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Continuity and change in customer loyalty

 

Today’s consumers enjoy unprecedented opportunities to compare products and services. With so much information available online, switching brands is quicker and more convenient than ever. Recent studies in the US and UK indicate that, amid the uncertain economic and supply conditions arising from the Covid-19 crisis, switching has indeed been on the rise.2

“Although the fundamentals of customer loyalty remain unchanged, brands are having to work harder to maintain it in today’s environment,” says Sana Mohammed, Director of Global Loyalty Strategy at McDonald’s. “They have to do a lot more speaking and a lot more engagement in order to get the same amount of loyalty as before.”

“Building the emotional connection and trust with customers that underpins loyalty has always required hard work,” adds Steven Bushong, formerly Senior Vice President of Marketing at Walt Disney and currently an executive coach and consultant. “It’s getting easier for customers to go somewhere else, however, if that trust is broken.”

The companies represented in our survey appear to be putting in the hard work to strengthen loyalty. While around one-fifth of respondents report deterioration over the past two years in their key customer loyalty indicators (customer churn, retention, lifetime value, net promoter score and customer effort score), between 21% and 31% say those indicators remain unchanged since 2020. In the case of churn, retention and customer effort, between 52% and 59% even report a net improvement.

Trends in customer loyalty since 2020

Figure 1: Change in five customer loyalty indicators in the past two years

Figure 1: Change in five customer loyalty indicators in the past two years.

 

Their effective use of emerging technologies goes some way towards explaining these companies’ apparent success. Among those that have seen improvement in at least some customer loyalty indicators, an ability to act on insights generated by analysis of customer behavior—thereby generating consistently positive experiences—is the most frequently cited contributor. Following closely in importance are firms’ increased investment in technology to improve such experiences and their ability to generate customer trust in their data practices.

Conversely, technology factors can also be causes of deterioration in loyalty indicators. Among respondents reporting declines in such metrics, problems experienced in encouraging customer advocacy are cited most frequently as a reason, but another is an inability to build trust in data practices. Brands clearly need to be careful in how they use new technologies in interacting with customers, and striking the right balance is a complex challenge.

Factors affecting change in customer KPIs


Figure 2: Principal contributors to improvement or deterioration in customer loyalty indicators in the past two years

Figure 2: Principal contributors to improvement or deterioration in customer loyalty indicators in the past two years.


Stimulant of change


Respondents emphasize how extensively their use of emerging technologies has impacted their efforts to improve customer loyalty in recent years: 63% say that recent advances in technology have “completely transformed” their approach. Executives from utilities, retailers and media companies are particularly vocal about the technology impact.


Beginning quotation mark  Recent advances in technology have completely transformed our approach to improving customer loyalty.”


63%

say recent advances in technology have completely transformed their approach to improving customer loyalty.

Figure 3: Share of respondents stating that they “strongly” or “somewhat” agree with the indicated statement about technology and efforts to improve customer loyalty

Figure 3: Share of respondents stating that they “strongly” or “somewhat” agree with the indicated statement about technology and efforts to improve customer loyalty.

 

The impact of technology on such efforts manifests itself in different ways:

  • Variety of channels made available to customers for interacting with brands
  • Functionality of customer-facing apps and websites (such as personalization options)
  • Speed with which AI-based chatbots—supported, where needed, by human customer-service agents—can answer customers’ questions and resolve problems
  • Use of social media and other technologies to encourage customer advocacy
  • Visibility provided to customers into how their personal data is used

For Sana Mohammed, the biggest impact of technology on the customer experience— and, ultimately, on customer loyalty—has been brands’ ability to generate insights from data and act on them. “We have a lot more data and much more powerful technology than we’ve ever had before,” she confirms. “We also have the ability to pull insights from [that data], and use it to define the next initiative. Technology has become a major enabler of unique, personalized, seamless, frictionless and memorable customer experiences. That’s huge.”

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