by sharing supplier stories. Tesco used this campaign to start social media conversations with consumers. All of this made individuals like me feel like they belonged to a community, laughing and empathising with each other over the same questions posed at every mealtime by households all over the country.

As Dave Lewis himself commented, “you can’t advertise your way out of a problem you behaved yourself into”. Tesco chose to handle the fallout of the 2014 accounting scandal with humility by opening up their kitchen and inviting everyone in. This led customers to see the UK’s largest grocer as a community of people they related to, rather than an impersonal price-war waging corporation.

Starbucks has delivered a similar initiative through their Upstanders programme – a collection of human interest stories featuring ordinary people trying to make a change in their lives and communities. There are no products to sell, instead the idea behind this programme is to inspire people and create a positive space of ‘chicken soup for the soul’. Fostering empathy in customers is a beautiful way to create empathy for the brand and do some good in the process.

2) Reciprocate: Nothing will make a purchase more personal and memorable than having the opportunity to contribute towards developing it. Back In 2009, Burberry ran a very successful campaign called ‘Art of the Trench’. During this initiative customers were asked to upload photos of themselves wearing the iconic Burberry coat. This campaign was an early and indirect form of co-creation which gave customers the chance to share their style, and for designers to be inspired and include these ideas in future designs. It also helped kick off Burberry’s very active and vocal social media presence. In 2012, they amassed the largest number of Facebook fans for a luxury retailer (10 million fans) and now stand at 17 million fans worldwide. They are also currently the most popular British brand on Instagram for the 2nd year running.

More recently, furniture brands like Ikea and Made.com have taken co-creation a step further by developing a more active collaboration. They have both invited customers to help design products, or crowd sourced ideas by asking customers to vote for designs by fresh talent that will then be produced mass market (Made Talent Labs). Ikea will also partner with universities and start-ups to solve life’s problems with clever, new products.

Co-creation is not just limited to the development of products, but also services that are offered. DHL’s co-creation customer workshops resulted in the development of Parcelcopter, a pilot drone delivery project, that can reduce mail delivery times from 30 mins to 8 minutes. The co-creation concept increased customer satisfaction scores to over 80 percent, reduced customer churn and increased revenue from new products.

3) Recognise: With all the customer data available to organisations, customers are demanding a more personalised and curated shopping experience, consistent across all channels. Much like the way Spotify and Netflix analyse your music and movies and make suggestions on what you may like next, customers want retailers to anticipate their wants and needs.

House of Fraser partnered with True Fit, a personalisation analytics platform, to achieve this. Customers can create profiles on the House of Fraser website, with their preferred styles, sizes and other filters and received instant personalised recommendations. This led to a 6-8% uplift in revenues with fewer returns.

Walmart has also recently partnered with Google to offer a voice shopping capability for the largest number of items on this platform for any retailer. Customers can link their account to Google Express and receive personalised recommendations based on previous purchases made in Walmart stores and on the website.

Neiman Marcus is focusing on providing the personalised experience in store, by using well trained sales associates to observe customers and act accordingly. In-store sales associates have been provided with devices that will have a customer’s complete purchase history so they can offer relevant suggestions for new purchases.  As summarised by Jeff Rosenfeld, Neiman Marcus’ VP of customer insights and analytics, “how do we combine data and tease out a little bit of the strength of what a sales associates would [naturally] notice

4) Reward: A loyalty scheme does not just need to be about points or discounts. Customers want to be rewarded throughout the time they have spent shopping with a retailer, with a mix of monetary rewards, experiences and opportunities to feel special. They may not remember the exact reward but they will certainly remember how it made them feel.

Rewards can be linked to status as with the mythical Nando’s Black Card, bestowed under mysterious circumstances on those who really really like chicken. Or Delta’s invitation-only 360 programme which offers customers gate-to-gate transfers in a Porsche Panamera. Sometimes this can be a subscription-only service like Amazon Prime, that integrates itself into a customer’s life offering free delivery, music and movie streaming, cloud storage and many other services. It might be the most successful loyalty programme out there and not even branded as one!

So what’s next?

As technology advancements occupy the minds of retailers, it is important to remember that customers are still human (until the zombie apocalypse anyway) and want to feel connected and engaged to the retailers that they handover their hard-earned money to. Loyalty programmes will become a much more complex offering that will require a retailer to really know and understand their customer, but it will lead to a more fulfilling relationship all around.

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