Depth of customer loyalty is driven by product quality coupled with how successfully the engagement with the customer is executed, according to the November 2013 Nielsen report, “How Loyal Are Your Customers?” which was derived from the Nielsen Global Survey of Loyalty Sentiment in which 29,000 Internet respondents from 58 countries participated. Nielsen’s global survey noted loyalty to be fickle, especially when competitors appear with product, promotions and technological infrastructure that not only catch the customer’s eye but also engage the customer with the least amount of technological friction.

“There is a strong link between the way consumers describe their loyalty habits and the way they subsequently buy — so even comparatively small shifts in what consumers say can manifest in big changes in what they do,” said Julie Currie, senior vice president of global loyalty at Nielsen, in comments about the survey’s findings. Approximately 84 percent of survey respondents indicated a strong preference to choose a retailer with a loyalty program over a competitor without one. The data points toward the efficacy of having a customer loyalty program over not having one. The vagaries of how customer relationship management (CRM) solutions are implemented is where the differentiation between brands takes place. Membership in the loyalty program does not guarantee loyalty, of course, but it does open the door for companies to earn the customer’s loyalty at every encounter.

This does beg the questions, “How are you going to engage with the customer when they are not standing in front of you?” and “How are you going to use the customer data derived from the engagement?” These two questions are not as simple as they may appear.

Use of Data

Information technology infrastructure capable of handling a robust influx of data is paramount. Data may come via a myriad of sources, including marketing, manufacturing, fulfillment, sales and support. Customers in 2013 are likely to be well versed in digital engagement and will be in search of a frictionless experience. The challenge for the IT decision makers at midsize firms is to ensure that infrastructure is interconnecting all internal entities. Most importantly, it enables the company to avoid fragmentation of effort and to speak with one voice. Furthermore, it means having in place the technology to support personalized engagement oriented to the touch points between the customer and the company.

Engagement

The customer may engage via social networks, a help line or loyalty program portals. In each case, the customer is choosing the manner in which it is most convenient to engage. IT leadership, especially in midsize businesses, is accountable for ensuring infrastructure is adequate to the task. If the infrastructure is not sufficiently integrated to allow the instant engagement to roll up to a customer service screen, then the customer experience will be fraught with potential disconnects. This is especially important for those small and medium businesses (SMBs) that may have a local physical presence as well as a far-reaching virtual presence. Capturing the interaction on both planes, the physical and virtual, allows SMBs a level of dexterity to make real-time adjustments to their customer interaction based on engagement data.

The loyalty program’s connectivity with the company’s social networks permits direct marketing and early warning to support staff in the event of a product failure. Moreover, there is no better way to engender word-of-mouth activity than personalization of the customer engagement via the social networks. The integration of social network engagement with the other areas of the company requires infrastructure concordance. The Nielsen report indicated that 75 percent of respondents expected loyalty programs to provide perks, such as free products, with 82 percent in the North American market expecting discounts or other money-saving offers from the loyalty program. SMBs have the ability to engage their customers on the fly, making adjustments as necessary based on sales, social media network sentiment, volume and engagement, thus keeping their loyal customers loyal.

Are Loyalty Programs for You?

Not all loyalty programs prove successful, and customer engagement comes in many flavors. As noted in Time, a number of brands within the supermarket vertical have shuttered their customer loyalty programs, which have a total of more than 172 million participants. They found that it was a more effective strategy to address the customer set at the neighborhood level instead of the individual level. Does that mean that they stopped engaging their customers? Not in the least.

SMBs that make the investment in customer engagement that provides customers with useful information and that enhances their experience will be best positioned to win the customer loyalty sweepstakes.

This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet.