The critical role of omnichannel customer loyalty in modern retail success

Building and maintaining a loyal customer base is critical to the long-term success of retail. This is especially true in today’s multichannel digital shopping space that now even includes hybrid brick-and-mortar “smart stores.”

Retail predictions recently released in a worldwide study by IDC strongly indicate that by 2024, 40% of retailers will adopt a multilevel loyalty strategy. To do so, they will leverage a “unified view” (think omnichannel) of the customer experience to increase retention rate by 20% and Net Promoter Score (NPS) by 35%.

Given that the retail landscape is continuously evolving with growing competition and economic uncertainty, retail customers are now more inclined than ever to switch brands. That is, unless they are given a bona fide reason to perpetually engage with a preferred brand through a relevant loyalty program that is tightly integrated with a more seamless and personalized omnichannel customer experience.

Moreover, the success of a customer loyalty strategy—carefully interwoven with an omnichannel experience—hinges on a retailer’s ability to collect first-party customer data. This data, a critical asset for any retailer, can then be leveraged to accurately predict consumer shopping behavior and habits while gleaning valuable data-driven insights for growing a retail/ecommerce brand.

Today, loyalty programs are proving vital in the collection of customer data that includes:

• Purchasing habits
• Buying frequency
• Preferred shopping channels
• Point usage rates
• Demographics
• Location
• Attitudes and behaviors

The primary driver and linchpin behind all of this relies on the sophisticated use of complex and evolving technology. Retailers who are successfully building and maintaining best-in-class customer loyalty programs—seamlessly connected to unified, omnichannel experiences—are now investing at a massive scale in digital transformation efforts.

Leslie Hand, group vice president at IDC Retail and Financial Insights, said “We are in the middle of a customer-led, technology-enabled revolution in retail.” This means that ecommerce and emerging smart stores (digital inside of physical) are now transforming at the “speed of digital” using cloud-based and AI/ML technologies with sensor-driven automation. AI/ML technology is even being used by retailers to determine the most effective customer loyalty schemes to implement while forecasting how they would perform in terms of sales/revenue. This can be done with or without segmentation methods.

This post will emphasize the importance of establishing outstanding customer loyalty programs in a digital retail environment and why they should be tightly integrated with an exceptional omnichannel experience powered by technology featuring AI/ML.

In addition, some of the revolutionary tech being used by retailers today will be covered with a specific focus on cloud-based services offered by Amazon Web Services (AWS) and JBS Dev. JBS Dev is an AWS Retail Competency Partner with many years of architecture and implementation experience in the retail/ecommerce space.

Customer Loyalty in Today’s Digital Shopping Environment

So, why is building and maintaining customer loyalty critical to retailers, especially in today’s digital shopping environment where consumers can easily switch brands with just a few mouse clicks or swipes on a mobile device? Well, the following numbers can explain why—

A study conducted by Bain & Company along with the Harvard Business School analyzed the costs and revenues derived from serving customers over their entire purchasing life cycle. They concluded that increasing customer retention rates by 5% increases profits by 25% to 95%.

An article that appeared in Forbes on the value of investing in loyal customers noted that new customer acquisition costs have increased by nearly 50% in the past several years. However, existing customers spend 31% more, on average, compared to new customers. Moreover, loyal customers not only spend more at a brand they trust, but they are also more likely to advocate for that brand bringing in new customers from referrals to family and friends (without incurring a new customer acquisition cost).

Likewise, a study on global loyalty conducted by Bond with a sample of 50,000 consumers across 15 industry sectors found that good loyalty programs continue to heavily influence customer advocacy, retention, and spend. Once loyal, 77% of customers are more likely to stay with the brand and 70% indicated they would be more likely to recommend the brand.

While there are many ways to structure a good customer loyalty program (both free and paid memberships), one very effective way to drive loyalty can be through membership only pricing in exchange for access to valuable customer data. For example, UK supermarket retailers, such as Tesco and Sainsbury’s, offer discounted prices—both in-store and online—through loyalty membership programs that turn customer data into a critical asset for them, largely through the help of technology. The more data these retailers collect, the better they can drive consumer behavior. Armed with consumer data, retailers such as these are able to match individual preferences while crafting more personalized and positive customer experiences. As a result, 80% of Tesco’s total sales now come from customers enrolled in their loyalty membership program.

If retailers in digital and physical spaces (or both) need any more convincing on why customer loyalty really matters, the results of a recent McKinsey & Company Loyalty Survey should rest the case:

• 3 out of 4 members of top-performing loyalty programs changed their behavior to generate more value for businesses
• 64% of members are more likely to purchase more frequently
• 50% are more likely to recommend to others
• 35% are more likely to choose brand over competitors
• 31% are more willing to pay a higher price to stay with a brand

Building Customer Loyalty Through Omnichannel Experiences

Retail customers, especially the most loyal ones, are increasingly moving across all channels or touchpoints of a brand to get what they want. These touchpoints include physical stores and an array of digital spaces—web, social media, emails, apps, and SMS to name a few.

Another channel gaining considerable traction consists of emerging smart stores like Amazon Fresh and Amazon Go, each featuring some of the world’s most advanced shopping tech. These smart stores—a hybrid of both physical and digital—use smart technology consisting of Computer Vision, smart shelves, smart carts, and smart scales that allow shoppers to buy products by putting them into a cart and walking out the exit without ever going through a cashier. Smart stores even allow retailers to more easily fulfill digital orders of customers at their physical stores using “buy online, pick-up in-store” (BOPIS).

