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03/31/2022

Long-Term Loyalty: Amplifying Relationships to Drive Higher CTLVs

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Consumer loyalty button

Relationships are a key driver of profitability for retailers. Where businesses are meeting dead-ends, however, lies in the tail-end of the customer journey. Far too many are overinvesting in their initial transaction to acquire a consumer, but then neglect to nurture that relationship, prematurely cutting the cord of what should be a long-term connection. 

From AI/ML to interactive experiences to loyalty programs, where should retailers focus their efforts in order to maximize each step of the customer journey and increase lifetime value? Find out how leading brands like Sephora, McDonalds, and Whole Foods have unlocked the key to loyalty, and leverage comprehensive insights from RIS News’ recent targeted research report, “Building Customer Lifetime Value,” to put data into action. 

In RIS News’ latest webinar, learn what it takes to turn long-term loyalty into a profit-generating strategy. From expert insights to takeaways from RIS News’ targeted research report, “Building Customer Lifetime Value,” get the details in the webinar transcript below.

Tim Denman: Welcome to the “Building and Maintaining Customer Lifetime Value” webinar, which is hosted by RIS and presented in partnership with Tech Mahindra. I am Tim Denman, editor-in-chief of RIS, and I thank you for joining us today. Customers are faced with numerous shopping options and retailers must invest in the technology and strategies to create meaningful experiences and relationships if they're going to attract and retain them. 

Building loyal and profitable customer lifetime value is an ongoing process that requires constant reimagining of the customer journey. With us to explore the current state of the customer journey and how retailers can enhance strategies, tactics, and technical fire power to ensure they're maximizing every customer relationship, is Maninder Singh from Tech Mahindra. Maninder, it's great to have you with us. May you take a second to introduce yourself to the audience and discuss your role at the company?

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Webinar Slide — Speakers
Webinar Slide — Speakers

Maninder Singh: Tim, thank you very much. I am Maninder Singh. I run the retail and CPG business for Tech Mahindra for the Americas, based in New Jersey. I’m excited to share my experiences around a very relevant topic, which is customer lifetime value. 

Denman: Thank you, Maninder. Henry Sardina from Saks OFF 5th was supposed to join Maninder and myself; however, he had a last-minute emergency and is unable to join us. Rest assured you're in good hands with Maninder, who will provide firsthand insight from the field on how retailers are currently building lifetime value.

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Webinar Slide — Targeted Research
Webinar Slide — Targeted Research

Many of the themes and topics we're going to discuss were covered in the recently released “Building Customer Lifetime Value” targeted research report. Building a mutually beneficial relationship with consumers requires a group of initiatives, strategies, and technologies working together to establish long-lasting and meaningful customer engagement. 

As part of our research project, we asked retailers for their top strategic priorities in the area of customer lifetime value, over the next six to 12 months. Retaining and acquiring customers are the one-two punch when it comes to customer lifetime value investment. This webinar will focus on four key themes, including meeting the customer where they are, loyalty, personalization, and the customer experience and customer engagement.

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Webinar Slide — Building Lifetime Value
Webinar Slide — Building Lifetime Value

Today, consumers have various channels to not only shop with their favorite retailers, but interact with them as well. We asked retailers which marketing channels they leverage to communicate with consumers, and not surprisingly, social media, email, and traditional print campaigns top the list. Other new and emerging channels that retailers are currently leveraging, albeit in much smaller numbers, include mobile push notifications, browser notifications, and geolocation-based communications.

All of these marketing channels provide retailers with a wealth of data on shoppers, but POS or sales data remains the primary source of information that is leveraged to build a unified view of the consumer. 

Today, the customers interact with brands through multiple channels — we all know that — but how can retailers and CGs ensure that messaging is consistent across these channels while still tailoring their approach to each unique channel?

Singh: Channel is an extremely important topic that you've touched upon. Retailers and consumer goods companies have to decide where to share the experience of the product, and brands have to decide what services to use. I use the word services, others use the word channels — they’re used interchangeably. 

Services could be a website (the web), mobile, social — we see a lot of engagement on TikTok, Facebook, Instagram, etc. — voice, which is the contact center, customer service place. It could be a physical store with inviting experiences, it could be events, a print brochure, television broadcasts, or human via a salesman representing the organization and the value proposition of the services or product. It could also be a radio broadcast, or even displays on Google Ads or billboards.

