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Market Movers Discussion about Loyalty Tactics and How Brands can Increase Emotional Equity with Customers

What does it mean to invest equity into a consumer relationship? Jeff Herrera, CMO of Annex Cloud chats with Casper Aagaard Rasmussen, VP of Enterprise Platforms at Valtech about loyalty tactics and how brands & manufacturers can increase their emotional equity with their consumers.

Transcript

Jeff Herrera:

Casper, good morning? How are you? I hope all is well. It's good to see you. Thanks for making time this morning to talk a little bit about customer retention, the digital experience, and engaging in this difficult economy. Valtech has been around for quite some time and has real expertise in our ecosystem and provides a tremendous amount of value to brands, retailers, and manufacturers.

That's exactly why we're doing this. This is why we started the Annex Cloud Market Movers video chat series is to be proactive and get some keen insight in front of brands and retailers and manufacturers so that they can find real solutions to help them get through this difficult time. So, thanks again for joining us.

And I thought it would be great to just kick this off and talk a little bit about what we've heard over the last few weeks. As you know, we've been relentless about making sure that people understand that customer retention is just very critical in this time fair.

And it should be critical no matter what you're doing. Because once you've worked so hard to retain customers, you want to keep them because you don't have to keep feeding the well all the time, even though that's a core part of your business as the economy gets better but it's really important that you maintain these relationships.

So, we'll talk about that. Let me start with a call. We have a client called MacKenzie-Childs, who's been with us for quite some time. And we're talking to a lot of our clients to help them get through this and identifying strategies to help them get through this economy. But their CMO, Larry Shaw, actually told us... And this is verbatim. And he said we can use this quote, "If we had to cut down to two to three services that we pay for, loyalty would be the one that we would want to keep."

So, I thought that just underscores exactly why you and I are here today to talk about this and make sure that we're all pressing the right buttons but I'd love to get your perspective on what is Valtech doing now given this new normal, especially around customer retention.

And we'll talk about the digital experience as we go forward but let's zero in on that right now and find out how you guys are bringing this to the market with clients and prospects. I'd love to get your perspective on that as well.

Casper:

Totally. And thank you so much for having me. So, he's spot on. I just want to say that upfront. I totally agree with that statement. And think about it this way, that loyalty is basically the level of equity that sits in the relationship between a consumer and a brand. And obviously, increasing that equity creates retention. That creates a reason for a consumer to stick around to typical tactics or strategies that we see to increasing that equity is loyalty, which is, of course, the mechanics of like incentives, it's the mechanics of re-engagements and giving consumers a way of approaching a brand than just engaging with a brand.

The other approach we see is definitely through content strategy, like the tone of voice, just the actual moments where you deliver certain pieces of content and how that maps back to the customer journeys and what type of content actually hits them. When we're talking about retention and getting into that advocacy state.

Jeff Herrera:

For sure. You mentioned a critical part of that customer journey, loyalty is a critical touchpoint in that customer journey. So, when you're talking to brands and retailers and manufacturers who are interested in... And you've seen this, right? You've seen a tremendous amount of groundswell activity around digital now like we've never seen before, right?

Because everybody has to stay at home. Everything's taking place online. Now there's this great big surge. In fact, I think Visa just reported unprecedented global eCommerce volume than ever before because of the COVID-19 crisis. But when you think about the customer journey and you think about where Valtech is recommending what that needs to give the best practices, the optimization around that.

And you highlight what that looks like, that customer engagement model, the actual journey, and those critical touchpoints. Obviously loyalty plays a critical role. But just flow through as to what that looks like in today's environment as you're talking to brands and prospects and clients as to what that needs to look like. I think that it would be really important for people to really understand this new normal.

Casper:

Yeah. No. Certainly. And I think it's worth just thinking about how manufacturers and actual retail as an example are fundamentally different. As one of the challenges that we see with manufacturers is that they have no relationships with the consumers of their products. They're sitting with a typical distribution model in between those consumers and themselves as the supply of the actual products, meaning they have no direct to consumer strategy.

And of course, that's a lot of the work that we're doing with big manufacturers out there to make sure that they can actually approach and engage with the consumers directly to start that culture of feedback, to start that culture of conversation instead of it always going through the point of retail, going through mom and pops, going through distribution channels.

So, that's definitely for manufacturers, something that needs to be taken very seriously. Going direct to consumer is a big, big adventure. There are many, many different complexities of doing it but it is certainly something manufacturers these days need to look at. And I think time to market just given the current situation of the economics is incredibly critical for manufacturers to get that opportunity of engaging directly.