Given all these touchpoints, savvy retailers are now implementing omnichannel strategies by providing a seamless and unified shopping experience in brick-and-mortar stores as well as through a host of digital channels. By doing so, these retailers aim to differentiate their brands from competitors while gaining a competitive advantage over online-only retailers by leveraging their physical store assets.

Studies have consistently shown that omnichannel shoppers are more valuable to retailers. For example, one study of 46,000 shoppers conducted by the Harvard Business Review (HBR) that focused on every aspect of the shopping journey found that 73% of the shoppers used multiple channels during their shopping experience (both digital and physical stores). HBR aptly stated:

Our findings showed that omnichannel customers loved using the retailer’s touchpoints, in all sorts of combinations and places. Not only did they use smartphone apps to compare prices or download a coupon, but they were also avid users of in-store digital tools such as an interactive catalog, a price-checker, or a tablet. They bought online and picked-up in store, or bought in the store and got their purchases shipped.

This same study also found that the more channels customers use, the more valuable they are:

• Omnichannel customers spent an average of 4% more on every shopping occasion in a store
• They spent 10% more online than single-channel customers and with every additional channel used, shoppers spent more money in the store

Most importantly, this research found that in addition to having bigger shopping baskets, omnichannel shoppers were also more loyal:

Within six months after an omnichannel shopping experience, these customers had logged 23% more repeat shopping trips to the retailer’s stores and were more likely to recommend the brand to family and friends than those who used a single channel.

A key takeaway here is that loyalty no longer stands alone but integrates with the entire customer experience across all of a brand’s touchpoints. The confluence of the two have given rise to omnichannel loyalty programs where retailers ensure that their omnichannel marketing strategies align well with their customer loyalty programs across all of a brand’s touchpoints. This results in a loyalty reward experience that is more seamless, personalized, and exciting for customers. It incentivizes loyal customers to engage even more with the brand and provide valuable data in the process. All of which is driven by sophisticated and revolutionary technology that is now increasingly using AI/ML.

Driving Omnichannel Loyalty with Revolutionary Technology

When it comes to omnichannel loyalty, the more data a retailer collects, the more effective a retailer becomes at understanding how the most loyal customers behave. It allows for personalization of the customer journey by catering to individual preferences and opening opportunities for upselling.

Retailers in both digital and physical spaces are now harnessing technology, particularly AI/ML models, to develop omnichannel loyalty strategies for enhancing customer interactions and engagement. With the recent democratization of these models using tools such as Amazon Bedrock, this technology is ushering in a new era of using data to create seamless and personalized customer interactions across various touchpoints. AI/ML technology enhances omnichannel loyalty strategies with:

• Predictive analytics
• Real-time decision-making
• Better customer sentiment analysis

Amazon Web Services (AWS) and its solution partner, JBS Dev, are making this revolutionary technology a reality for retailers that wish to elevate their omnichannel loyalty strategies. JBS Dev is building generative AI solutions for its retail customers that significantly impacts marketing, customer service, and the customer experience.

Here is just a sample of the many serverless tools and cloud services being used today that make these strategies much more accessible and cost-effective for retailers.

With Amazon Personalize, a retailer can deliver the right customer experience at the right time with a fully managed machine learning (ML) service that uses data to generate item recommendations for users to increase average cart size.

Amazon QuickSight Q lets retailers ask questions, in natural language, about their data and receive accurate answers with relevant visualizations. Along with this, Amazon QuickSight powers data-driven retailers with unified business intelligence at hyperscale to meet an array of analytical needs. With these tools, retailers can easily generate data-driven insights about their customers and shopping habits.

To easily build generative AI applications for retail, Amazon Bedrock offers quick access to high-performing foundational models (FMs) from leading AI companies via a single API.

Amazon SageMaker, a cloud-based ML platform enables developers to create, train, and deploy machine-learning models for retailers. Retailers can also easily consolidate and integrate their customer data gathered through various channels into a single service with AWS Glue.

Retailers can also scale their operations by forecasting millions of items using the same technology as Amazon.com with Amazon Forecast. This cloud-based time-series forecasting service allows retailers to optimize inventory and reduce waste with accurate forecasts down to the granular level. It helps retailers to improve capital utilization and workforce planning while making long-term decisions with more confidence.

Lastly, AWS Lambda, an event-driven, serverless computing platform for running custom code can easily provide an array of online triggers for retailers when it comes to orchestrating omnichannel loyalty programs for customers.

Conclusion

When it comes to omnichannel loyalty, technology—particularly AI/ML—is the key to unlocking value for retailers in both physical and digital spaces. Through instant processing of data, where everything is a piece of the puzzle, retailers can create connected and interactive experiences for their most loyal customers along every step of the shopping journey at all of a brand’s touchpoints.

AWS and partners such as JBS Dev play a huge role today in lowering the barrier of entry for retailers. They do so by making revolutionary technology available on a much wider scale than ever before. AI and ML tools are even being used by developers and builders to generate code more efficiently and cost effectively for these retail loyalty solutions.

The ability to put together pipelines of these tools and services that synergize with each other has democratized the playing field. With this tech, retailers are now light-years ahead of where they used to be when it comes to building robust omnichannel loyalty solutions capable of connecting all critical points of data together.

For more details on how JBS Dev delivers leading-edge loyalty solutions for retail businesses, visit the website. If you’re going to the National Retail Federation (NRF) Conference, January 14 – 15, 2024, visit the JBS Dev team at the AWS booth 6020 to learn more.

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JBS Dev, an AWS Retail Competency Partner, has been delivering leading-edge software and application-based solutions for retail clients for over 20 years to support proprietary business models and innovative technological solutions.