Evolving CX: The challenges of achieving customer loyalty in a digital age

9 minute read
Updated On | May 24, 2024 2:20:18 PM
Publish On | May 24, 2024 6:41:32 AM

 

In a global marketplace that’s extremely competitive, and where online commerce makes it easier than ever to shop around, generating customer loyalty and retention has become an arduous task for every type of retailer.

Retailers have recognized that intuitive, hassle-free, fast and individual customer experiences are essential to generating the loyalty that’s so important to the bottom line. According to Markinblog, 89% of companies now see CX as a vital part of the drive for loyalty. 

But achieving this is much easier said than done, for two reasons. The first is that customer expectations are rising like never before, and their tolerance for any inconvenience or poor service is almost nonexistent. SEMrush research has found that 92% of customers would abandon doing business with a company entirely after as few as two or three negative interactions. The second is that achieving the right results in customer experience terms is easier said than done: over 70% of CX leaders have told Gartner that they struggle to design the right projects to inspire loyalty and retention.

Statistics

But while it’s a difficult proposition, it’s by no means impossible. This blog explores the main challenges to overcome when attempting to maximize customer loyalty, why it’s still worth making the effort to invest in retention, and how technology means loyal customers are still a realistic aspiration.

The costs of customer acquisition vs retention

It may take a lot of time and effort to try and retain existing customers in the long-term. But even in the current climate, it’s still far easier to do that than it is to attract new customers to a business. Research from Harvard Business Review has found that the cost of acquiring a new customer can be as much as five to seven times the cost of retaining a customer already engaged with the brand.

Why is this the case? For starters, existing customers already have awareness of - and at least to some extent, appreciation of - a brand and its products. This means that customers are naturally more receptive to exploring other products, and to upselling and cross-selling opportunities that they’re presented with. The longer that they shop with a particular brand, the more positive they will feel about it, making them far more likely to turn to that brand before considering any competitors. 

Because of these factors, improving customer retention can make an enormous difference to Customer Lifetime Value (CLV), and by extension, boost the bottom line of any retailer. According to Bain and Company, increasing a retention rate by just 5% can boost overall profits by at least 25%, and potentially by as much as 95%.

Customer Lifetime Value

What are the challenges of securing customer loyalty?

Of course, it’s very easy to talk about customer loyalty, but achieving it in practice is a very different proposition altogether. There are five main areas which can have a particularly bad impact on retention efforts:

Icon_Poor Customer Feedback Poor customer feedback 

Customers feeling dissatisfied for whatever reason is a natural part of any business. The problem is that the dissatisfaction isn’t kept just to that person: whether it’s through social media or by word of mouth to friends and family, customers won’t hesitate to share with others what they think of the bad experiences they’ve received. 

All these complaints can add up to a damaged reputation among the consumer base, and can negatively affect the perception of a brand among new and existing customers alike - especially among those who place great stock in the views of their peers.

Icon_Lack of social media brand advocacy Lack of social media brand advocacy

The sharing of experiences by customers can be just as powerful in a positive way as it can in a negative one. The most engaged and enthusiastic of customers, who love shopping with a particular business, often become ‘brand advocates’, where they will actively share positive experiences in person and on their social channels. This organic content can be incredibly powerful, and resonate more with customers than paid-for advertising campaigns, or messaging that comes direct from the brand. Those whose brand advocate reach is limited are missing out on a huge opportunity to build more lasting customer relationships.

Icon - Lack of consistent communication Lack of consistent communication

Customers want to be able to get the information they want as quickly and easily as possible, by whatever means they need to do so. Most of the time, that means browsing through a website or engaging with an AI-supported chatbot. But there will always be a demand for human interaction in some cases, such as when looking for specific advice, or needing a particularly complex customer service issue to be resolved.

Many organizations make it difficult for customers to get that human contact through an over-reliance on digital support, which can then leave customers frustrated when they’re unable to speak to someone who can help them.

Icon_Poor offers Poor offers

Discounting and special offers have been a retail staple for almost as long as there have been stores, and are still just as valuable today, especially as cost-of-living issues mean more purchasing decisions are based on price. However, not every offer is a good one, and not every offer will be appealing to every customer. If customers feel that their email inbox or social media channels are being bombarded with poor or irrelevant offers, especially without any obvious personalization, they can very easily be put off from any purchases in the future.

