My grandmother never did change her shopping behaviour much. She used to buy her daily groceries in one store only. Her bread at the same bakery. And her meat at the same market stand. Year in, year out. For decades. Your grandmother likely did the same!
All of this has changed and customers are not as loyal as in the old days. So how can we design products and services in ways that ensure high customer loyalty?
Let’s find out.
Customer Loyalty in the digital space
Customer loyalty is a hot topic during the ongoing and global digital transformation phase. Gone are the days that loyalty was mainly due to a personal contact with the company. Gone the days of unwavering brand loyalty.
In the digital space, previously entrenched sectors like banking, insurance and telecommunications are now faced with a multitude of new digital competitors. The competitors (like digibanks) are able to offer much lower rates than many established companies with large overheads can offer. Low interest rates, and smaller margins, make it even more difficult for companies like banks to compete.
So if you cannot compete on price, the only thing you can do is to compete on offering an amazing customer experience. And most companies now have to think about how they create loyal customers online. Customer facing staff have largely been made redundant, so the app becomes the new customer relations agent.
The app as customer loyalty agent
The problem with having the app as the main conduit for loyalty, is that most apps are not designed with user engagement in mind. They excel at being functionally sound and bug free. But there is mostly no motivation in the design for users to interact with this functionality, and certainly not for a sustained period of time. Normally they offer non-engaging, linear experiences.
Most banking, insurance and other apps are therefore not used enough, so customer loyalty is suffering. If the app is the new customer loyalty agent, it needs to do one thing well and that is to interact in an engaging way with its customers. Just like the baker did with my grandmother in the old days. It was the experience in the bakery that mattered, not the functionality (a place to buy bread) of the bakery.
Today it is no different, it is the experience around the services you provide that will ensure deep customer engagement and brand loyalty.
Many companies now have a loyalty program, but their successes are few and far between. The reason for this is that customer loyalty design is based on giving users extrinsic rewards for their loyalty. Buy something, get a point. Buy something more, get two points. Redeem your points. But this is not loyalty, this is bribery. The effect of bribing customers with rewards is that they will stay loyal, until the moment another company offers them a better bribe.
The following clip from the office shows it well:
As you can see, many companies also rely on bribing their staff to stay loyal. They are loyal until some other company makes them loyal to that other company.
Apple doesn’t need a Loyalty Program
Look at Apple. Their products have always been more expensive than their competitors. Yet they flourished. Ever seen a true Apple Loyalty Program? Nope.. Doesn’t exist.
So why is that? Because of the experience around Apple. Not price. Not bribing their customers but making them feel special, making them feel that buying their products makes them special, elite customers. See Apple’s ‘Think Different’ Campaign
Customer Loyalty App 2.0
So how do you make your app into a real customer loyalty agent? What steps do you take to ensure that you can compete on experience rather than price? How can you make your customers feel special in a digital application
Well, first you need to understand what business metrics you need to design for. What should be the top 3 outcomes of the user experience in the application? Prioritize the list so that your design optimizes for these metrics.
Then make sure that you know what user actions in the app will see an uptick in your metrics.
Thirdly, know your users (we call them players in Octalysis gamification): what are they motivated by? Use the Octalysis Octagon to make insightful where the core of the motivation of your users lies.
Once you have the above sorted establish what rewards you can offer and how users keep track of their journey. You have just established the Octalysis Strategy Dashboard (https://yukaichou.com/gamification-study/the-strategy-dashboard-for-gamification-design/). Hurray!
Now you are all set to think about features that will motivate people to come back to your app again and again in an engaging/fun way. Make sure that these features go further than just bribing people with points, discounts, status or collectables. Such rewards have their use but will not lead to long term loyalty. Think about intrinsic motivation: what makes them feel special, epic even? What autonomy and strategic choices can we give? How does social influence and collaboration look like? How can we get to a non-linear experience?
Anyway, you get what I am pointing at. Then of course you need to balance the in-game economy. And translate all of the above into a convincing gameful UX. And then develop it.
Sounds like a lot? Not sure if you can do this yourself? Don’t worry, we are here to help out as we have done for many innovative savvy companies. They knew that customer loyalty is all about designing for user motivation.
And user motivation is what we do best.
Contact us for an initial free consultation and advice on your program or ideas.