A Framework for Driving Omnichannel Loyalty

Talking about omnichannel is very fashionable for retailers nowadays. At a high level, the concepts behind providing great customer experience across channels are easy to understand. However, those in the business know that executing on a great omnichannel strategy is pretty challenging. Omnichannel retailers are acutely aware of three key trends that are heavily influencing the industry today:

• Showrooming: For some retailers, it's the bane of their existence. For others, it's just a mild annoyance. Either way, it's an undeniable phenomenon that's been covered heavily in the press.
• Increased acquisition costs: It's becoming increasingly expensive to acquire loyal customers across all channels. For example, daily deals were pitched as a compelling acquisition tool, but for many retailers they've proven to be high cost and ineffective at bringing in profitable and loyal customers.
• High customer expectations: Omnichannel customers have come to expect a great overall cross-channel experience. According to a recent eMarketer survey, 34 percent of survey respondents say 24/7 customer service is the most important attribute of a great retail experience. Furthermore, 20 percent of survey respondents say that being rewarded for purchases, feedback and referrals is most important to them.

Given these trends, now more than ever, it's critical that retailers invest in and focus on building a loyal customer base.

How is Omnichannel Changing the Game?
For retailers, omnichannel means that the number of customer engagement touchpoints has dramatically increased. Just a few years ago, it was sufficient to interact with customers in-store as well as via an e-commerce website accessed through a PC. Nowadays, retailers must effectively communicate across a myriad of channels, including PCs, tablets, smartphones, in-store, etc. The mediums include website interaction, email, text message and good old-fashioned face-to-face discussions with store associates.

Due to the proliferation of personalization and CRM technologies, customers have come to expect brands to know who they are, what they purchased and their channel preferences for interaction. For many retailers, implementing an overarching omnichannel strategy has revealed a key pain point: siloed data. Many retailers have a heterogeneous set of vendors across e-commerce, point of sale, email service provider, CRM and customer support systems. These systems were deployed at different stages of the company's life, and over time they've grown to be silos of data that are difficult to integrate for the purpose of providing a single view of the customer. The bottom line: Executing an omnichannel strategy puts an increased strain on your whole team, especially marketing and IT.

What Does This Mean to You as a Retailer?
Given that omnichannel is hard, there's a huge opportunity for retailers who get it right. According to a Deloitte study, omnichannel customers spend 93 percent more per transaction than customers that only shop online. Similarly, omnichannel customers spend 208 percent more per transaction than those that only purchase in-store.

Similarly, the Deloitte study found that customers who engaged with the brand in certain ways were more valuable than those that didn't engage in a particular behavior. For example, customers who visited a retailer's mobile website spent 59 percent more than customers who did not. Customers who "liked" a retailer on Facebook spent 44 percent more than customers who did not. So what's next? Here's a framework to help you develop a strategy for increasing omnichannel loyalty.

1. Understand your customers. Decide how you'd like to segment your customers, then develop an understanding for key characteristics of that segment. You'll want to analyze purchase behavior within a segment, including metrics such as frequency, average order value and which channels they're purchasing from. In addition, you'll want to understand how those customers are interacting with you across various channels.

2. Develop hypotheses for behaviors that will lead to increased monetization. Once you understand your customers, it's time to develop hypotheses on how to increase monetization of them in a specific segment. Let's say that you've decided you want to target purchasers in a middle decile, as defined by lifetime value. Based on your understanding of your customers, you've found that customers in the next higher decile are more engaged in the form of writing product reviews. Therefore, you develop a cause-and-effect hypothesis that if you can get a middle decile customer to write more reviews, they'll be more highly engaged and, therefore, spend more money and move up to the higher decile.

3. Incentivize behaviors to achieve results. Once you've decided on your hypothesis, a loyalty program can be used to incentivize a specific engagement activity. Continuing the example above, you can test your cause-and-effect hypothesis by rewarding customers for writing a review. Once you've set up the incentives, it's important to review results to see if your hypothesis was correct.

Omnichannel retail and the challenges that it presents are real phenomena that you need to tackle head on. Take a hard look at your customer loyalty strategy because what you'll quickly realize is that you have a lot of untapped ideas on how to increase loyalty, and ultimately revenue, across numerous customer segments. A modern loyalty program can help you execute on those ideas in a cost effective and agile manner.
David Louie is the director of products for 500friends, a loyalty marketing platform for retailers.