Next, it could be gaming, this is the new paradigm that Facebook has invested quite a lot in, which is the whole universe of metaverse, the Oculus, gaming, Pokemon, all that stuff. All of a sudden, the service changes to console, your mouse, etc. It could be packaging; for example, a toy's artist uses color schemes on the package and then designs it all together in terms of how the folding happens so that the reading material on a package comes upside down, etc.

It could be an IOT as a service, which is gaining popularity: where you get into your car and say to the car system, "Hey, where is the nearest Chinese restaurant?" All of a sudden the service changes from a Google Fitbit to Google Glass. 

Finally, there is mail, which is the snail mail or email campaigns that are run. I’ve mentioned about 15 channels. Some may argue there are more, but largely, these are the services that retailers would typically use depending on what kind of business they are in. 

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Webinar Slide — Meet Customers Where They Are
Webinar Slide — Meet Customers Where They Are

Of course, the paradigm is being changed a bit by what Tesla and Carvana are doing, but largely, if you’re car shopping, you would browse about the car, the features, and then actually go to a store to take a test drive. There has to be consistent messaging between the web and store experience. Then voice is very popular in the telecom business.

You hear about the T-Mobile or AT&T plans, but eventually you call the contact center to say, "Hey, you know what? Maybe you could throw in a free Netflix subscription for me. Maybe I could get a free headset, or whatever." Typically, we've seen most of those buying experiences end up in the contact center.

Look at a different industry of direct marketing, such as a Mary Kay or an MV, where events are important. You have ladies going to parties, talking about the latest products they've heard about or seen. Then, the men go to events, talking about the new protein shake on the market. That's why it's extremely important for brands to have a consistent strategy across all of these channels. 

Tech Mahindra has made some good acquisitions in all these spaces. For example, on the web, we've acquired a company called the BORN Group, which is the best digital agency around with UI, UX content, and creative. We've made relevant acquisitions in the voice space, the contact center. We've done events like FIFA, we're participating in the ICC. We've invested into packaging, acquiring a company called Pininfarina, which has done the entire paradigm of how to evolve the best of breed and the latest thoughts around packaging. A lot of relevant services, and what you pick and the strategy around that is relevant for retailers and consumer goods companies.

Denman: You mentioned there's 15, maybe up to 17 channels or key channels, that we could pinpoint right now off the top of your tongue. Obviously, with so many different channels, there's a lot of different data being collected. How do retailers turn this great data into something they can actually use?

Singh: At every service, or channel, there is data that gets produced and looked at from a global perspective. We talk about the globe in longitudes and latitudes — the Equator, Tropic of Cancer, Tropic of Capricorn — that gives you the entire perspective of the goal. A similar logic applies when looking at data. When you go to the web and buy a product, you have the first name, last name, email ID, where the customer lives, those are what I call the longitudinal data parameters. 

You make a phone call, you leave a longitudinal footprint of your data. You go to an event, register yourself —again, you leave a longitudinal footprint of some data. Where the story gets completed is the latitudinal aspect, which is the preference. Does the customer buy high value items in-store and low value items on the web? What has been the buying behavior? What have they bought for the family, etc.? 

“All those come in the paradigm of preferences and when you link the latitude and longitudinal aspects together, you have a complete 360-degree view.”
— Maninder Singh, Business Head, Retail & CPG Vertical, Tech Mahindra

There was an interesting conversation I had once with an airline customer where they said, "Who's more important to me as a client?" For example, I fly United. Being a global services customer is important because they know I make four trips a year on business class and give $20,000 of revenue. Or should they focus on somebody like John Doe who makes 20 trips in economy class. 

Who's more important? Then they realize that John Doe, who made 20 trips on economy, actually makes a lot of collateral and ancillary purchases — he rents a car, buys something on the flight, buys the internet, and books a hotel from us.

There's no right or wrong answer. I'm offering a paradigm of how the data can be involved looking into two customers. For all you know, it may turn out, depending on the situation, that John Doe is more important in terms of the customer lifetime value. On an average, from a study conducted by Gartner, there are more than 22 MarTech platforms that different companies use.

With the rise of social media, mobile commerce, and so on, how do we make sense and get a 360-degree view of the customers? We've invested in a company, Factorial, which is a scalable extensible and highly configurable cloud-based engagement platform. It integrates all these digital channels, helps make real-time data-driven business decisions to maximize the ROI and heighten the overall customer experience.

Interestingly, for all the football fans, we did a fan engagement automation solution for Jacksonville Jaguars in the U.S. Statistically, we increased about 200% of engagement rates by putting all the data together around what services the customers touch and obtaining a unified view.