On the other hand, when we're talking about retail, a lot of the experiences that we've seen to date has been very much focused around the awareness, the decision, the conversion and then you're leaving it at that because that's how people have seen e-commerce playing a vital role so far while we are seeing it definitely moving. It's like what happens post-conversion.

What are we doing to re-engage our people? What are we doing in order to get people back into our funnel and convert with us once again? And that's where we see loyalty programs, that's where we see marketing automation. Basically in time, an ocean of re-engaging and being top of mind and giving folks a reason to stick around and be interested in us as a brand and bringing them back into the fold. We certainly see that being key.

Jeff Herrera:

For sure. So, a couple of things is as I see it and I think you could add some perspective here as well around that content, right? What is the content and engagement process is now critical more so than ever before because you don't have the personal connective tissue that we're used to. Now, things are starting to open up a little bit, right? You're seeing that Casper where gradually a phased approach post-COVID.

I think you're starting to see more pickup and deliveries. I think restaurants are starting to have to reconfigure their businesses a bit and understand the social distance scene and how that's factored in. And as well as some of the different elements around logistics to keep everything sterile.

But I think the content piece online and the engagement part is pretty important more so than ever before because everybody's online. Can you describe what your clients and prospects should be looking at as it relates to having real meaningful content and that touches real relevancy with respect to the shopping behavior, the engagement, the customer experience? I think that would be helpful for people to understand from your expertise as to how you bring all that together.

Casper:

Yeah. Totally. So, if you think about it post-conversion, the state of mind for a consumer is really how do I get as much value out of the product that I just purchased and that is what retail and manufacturers need to help me understand. So, it's the application of the purchase that I just made.

When we look at let's say groceries, we're seeing a lot about how can these products or purchases actually help me change my lifestyle? How can I help improve my body? How can I help improve my mental health by considering the benefits of the purchase that I just made? It means that I'm starting to get different perspectives on the value of the product that I just purchased instead of just thinking of it as being a simple replenishment of whatever goods that I need for my home. And that is really how we see, for instance, retail being able to re-engage with their consumers and creating that adoption or that more equity in the relationship to make sure that people come back and do a repurchase.

Jeff Herrera:

Okay. Okay. Let's look at a couple of market examples where big, big market brands like Target, like Macy's, like REI. Sadly, J.Crew just had some struggles and then they filed for bankruptcy. And one of the things that stood out to me was that on the J.Crew side, is that they lacked a really loyal customer base and that whole fashion apparel vertical is extraordinarily competitive.

So, you have to continually stay up-to-date with the latest trends and be able to adapt and be very agile in terms of meeting those demands. But in the absence of... I don't think they put a loyalty program in place until 2018. And that was a bit problematic for now because it's called out that they didn't have a loyal customer base.

So, when you see companies like Macy's doubling down on loyalty and Target scrapping their original loyalty program because it was undifferentiated, it was transactional in nature and it didn't have any real meaning for the target guest. So, they scraped it and came up with Target Circle and now they've got a huge momentum around that.

Can you talk a little bit about the verticals, say fashion apparel, health and beauty, luxury goods, outdoor sports, and outdoors, whatever it may be, how should that verticalization work as it relates to creating the optimal customer engagement? Right? So, when you see something happened in fashion apparel, what should brands and retailers be looking at now to remain very competitive in this new normal?

Casper:

Yeah. So, I think one of the... And I honestly think that's across verticals, is one of the key ingredients of a successful customer retention strategy is to increase the barrier of change. You need to make sure that, it can't change as easily as I may have been able to in the past. Me just sitting with points on an account that I haven't really redeemed from or been rewarded from in the past is simply not enough these days.

There needs to be some type of equity in the service that you provide to me. And as I'm seeing more and more reason for sticking around, I'm less likely to go astray. And I think that's the type of change that our target implemented with the target circle, where it's moving away from a more traditional you're earning points and you're getting benefits, it's becoming way more of a bonding mechanism than anything else.

And honestly, that is what loyalty is about today. It's not just about me accruing a balance and getting a slight discount on my next purchase, it's really about me using it in a day to day and an everyday situation. What we see for instance within digital grocery is that barrier of change is extremely low because a lot of these digital grocery solutions that we've seen today, like within specifically the grocery industry basically are only relying on the replenishment or my convenience for restocking my personal household needs as the barrier of change.

It means like we did research and a study where on average, it takes me 83 clicks to change from one provider to another because that's the average amount of goods that I buy over a quarter. There was no other reason for me to stick around in that.

