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Business Unplugged™
This blog features Carol Roth's tough love on business and entrepreneurship, as well as insights from Carol's community of contributors.

Customer Loyalty 3.0: The Future of Customer Engagement

Written By: Carol Roth | No Comments

I have been talking a lot about the concept I have coined as “Loyalty 3.0” and wanted to provide a bit more background on what Loyalty 3.0 is

With customers having so many different options to choose from for goods and services, developing long-term loyal customers is critical for brands and customers.  Not only is it easier to sell more things to customers that already love you, but raving fans will tell other customers about your brand or company.  When you factor in the expense of trying to reach new customers and the high lifetime value of each individual customer, loyalty needs to be a top priority for every business.

However, many companies have approached this effort in very much the wrong way and are stuck in old-school, ineffective loyalty approaches.  It is critical for companies that want to develop long-lasting customers and raving fans to start coming around to what I call Loyalty 3.0.

But to understand Loyalty 3.0, you need a better understanding of where we have been.

Loyalty 1.0 was where companies believed that by rewarding the customers that spent the most with them, they were creating loyalty.  This came in programs like points-per-dollar spent or buy 9, get one free cards.  In fact, many companies are still stuck in this trap, which looks an awful lot like bribery.

There are several problems with 1.0.  It:

-Creates loyalty to the program, not the brand or company; you are only as effective as your offer;
-Creates another form of price competition; buy 9 and get one free is akin to a 10% discount across the board; and
-Only rewards the “spenders”- customers are only considered as important as their last set of purchases.

Loyalty 2.0 evolved in the form of social media where brands realized that it was not just the spenders who were important, but also the influencers (aka the senders) who indirectly accounted for sales through brand advocacy.

However, many companies approach 2.0 in the same way as 1.0.   Once they identified the senders, they employed the exact same strategy and tried to buy their attention and affection with swag.  This still doesn’t create loyalty.

Loyalty 3.0 is where we are headed (and yes, some companies have been doing this for a long time, but they are definitely in the minority).

This is where companies and brands engage both the senders and the spenders, by making them feel cared for and important.  It is a holistic approach which can be led with product functionality (think Apple), customer service (think Nordstrom), creating an experience or lifestyle association (think Harley Davidson) or even by creating a bridge to the customer with ancillary products, services, content or experiences that are important to the customer (think food companies with time saving recipes).

As you approach this new era of loyalty, key questions to ask yourself are:

-Do I know who my spenders and senders are?
-Am I listening to their dialogues to understand what is important to them and what easily fits into their lives?
-Am I demonstrating to them that they are important and that I care for them (as a brand or a company)?

These questions form the cornerstone for approaching Loyalty 3.0.

Article written by
Carol Roth is a national media personality, ‘recovering’ investment banker, investor, speaker and author of the New York Times bestselling book, The Entrepreneur Equation. She is a judge on the Mark Burnett (Shark Tank, The Voice, Survivor, The Apprentice) produced technology competition series, America's Greatest Makers, airing on TBS and Host of Microsoft's Office Small Business Academy show. Previously, Carol was the host and co-producer of The Noon Show, a current events talk show on WGN Radio, one of the top stations in the country, and a contributor to CNBC, as well as a frequent guest on Fox News, CNN, Fox Business and other stations. Carol's multimedia commentary covers business and the economy, current events, politics and pop culture topics. Carol has helped her clients complete more than $2 billion in capital raising and M&A transactions. She is a Top 100 Small Business Influencer (2011-2015) and has her own action figure. Twitter: @CarolJSRoth