Denman: Following up on the idea of the John Doe customer versus the known customer — this is probably the most obvious thing that we're going to say today, but building loyalty, whether it's known loyalty or not, is key to building increased customer lifetime value. No one would argue with that. A loyal shopper is a profitable shopper. 

To uncover just how powerful a loyalty program is, and can be, when looking to maximize customer profitability, we asked survey respondents a group of questions on the current loyalty efforts and behavior of loyalty members. About three quarters reported they have some form of a loyalty program, and of those that offer a formalized program, one-third reported that more than half of their customers are members of that program.

By offering loyalty programs, retailers gain valuable data — we talked about shopper behavior and purchase trends both in-store and out. What's more, as members of a retailer's loyalty program, they're more loyal and active shoppers. Nearly half of those surveyed report that 60% or more of loyalty members have made a purchase in the past three months.

It's clear that loyalty members are active shoppers and are likely a retailer's most profitable and frequent consumers. A top priority for retailers that offer a loyalty program is to convert casual shoppers into loyalty members. How could they best do that?

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Webinar Slide — Building Meaningful Loyalty
Webinar Slide — Building Meaningful Loyalty

Singh: There's an age old saying that says: satisfaction is just a rating, loyalty is a brand, and loyal customers don't just simply come back, they come back with friends and families. We’ve all experienced this. Especially in the e-commerce world, there are numbers and formulas that can be used to get the health of the store with respect to the visitor account, foot traffic, and the average auto value. 

For the last two days I've been talking with clients about conversion rates. Of course, these are important indicative parameters to gain valuable insights, but there's one metric around the customer lifetime value, which outweighs all of the rest: The conceptualization around the customer lifetime value as a counterpoint to the cost to acquire a customer. A lot of businesses fail because they overinvest in the initial transaction to acquire a customer and neglect the relationship that comes afterward. 

To your point, Tim, it is programs like loyalty. Some loyalty programs suck to an extent that you walk into a store and keep playing around with the app, get a coupon, or a voucher. Finally, you give up because they are not built to provide that experience.

Increasingly, our clients have invested in that because the business model fails when the cost to acquire a customer exceeds the customer lifetime value. Whereas a well-balanced business model would require the cost of acquisition to be significantly less than the customer lifetime value. To give an example in terms of dollars, if it costs $60 to acquire a customer, and over the lifetime they just spend about $40, as a retailer or a CG company that’s a problem. However, if it costs $60 to acquire a customer and they spend $150-200, then you are good. 

That's where loyalty programs play a good role. 

“A loyalty program should actually glue you across all 15 of these services. It can cost anywhere between five to 25 times more to acquire a new customer than to retain an existing customer. We've all seen good, bad, and terrible examples of how the loyalty platforms are built.”
— Maninder Singh, Business Head, Retail & CPG Vertical, Tech Mahindra

Tech Mahindra has invested over the last few years into a loyalty platform called Mobility, which is a centralized SaaS-based platform for loyalty and reward-based engagements. It goes across multiple industries. Relevant to retail and CPG, we've worked with one of the largest consumer goods brands — a major player in the cookies and chocolates segment — to help increase the sales of nine chocolate brands through this platform. It’s there. Every day I see clients investing heavily in building a robust loyalty program.

Denman: You mentioned earlier — in rather colorful language — that most loyalty programs aren’t very great, don't operate as they should, and are just there. What can retailers do to turn those run-of-the-mill loyalty experiences? Or even transform a subpar experience into a shining star, something they can hang their hat on? What can they do to increase the power of the program?

Singh: It depends on what covering the loyalty program is. Have you taken the pains to look into what a customer journey is? A customer journey for me would be very different from a 15-year-old shopper or a 65-year-old shopper — even if you only consider the services that we touch. A 65-year-old shopper may touch one, two, or three services, whereas these kids who are spending so much time on mobile phones will touch a lot of other services. The idea is to take a step back and define various personas of the client. The persona of a kid walking into the store, or a 30- to 60-year-old woman walking into a store to a man with a different demographic.

“It's important to first do the journey personas of the variations of your prospects for whom you want to convert into clients, and then build the loyalty program considering all those aspects.”
— Maninder Singh, Business Head, Retail & CPG Vertical, Tech Mahindra

For a large retail pharmacy chain, I myself have walked into stores and even the retail folks on the shop floor are frustrated at how the loyalty program is built. If the app doesn't work in the store, what does the customer do, they go directly to an associate. If the associate is not well-trained to answer the question, it not only leads to customer dissatisfaction, but it also leads to employee attrition. 