Icon - Lack of loyalty schemes Lack of loyalty schemes

Similar to the previous point, the absence of an effective loyalty scheme can make customer retention far more difficult than it needs to be. Loyalty programs are long proven to drastically increase CLV, and don’t require a major investment to implement or maintain. Furthermore, they tend to incentivise purchases from a brand at the expense of competitors, which can make a real difference to overall market share.

Overcoming CX challenges with technology evolution

Resolving many of the challenges listed above comes back to the same things: more time, more budget, more skilled customer experience experts, and more resources in general. But in a competitive marketplace, and given the turbulence the retail industry has had to deal with over the last few years, many retailers aren’t in a position to make that level of commitment.

The good news, however, is that technology - including recent innovations like artificial intelligence and machine learning - is stepping up on many different fronts to fill the void:

Icon_Improving customer data storage Improving customer data storage

Most of what customers want from a good retail experience is generated from insights into their behaviors and buying patterns, whether as a customer base as a whole or individually. But achieving this requires large amounts of data to be collected, stored and processed. Advanced data management capabilities, combined with AI and ML, can help customer data from all sources to be consolidated for the most accurate insights possible, while also ensuring compliance with data protection regulations.

Icon_Omnichannel support Omnichannel support

Customers expect to engage and interact with businesses across a multitude of different channels, which requires an omnichannel brand strategy. According to Shopify, the brands with the best omnichannel engagement are boosting annual revenue by an average of 9.5%, compared to 3.4% among those whose strategies are poor.

AI in particular is proving key to making omnichannel a seamless, practical success. The likes of AI-powered chatbots, virtual assistants and Natural Language Processing (NLP) means that customers can always get the support they need, across websites, social media, messaging platforms, mobile apps, phone calls and more.

Icon_Digital transformation strategy Digital transformation strategy

AI and ML also fit into wider digital transformation strategies, helping transform retail operations end-to-end. For example, they can be used to automate repetitive processes for greater speed and accuracy; optimize workflows for greater efficiency; and support more informed and data-driven decision making. All this supports more streamlined day-to-day work, lower costs, and a lower admin burden on staff, which filters through to the customer experience as the retailer has more resources and expertise to devote to CX.

Icon_Scalable loyalty schemes Scalable loyalty schemes

Technology is essential for taking loyalty programs to the next level and giving customers the offers and incentives that they want and expect. AI analysis of customer behavior allows for greater personalization in loyalty offers, including targeted promotions that are more likely to be of interest and more likely to generate conversion. Furthermore, AI and ML can also automate many of the administration tasks of the scheme itself, meaning greater results can be generated without putting further pressure on staff time and resource.

Icon_Resource for supporting brand advocacy Resource for supporting brand advocacy

One of the biggest obstacles to a successful brand advocacy strategy is identifying and connecting with the right people to promote the brand. AI-driven sentiment analysis can help with this, along with social media monitoring tools, in finding the influencers and ambassadors who are saying the right things about the business. This allows retailers to connect with them directly, build strong relationships, and explore opportunities to work together and spread positive messages even further.

Icon - Hyperpersonalization Hyperpersonalization

The amount of data that AI and ML can process means that personalizing messaging and offers to individual customers is suddenly within the realistic reach of most retail operations. This hyperpersonalization can be instrumental in maximizing customer experiences, from tailored recommendations and customized messaging to intuitive customer service messaging that ensures every customer feels valued at every touchpoint.

Diagram - Challenges vs Benefits

In summary: AI and CX working together for success

AI and ML technology is still in its relative infancy, so the possibilities that it can generate from a customer experience perspective are only now becoming fully understood. However, the benefits listed above make clear that it’s essential to get on board with the AI revolution sooner rather than later - because if you don’t take advantage, you can be sure that your competitors will.

By 2025, as many as 80% of customer service and support organizations will be using artificial intelligence to support customer experience

Of course, all this can be a major undertaking, and it requires careful planning and assessment to ensure that AI and machine learning are used in the right places. This is where the help of an experienced, expert partner like Ciklum can be so invaluable. Not only do we understand the importance of customer experience in the age of AI, we also understand how best to apply it in specific business circumstances. That’s why we blend out leading AI solutions with detailed product design processes, so that AI makes a real difference to internal operations and customer experiences alike.

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