How to Build Customer Loyalty Using Technology and Data

Relying too much on winning new clients can be a losing strategy when it comes to growth. According to recent research, customer acquisition costs have risen by about 60% for both B2B and B2C companies over the years. This trend is likely to continue due to increasing competition and brands investing in similar marketing tactics, among other reasons.

Building customer loyalty comes up as a powerful countermeasure to address this issue and lay the groundwork for expanding your business sustainably. Studies have shown that increasing customer retention rates by just 5% can boost profits by 25% to 95%.

Customer loyalty involves two essential components: the emotional connection and the technological infrastructure. The emotional aspect, often managed by your Customer Excellence team, focuses on building customer satisfaction and relationships. The technological side leverages digital tools and data to enhance and personalize customer interactions at scale.

In this article, we will:

• Introduce the idea of a customer-centric approach to business.
• Discuss ways to build and maintain customer loyalty.
• Touch on the challenges you may face in the process.
• Focus on the tech and data layer, supporting your other customer loyalty building efforts.

Start with a customer-centric approach 

Customer centricity is a business strategy that puts the client front and center of your company’s operations. It involves addressing individual needs and providing a high degree of personalization in both communication and the products or services you offer.

A client-centric approach is crucial for developing strong customer relationships and ultimately building customer loyalty, which enhances long-term profitability. The success of this strategy stands on the quality of customer-related data you collect and analyze. This includes understanding preferences, trends, demographics, and motivational factors.

With the phasing out of third-party cookies by Google, a process that started to accelerate in early 2024, businesses are pressed to develop new strategies for collecting and efficiently using zero-party data – information that customers willingly share with you. This shift necessitates a focus on gathering high-quality, direct customer data to maintain effective personalization and engagement.

In general, adopting a customer-centric approach rooted in quality data leads to increased customer retention and a healthy revenue stream. Let’s now discuss specific strategies to build customer loyalty.

Why is customer loyalty important?

According to a Sprout Social report, increasing loyalty is a top priority for 2 out of every 3 business leaders in 2024. The overarching goal of retaining customers to increase their lifetime value is clear, but how do you actually achieve this? Which areas should you focus on, what trends should you observe, and where should you direct your efforts?

Given the current global economic conditions, marked by inflation and geopolitical uncertainties, people are more conscious of their expenditures. This makes loyal customers, who spend 31% more on average than new customers, particularly valuable to your business.

Strategies to build customer loyalty

To tap into this potential, consider incorporating the following aspects into your loyalty marketing strategy. By leveraging technology and data, these strategies can be implemented more effectively, ensuring that your efforts yield the desired results.

Emotional approach

To truly build customer loyalty, you need to adopt an emotional approach. Customers seek more than just discounts – they desire a deeper connection with the brands they support. They want to feel understood, appreciated, and heard. If your brand resonates with their values and makes that connection, they are more likely to remain loyal. For instance, brands like TOMS have successfully created emotional bonds by sharing their commitment to social causes, leading to a loyal customer base.

Micro-segmentation and micro-targeting

Micro-segmentation and micro-targeting are essential for building customer loyalty. These strategies involve dividing your customer base into very small segments and tailoring your offerings to meet their specific needs and challenges. Understanding your customers is the first step to retaining them. By leveraging the data you collect to send relevant messages and deliver content through the right formats and channels, you can personalize your approach and create a better fit for each customer. This hyper-personalization makes customers feel valued and increases their loyalty to your brand.

Sustainability

Sustainability plays a significant role in fostering customer loyalty. As interest in environmental issues grows, green loyalty programs are becoming increasingly popular. Customers are more likely to favor sustainable brands because eco-friendly practices resonate with their values. For example, brands like Patagonia have built strong customer loyalty by emphasizing their commitment to environmental sustainability. Adopting a pro-eco stance can significantly enhance customer retention.

360 customer view

Having a 360-degree customer view is crucial for building loyalty. This approach involves using technologies and solutions that provide a comprehensive view of your customers, allowing you to collect valuable data points. By tracking when and why customers interact with your brand and recording all instances of engagement, you can gain original insights and new information. These insights are key to understanding your customers’ needs and behaviors, enabling you to tailor your offerings and interactions to retain them effectively.

Employing a cross-channel communication approach as a way to build brand loyalty

Using a cross-channel communication approach can significantly boost customer loyalty. Research shows that the more channels you use in your marketing strategy, the higher your purchase rates will be. To enhance customer engagement and loyalty, incorporate multiple channels, including online, offline, in-store, and digital. Experiment with channels you haven’t tried before to find the most effective combinations. Steady, data-driven communication is key to making your loyalty programs successful. 

Challenges in the loyalty marketing

1. Proper understanding of customer needs

Customer expectations usually require you having a deep understanding of their needs, making highly-personalized communication essential. This challenge underscores the importance of quality data, which provides the foundation for effective personalization. Invest in reliable data collection and analysis tools to gain insights into client preferences and behaviors.

2. Fitting communication

One common issue is delivering recommendations and communication that don’t quite fit the customer. Many customers feel that the personalization they encounter misses the mark, which can lead to disengagement. Identifying why this happens is crucial. Often, it’s due to incomplete or inaccurate data, or a failure to analyze and interpret the data correctly. Utilizing advanced analytics can help refine personalization efforts.

3. Focus on customer data

With the decline of third-party data sources, focusing on zero-party data and privacy has become both a trend and a challenge. You can no longer rely on external data providers and must develop strategies to collect quality data directly from customers without infringing on their privacy. This involves creating value exchanges where customers willingly share their information in return for personalized experiences.

4. Hyper-personalization

Hyper-personalization uses predictive analytics to tailor individual customer experience by anticipating needs and preferences. Techniques like predictive segmentation, which groups customers based on predicted behaviors, and micro-targeting, which delivers specific messages to well-defined audiences, are essential. These approaches work together to enhance marketing efforts by delivering the right content to the right people at the right time.

What’s next?

Attracting new customers is important, but working to keep them is crucial, especially for business models heavily reliant on repeat purchases, such as ecommerce, financial products and services, and supermarkets. In an era of rapid technological change, a customer-centric approach powered by quality data is essential for driving customer loyalty and brand advocacy.

Boosting brand loyalty requires efficient cross-channel communication. This is where MessageFlow excels, having successfully supported loyalty marketing efforts at multiple major retail and ecommerce businesses. Our platform allows you to personalize, engage, and retain customers more effectively. Use data from your campaigns to adjust and optimize your strategies, ensuring that customers stay with you for repeat business.