It's a very deep, endless pit that the store falls into. Hence, a persona-based approach to loyalty is extremely important. The UI and UX that goes with it are extremely important. Most importantly, it should also tie down to how you make sense of how the customer is engaging, and the data that is produced to make insightful decisions.

Denman: As we discussed, the loyalty program provides a lot of data that retailers are able to leverage for many different things. One being personalization. Increasingly, customers are demanding a personalized, very tailored experience, and are willing to provide retailers access to some of their data, shopping history, and behavior if the end result is a more streamlined, enjoyable experience. 

We asked retailers what percentage of customers they plan to engage with on a personalized level over the next three years. To no surprise, they have big plans for personalization with more than 80% reporting that they will be personalizing the shopping experience for at least 20% of customers. A more striking statistic is that 25% of retailers plan to personalize the path to purchase for 70% or more of their customers.

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Webinar Slide — Personalization
Webinar Slide — Personalization

Of the real power users, 10% plan to provide a tailored experience for 90%, which is an impressive goal. Are they personalizing this experience? As you can imagine, "personalization" can mean a lot of different things: product personalization, a personalized experience, personalized service. The most popular retailers are "personalizing" interactions with shoppers in the marketing and promotions arena, which isn't a surprise to anyone. 

Maninder, personalization is much more than a buzzword. It's a vital piece of the path to purchase from both a product and experience perspective. Can you talk a bit on how your clients are leveraging personalization to improve customer lifetime value?

Singh: Personalization, quite frankly, is not a choice anymore. It's the need of the hour for all major brands in the pursuit of enhancing the customer lifetime value. We've talked about certain statistics for us to understand. I'd like to answer further by relating my experience to various stages of buying experience. The first being driving traffic and awareness, which is pre-visit. 

Whole Foods, for example, wanted to build brand awareness, drive traffic to new locations, and especially attract new customers who aren’t too savvy about organic, eating healthy, and all those new paradigms. That became a key element of the pre-visit strategy, and the company deployed geofence notifications to drive store visits when a customer was either near a Whole Food store or at a competitor store. Roughly 10% of those who engaged with the notification did visit a store.

Now, 10% is a small number, but when you look at the absolute universe of where that 10% is belonging to, which is quite frankly, three times more than the industry average of a post-click conversion. Driving traffic to stores via retailers apps is a relatively untapped opportunity. 

“Through the Mobility platform that Tech Mahindra has, we are empowering some of the retailers to have that post-click conversion success through these geofence notifications. That's one aspect of what you do in terms of the pre-visit.”
— Maninder Singh, Business Head, Retail & CPG Vertical, Tech Mahindra

Now, converting them during the visit. The other day my daughter wanted to have a McDonald's ice cream sundae, but there was a long line. The line actually prompted me to download the McDonald's app so that I could quickly place an order, then just walk in, and collect the order. I realized that I had read something that McDonald's identified increasing order size as a core element of the strategy. If you just want an ice cream sundae, how can you drive more sales by integrating the physical and digital worlds at its drive-through facilities?

It implemented a decision engine: What did you order last time through the app? Did you order the fries that we recommended while you were still browsing through? What are some of the items in McDonald's that are trending for that day, location, or weather? All efforts have been made to make the ordering experience a lot easier. It drives stronger conversion, and ultimately increases the basket size, which eventually leads to more revenue.

 Again, that’s a personalization strategy, which increases bucket size during the visit. Then, of course, what do you do post-visit? That's where the aspect of loyalty comes in — you have to be constantly engaged with the client. 

Take Sephora for example. Sephora's strategy to increase its customer base led the company to make efforts to increase store visits in terms of post-visit surveys or sending notifications that could be tailored to customer communication preferences. If you know that when you go through a loyalty app, they'll ask you to select what communication preferences you would like or dislike? 

Depending on what the client has selected, you essentially push coupons, vouchers, new products that come into the market, etc. The whole idea is that you always keep the retailers top-of-mind. The age old saying says, “out of sight and out of mind.” These things post-visit have a personalization impact that leads to more customer engagement and of course, more customer loyalty. 

Denman: As a key piece of our research here, we asked retailers to provide their current maturity on a select group of technologies that are designed to improve and enhance the summer experience and customer engagement. Current investment is focused on loyalty tracking, including email personalization and personalized offers with about one-third of respondents reporting they are in the midst of an upgrade of one of those three pieces. 

