Loyalty 3.0: A Series
What is Loyalty 3.0? I did not know either until reading the book. It really is interesting how you learn things when you read about them. Through reading the first chapter, thoughts and figures that I have had and seen started to have real meaning and were truly given definitions.
When it comes to customer loyalty, it seems like a no-brainer for businesses to desire. But why do all brands not have customer loyalty?
The reason that so many businesses and brands lack customer loyalty is that they are living in the past. They are still using tactics that Paharia (2013) defines as Loyalty 1.0 and 2.0. And since we are now talking about Loyalty 3.0, today’s brands need to step up and transition to the new way of creating loyal customers.
But, how do we become customer loyalty experts? I think it is best to learn from the past and then see how we need to change.
The oldest form of customer loyalty, defined by Paharia, is Loyalty 1.0. Loyalty 1.0 is characterized by “Frequent-flyer” cards, Cash-back credit cards, and BOGO (buy one get one) deals. This mindless type of deals that customers offer just end up creating customers who are loyal to the deals, not the company. Customers will come and go depending on how much of your product you are going to give them for free. This is not true loyalty, and marketers knew this, so they moved to Loyalty 2.0.
Loyalty 2.0 added segmentation and personalization to the table, as well as direct mail and email campaigns. This was a step in the right direction because it began the process of brands trying to be more personal with their customers, but it fell short of success to the delete button on the email inbox.
And this long loyalty journey all led to Loyalty 3.0, which is where marketers are beginning to adapt their marketing tactics. Loyalty 3.0 is defined by engagement and a deeper connection between the brand/company and the customer. It also includes using data-driven motivational techniques.
As the consumer market increasingly becomes filled with Millenials and Gen-Z, the need for authentic and relational companies heavily increases. In an article by Wilson Ozuem, he quotes “for example, Zollo et al. (2020) found that millennials naturally expect contemporary media to be used by brands to create meaningful dialogues online” (Ozuem, et.al, 2021). This demographic of consumers deeply cares about authenticity and feeling known. They want to know their brand's values and want to use brands that value their customers as well as the things that their customers value.
But, why is this important at all?
Research says that repeat customers spend more money than new customers. This means that if a business can keep customers coming back to buy their product, they will continue to make more sales, rather than continually gaining new customers who only try out products and never return. Research also claims that repeat customers give higher satisfaction scores and give referrals more often than new customers.
With all of this accounted for, it is said that it takes five new customers to make up the amount that one repeat customer brings in. That is insane.
It is important that we as marketers pay attention to our customers’ needs. It is important to our customers to feel seen and cared about, so it should be important to us to communicate well on behalf of our companies, the intentions that we have for our customers. This will help us with sales in the short term, but create a fan base of loyal customers that will fuel success in our companies in the long term.
Paharia, R. (2013). Loyalty 3.0 How Big Data and Gamification are Revolutionizing Customer and Employee Engagement. McGraw Hill Education
Ozuem, W., Willis, M., Howell, K., Helal, G., Ranfagni, S., & Lancaster, G. (2021). Effects of online brand communities on millennials’ brand loyalty in the fashion industry. Psychology & Marketing, 38(5), 774–793. https://doi.org/10.1002/mar.21466
Zollo, L., Filieri, R., Rialti, R., & Yoon, S. (2020). Unpacking the relationship between social media marketing and brand equity: The mediating role of consumers’ benefits and experience. Journal of Business Research, 117, 256–267.