And I think a lot of digital groceries in particular, whether it's the Amazon freshers, whether it's the Instacarts of the world are seeing that now the market is starting to reopen because they're having a really hard time. Like re-engaging with the customers because that barrier of change has been too low. I simply do not have any reason to stick around and that means that a market shift might be coming up.

Jeff Herrera:

Yeah. I think that barrier change is absolutely very relevant for today, more so than ever before. I keep thinking about when economic hardship takes place, which hard I mean, unemployment's off the chart, right? So, people are now having to rethink what happens with all of that they currently have and where can it be best applied that creates anxiety and an easiness.

And I think brands and manufacturers and retailers have to be really sensitive about, "Hey, there's that level of thinking now." Now, people are more inclined to look at the real value and cost because of that situation. And customer retention is this opportunity to create those experiences.

What you're referring to as opposed to, "Yeah. Guess what? I have this really great loyalty program, get a bunch of points, get $5 off on your next purchase." It's more about the engagement around all the opportunities of value that a good strategic loyalty program can bridge that gap. So, I think that's really important.

Casper:

Yeah. And we really see it is that emotional connection that you're starting to create. Like I'm not doubting myself as I'm re-engaging a brand. The worst situation you possibly can get into as a brand is the people are doubting the value of that relationship you have and loyalty is of course, like again, one mechanism but at the end of the day, it comes down to the emotional connection that I have.

So, even think about how retention can be amplified by thinking about social responsibility, by thinking about the service affinity that's associated to the service you're offering to the market, you need to stand out, you need to be different. There are a lot of plays right now about food waste is a unique character or unique characteristic of a service that's offered to the market that makes them stand out. And that means I'm way more competitive when people have an opinion.

And those are the types of uniqueness you need to find. So, you're not one of many. And unfortunately, like you were saying, a loyalty program rooted in points and pure rewards, not having any type of bonding or engagement mechanism assorted to it is so last year. And everybody has it and that's why Target and these other big players are starting to really accelerate their focus on loyalty and retention. And it comes in and becomes this experience or this emotional connection that you want to establish and stuff.

Jeff Herrera:

Yeah. Well said Casper. For sure. And when I think of... I love Amazon but I'm not emotionally attached to Amazon. It's a great convenience for me. And I get it. It's very frictionless. I understand it. But I pay for prime. I want to own that service. I'm deeply invested in that part of it because I want to get to the value that I paid for.

But if somebody has something elsewhere I'm able to create some more value, I would absolutely leap in a second to go take a look at it. I'm not emotionally connected to Amazon. I love the frictionless shopping experience but if you give me something else, I'm in, right? Give me something more value, more high perceived value, more connection, I want to look at those. So, I think your comments are spot-on for sure.

Let's switch gears a little bit and talk about success, right? Let's talk about how do brands and manufacturers and retailers achieve success now. So, if they come to you Casper at Valtech and they say, "Guess what? We're thinking about recalibrating our business, we're having a change. We're having a pivot. We're having to shift resources. Casper, help us get through this?"

How are you guys providing some of that valuable strategic insight right now to those prospects and clients around how do they achieve success in this new normal from A to B? Talking about their platform considerations of digital experience. We've talked a lot about customer retention and loyalty but what's that message right now from Valtech?

Casper:

So, what we go in and do first is of course to define success. And based on the market position that you have right now like some see success in acquisition, some see success and increasing the customer lifetime value, which typically right now see that it's about increasing the customer lifetime value. And that means you're stretching the duration of activity that you see between consumer and brand. And that means the re-engagement is working.

So, we see clients that are sitting with a low customer lifetime value getting incredibly high and great benefits from increasing it because it means people are coming back and coming back and coming back and continuing to generate the revenue as the individual they have. And the more customer lifetime value at the end of the day, the more loyalty you have to that brand.

And that's really how we look at it from a strategic point of view. So, we wrote it back in that KPI and then we find the right tactics and strategies to amplify it and increase it. And honestly, depending on whether you are a manufacturer, even in retail, what type of vertical or what type of a retail vendor provider you are, those tactics are greatly different.

Jeff Herrera:

Okay. Okay. It would be safe to say as part of that strategy, those key success metrics are now's the time, right? To take the appropriate action properly, surprise and delight, and wow and keep making meaningful touchpoints with their current customers and make sure that that path is clear for them to move forward in this new normal. Is that fair to say?

If you look at the assets, so customer service should be spot on, should be fantastic, your website should reflect this new normal so that content piece that we talked about should reflect what it's about now in this new market economy, where there are significant challenges. Obviously, the value proposition, all that should be conveyed across all those assets. Correct? That's what we're talking about now.