“Over the next 12 months, personalized offers will continue to be an important investment area along with interactive signage and AI recommendation engines.”
— Tim Denman, Editor-in-Chief, CGT & RIS

We stretch that timeline out to two years. Again, digital signage is there, live chat makes an appearance, and AI recommendation engine is there again also. Around one in five report plans to make significant investments to do digital signage, live chats and AI. 

Maninder, is there anything surprising about this data? There are quite a few emerging technologies, such as augmented reality, facial recognition, image shirts, and object recognition. There are very few, and in some cases none, of the retailers surveyed that have this technology, or at least up-to-date technology in place. What do you make of that?

Singh: Just before this I was on a webinar about metaverse. We all have been hearing about that — where you create an avatar of what you do in your real life. Gamification. We've heard how Facebook has invested tons and tons into this next wave of the metaverse and a lot of things in this survey reflect that. 

A friend in Europe had placed an order online, went into the store and they've been given lockers to make the experience very touchless. They’ve captured some image recognition of that person, and so, he walks into the store, goes to the locker where it's a touchless experience, the image was recognized, the locker opened up, and he collected his order and left.

We see a lot of these things happening. With the advent of 5G, a lot of the use cases, which were previously not possible because of low latency, are now possible. We are talking to apparel clients who want to roll out the concepts of smart mirrors. You don't have to wait in long lines anymore to get into a fitting room. You can pick up a shirt, scan the barcode on the shirt, and suddenly see yourself wearing that shirt. The best thing is you can see yourself wearing the shirt in different colors. Those are things that are happening in retail using a lot of these newer technologies.

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Webinar Slide — Customer Experience and Engagement
Webinar Slide — Customer Experience and Engagement

In today's uncertain times, you can see the world around us getting recalibrated. Especially the post-pandemic era where the industries at the forefront of these paradigm shifts, where consumer preferences are changing overnight.

With the rise of e-commerce, companies are exploring various engagement models such as BOPIS, curbside pickup, complete online, complete offline, where stores are more of an experience center or fulfillment center, and many more to enhance the overall customer experience. 

We are seeing the rise of D2C, personal experiences, the AI/ML-driven conversation experiences, and so on. Tech Mahindra itself has a lot of expertise around creating these experiences for our clients. Every day I'm involved in creating some kind of a POC around some of these.

The customers are curious to ask what the whole paradigm of metaverse can offer. How can we use virtual reality, augmented reality? The other day I saw a partner product where somebody could walk into an Abercrombie website and actually see themselves wearing a glass, piece of jewelry, or piece of cloth on them.

You can imagine the immersive experience, image recognition, and the whole aspect of AI/ML that goes into building something like that. That's the future of the stores, and the stores who do not adapt to that, it’s very sad to see. 

On the West Coast, our friends in the Bay Area would know about the fries. It was highly publicized unfortunately, the last store that closed down, because they had that entire model that was just based on a store footfall experience and then capitalized on what the other services that we talked earlier could capitalize. It’s sad to see them not around anymore. 

“The retailers who would look into some of these emerging technologies that you've seen will be the ones who will be successful going forward.”
— Maninder Singh, Business Head, Retail & CPG Vertical, Tech Mahindra

Denman: Maninder, do you have any examples of using data to measure the cost of serving customers as a factor to prioritize who you go after? Does customer lifetime value take into consideration these operating costs?

Singh: That also goes back to my earlier point, what is your strategy across the 15 services or channels? We've got advertising companies like Dentsu, which will give you a lot of data around the cost of acquiring a customer or serving a customer across some of the traditional advertising channels like broadcasting, radio broadcasting, or billboards, etc.? 

With these new services being involved right now, how does the strategy shift? In my portion, I have been on a project for Turner where they were trying to understand how best to acquire a customer through some of the digital channels and whether you call the Google ads or the Bing ads? And now I think yeah, we have a lot of tools on platforms available, which not just gives you data around how to acquire a customer and serve the customer through some of the traditional earlier media channels, but now across these new services.

That is something being tracked. And like I said different brands could then take a stab at, "Hey, you know what? Out of these 15 services or channels, these 10 don't really work for me." Right? "Even these five are where I need to spend my budgets." So, yeah. So there are increasingly the brand guys and the marketing guys doing that analysis day in and day out and giving relevant inputs to the budget team to see where they spend dollars.

Denman: That puts a bow on everything and brings it back to the original point of the 15 services. Thank you, Maninder for joining us, we appreciate your insight. Thank everyone for joining in and listening, and a big thank you to Tech Mahindra, our sponsor of not only this webinar, but also the research that we conducted. Have a great day.

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