Digital Transformation of Businesses Significantly Impacts Customer Loyalty

Digital transformation among loyalty marketers has been an ongoing process and one that sparks considerable and sustainable customer loyalty.

What’s more, digital transformation has been a “game-changer” among loyalty marketers, according to Stellar Loyalty CEO Kevin Nix.

Loyalty360 sat down with Nix to discuss this compelling and important topic for loyalty marketers.

Can you talk about customer loyalty and the digital transformation of business, and the current and future impacts of this?

Nix: Industry reports have confirmed that digital leaders consistently outperform their competitors on the three key financial fronts over time: gross margin, operating margin and profit margin. Why? Because through digital transformation, brands can reinvent the customer experience and differentiate.  Customers have demonstrated that they will flock to brands that deliver on efficient, consistent, relevant and satisfying experiences. 

Let’s look at two examples. First, The Apple Store is a perfect example of a digital transformation of the entire browse, engage, and purchase experience. It was the entire experience – from the store look and layout to the ease of ordering and paying with the sales associate to the immediacy from product interaction to a happy buyer. Consumers wait patiently in line to get into Apple stores even today–now that’s customer loyalty.

The second example demonstrates how convenience is the new currency. Domino’s Pizza has shared how online and mobile ordering has become key ingredients to its recent financial success, while it’s seen competitors like Pizza Hut and Papa John’s remain mostly flat.

Is digital transformation of business necessarily the correct path for every loyalty marketer?

Nix: The goal of loyalty marketing is to build “big L” loyalty, which is a loyalty to the brand where customers are willing to be advocates. This means loyalty marketing must take into consideration all aspects that will make the right impact on “big L” loyalty -- customer experience, value, competition, etc.

The question is not “Is digital transformation necessarily the correct path for every loyalty marketer?”–rather, it should be “Has the loyalty marketer considered how digital transformation can significantly change the customer experience, deliver competitive differentiation, and drive an increase in customers’ loyalty (rational and emotional bonding)?”

Consider how Uber digitally transformed transportation by creating a more satisfying customer experience, which drove tremendous word of mouth and referrals. When the taxi industry started to challenge them legally, their customer advocates came to their defense in droves.

Loyalty is a strategy that needs to work from the top down and across the company. How a brand thinks about its customer and how to acquire, engage, transaction and reward them – this is how the business defines the ultimate customer experience and earns their loyalty.

Digital customer engagement is such a burgeoning topic for loyalty marketers. What is being done well in this regard and where do the challenges lie?

Nix: Organizations doing digital customer engagement well understand it has to be a rewarding two-way street. It can’t be one-sided where the brand is asking the customer for information and engagement that benefits only the brand.

For an example of engagement done right, look at programs like the PlayOn Kansas Lottery mobile app. The new app benefits the Lottery and the players. For the Lottery, the purpose is clear: The new PlayOn loyalty program delivers a mechanism to connect 1:1 with its players and learns valuable information about the player purchase, preferences, engagement in Lottery promotions, etc.  (Keep in mind all lottery tickets are purchased at Lottery retailers today.)

For the players, the benefit is first and foremost speed, followed by a reward. Today, most players must input long digital and alpha-number codes for each ticket they purchase to enter into second-chance promotions. It is time-consuming and tedious. No longer! With the new Kansas Lottery PlayOn mobile app, players simply use their smartphones and scan the ticket codes–fast and simple.  To add to the value, the PlayOn program rewards players for their ticket purchase, as well as extending the Lottery experience in enjoyable ways, such as special offers, free games that deliver instant gratification, social engagement, etc. It is a win-win proposition.

Where many brands run into challenges is when they consider digital–or mobile–as just another channel and treat it like an island. As Forrester’s Thomas Husson predicted, most brands have continued to underinvest in their mobile strategies, treating mobile as just another siloed channel instead of making it a fully integrated part of their overall strategy to transform the customer experience.

This has resulted in brands approaching mobile in one of two ways:

1) Mobile is either created separately by a third party and, therefore, not integrated into the brand’s systems, resulting in disconnects around things like inventory not being available or coupons not being connected to the customer’s account, or

2) Mobile is just responsive web, which is a huge mistake. Native mobile apps can dramatically transform customer engagement and experience, such as in the case of Hilton Hotels’ mobile app, which lets guests skip the check-in counter, pick the rooms they want, and more.

What effect has digital transformation of business had on customer loyalty in recent years?

Nix: It has been the game changer. Customer expectations have been completely redefined by digital transformation. They expect the brands they love to make their lives easier, to know what they like and how they like it. Stellar Loyalty client Harlequin knows so much more about its readers today than just a year or two ago, thanks to digital innovation around receipt scanning. This has enabled the publisher to learn buying habits, preferences, locations, etc. By rewarding its customers and making it easy for them to share their purchase information, now Harlequin and its retail partners have data that includes basket size and contents. From the contents, they can uncover new and valuable insights.

For example, the publisher learned that many of its readers are also pet lovers, which has influenced the publisher’s and its retailers’ marketing, engagement, and loyalty activities. 

What are the positives and negatives of a digital transformation of a business?

Nix: Digital restaurant ordering provides us with a good look at both the positives and negatives that can happen with digital transformation. There are so many upsides to online and mobile ordering. Consumers are quickly taking to the idea of eschewing the order line and hopping on their phones to place their order. It saves them both time and hassle, which makes them happier and more loyal customers.

According to industry reports, digital ordering is growing by double digits in an industry searching for ways to grow. And think about how easy it is for restaurants to upsell when ordering online versus if you are dependent on a person taking the order who may or may not recommend adding a special side or dessert to your order. Research shows that when consumers order digitally, they are twice as likely to order on a deal, and that deal is usually a coupon, giving the restaurant endless options when it comes to testing new items or driving interest in certain offerings.

The negatives arise when the brand hasn’t fully thought through the experience from start to finish. As innovative and paradigm-changing as Starbucks was when it first introduced mobile ordering, while it significantly improved speed to order, it didn’t account for the impact it had on the delivery end, creating a backlog of people waiting at the pickup counter.

Similarly, Panera Bread created a great app with easy ordering and built in recommendations, but it failed to think through the end-to-end process, so customers have been frustrated when they have ordered items which are confirmed via the app – but once they go to pick it up – the item is not available at that particular store.  Finally, digital is often used as an “acceleration” of doing poor communication faster. Sending more, un-personalized communication, simply because digital is faster and easier, is shifting the business in full reverse.

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