Casper:

Yeah. Absolutely. Having one unified view and one unified voice across all the touchpoints that I have with the brand is extremely important. And you see some of the most startup type brands, like HelloFresh being incredibly good at that. You see that they are digital natives by hot. They are obviously founded... I wouldn't say recently but if you compare it back to some of the big players in the same market, they are recent.

And you'll see that digital integration into all channels, whether you're talking to a customer service representative or you're engaging with the website, you're engaging with the app. Well, even if you're canceling your subscription, you're getting a very unified message. And they're calling and approaching you as the individual that you are. Yeah.

Jeff Herrera:

Got it. Got it. So, let's wrap up. I think what we've talked about, we covered a lot of ground. I think this is fair to say that this is... Now that the 30-day shock is over now, we're well beyond 30 days, this is really an opportunity, right? For brands and retailers to refocus, understand the challenges that are in front of them, pivot, right?

Make sure that the resources are put in place, especially around customer retention and digital experience and the consumer life cycle and the barriers that we were talking about and make the business work now because we're solely coming out of this. They want to be well-positioned to not only just get through this but thrive. Right now, thrive competitively and position themselves to win now that they've got this recalibration taking place.

Right now, this is the opportunity to take the right action, make sure you're investing in the retention programs that you need, make sure you have the right content to deliver that messaging and that you're delivering relevant meaningful messaging across every touchpoint in the customer journey. And that's what I'm hearing from you as well. Correct?

Casper:

Yeah. Absolutely. I think the most important tactic to take on would be re-engagement in general. Does that come from having a powerful and robust loyalty solution? For sure. It also comes from just having the correct marketing automation strategy in place. Absolutely. I think going forward, the notion of customer acquisition, the importance of that, may decrease for a lot of grants.

And I think they're going into red alert mode around retaining the existing customers. They have to make sure they're not even allowing for a market shift to occur. I think the average cost of acquisition going forward will increase simply because it's station is going to be around and we're moving into a different economy going forward. And that's why I think the effect you're getting from re-engagement is just simply going to be better value for the money.

Jeff Herrera:

Awesome. Well, Casper, you've been terrific, provided a lot of great insight. Obviously Valtech is one of our pioneers in systems integration and partner solutions. And this is why we do this. We come together as partners to support our clients and prospects. Everything that we do now related to market movers, Annex Cloud Market Movers. We have the video chat series there.

Where can people best find Valtech besides the website? They can find you on LinkedIn but is there a particular piece of thought leadership that we should be mindful of, that we should tell people about or anything else that in this new normal that we should direct people so that they can easily find it with Valtech?

Casper:

Yeah. So, we're obviously very active on LinkedIn. We're publishing a ton of thought in content, both around the COVID situation and what that means to both manufacturers and retailers, basically all verticals and industries. Obviously, all of that content can also be accessed on valtech.com. There is a section dedicated for insights where you can go in and understand what we as consultants mean that companies need to do right now.

Jeff Herrera:

Awesome. Thanks, Casper. Well done. I really appreciate it. And let's do this again as soon. Okay?

Casper:

Thank you so much. Thanks for having me.

Jeff Herrera:

You bet. Take care.

Featured Speakers

Jeff

Jeff Herrera

CMO, Annex Cloud

casper

Casper Aagaard Rasmussen

VP of Enterprise Platforms, Valtech

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Since 2010, Annex Cloud has provided industry leading loyalty solutions to more than 250 leading brands and retailers, including Jenni Kayne, Hewlett-Packard, Bed Bath & Beyond, e.l.f. Cosmetics, Olympus, Sugarfina, Mizuno, MacKenzie-Childs, VF Corp., with the ability to engage tens of millions of their customers one-to-one at scale.

The Annex Cloud platform provides fully integrated Customer Loyalty, Referral Marketing, and User Generated Content (UGC) solutions that seamlessly work together to optimize the customer journey and deliver a unified customer experience that is designed to accelerate revenue growth, retain valuable customers, increase average order values (AOV) and drive repeat order frequency.

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Technology innovation and a shift towards a consumer-centric economy, the “economy of experience”, have created unprecedented disruption for companies as they look to embrace the digital era that will drive business transformation. We believe the most significant challenge companies face today – particularly large and established global businesses – is the constant state of change in this new economy of experience, as it requires organizations to innovate and grow since cost-cutting measures are no longer sufficient to compete and drive value.

We combine experience design, technology development, marketing crafts, and strategy in all stages of the business lifecycle with unique services that outcompete others in quality, speed, and value. Our model that leverages our global intelligence to tackle the challenges of today and tomorrow. We realize Transformation by doing.

To learn more about Valtech, visit valtech.com