Some time ago my wife Nicole posted a small series of blogs about the topic of Loyalty on ciber.com. In these readable blogs she identified and summarised three main strategies of acquiring loyal customers, which are

• Every day low price
• Classic loyalty programs that base upon cash-back options or that are points based
• Hybrid models

To gain and retain loyal customers it is necessary for Retailers (or brands, or …) to get into a mutual engagement with the customers. In order to achieve this it needs something like a WOW!-factor. An important way to get this factor for Retailers is the usage of social media (or social CRM when being more advanced). Every day low price of course means plain ole price competition. No WOW!-factor whatsoever involved here. On top of that there can be only one competitor that actually has the lowest price. All the others go in from second place onwards. Given that, competition only on price is the surefire way to a Retailer’s death if the Retailer is not the one with the lowest price. Price competition kills margin, service levels, shopping experience, ability to gather and analyze more data on customers, as it needs an investment, which needs to be paid out of lowering margins. Every day low price works well for highly commoditized products and services, else it is dangerous. Customers will not see the real price of a good or service anymore but ask/search for a discount. It is extremely difficult to change this behavior once it shows up – and we consumers are already educated about the fact that the same product can come cheaper, so why pay the full price? How do Groupon or other, less known similar providers (like steals4all.com, an aggregator on Groupon, or 1-day.co.nz, to name but a few) fit into this – at various levels? Well, Groupon basically adds some WOW!-factor to price competition by adding a community feeling and some lottery atmosphere. But essentially Groupon is about low prices, which widely opens the road towards price competition, with all its risks. Having said that, Groupon has hit a nerve, as rising user numbers and soaring valuation show. There is a demand. Still it needs to be used wisely and as a part of a wider social strategy, or preferably by Retailers who follow low price strategies – with the caveat that Groupon, being a business, takes an additional part of the remaining margin for itself, of course. Leading Retailers who want to take real advantage of social environments (not social media, not social CRM) will get further. These Retailers will provide added value to their customers, be it via a consistent user experience in the different channels, ease of use, solutions to challenges that I, as a customer always have, co-creating it with their customers and so on. These Retailers will also successfully integrate their social media endeavours with their traditional CRM strategy and implementation, in order to learn and be able to act on the learning, to their customers benefits, which is the ultimate way to the Retailers’ nirvana. Mark Tamis , I and others have blogged about this before, so there is no real need to repeat possible value adding scenarios, but probably much scope to look into taking more advantage of value adding and possibly co-creation (I need to thank @grahamhill for a good discussion and links to this topic, which I still need to digest). Groupon and its likes are by far not the end of the road – merely only the beginning.

Brick-and-mortar retail businesses face a combination of ever-increasing customer expectations, customers being “educated” to expect and receive promotions, and of course an ever increasing competition in the market place for their customers’ share of mind and share of wallet. On top of all this they need to realize that they do not control the communication to their customers anymore, let alone being capable of controlling the communication in between their customers. As many bloggers, including myself, and analysts already stated, the advent of extremely user friendly and ubiquitous mobile devices and web applications essentially decoupled retailers from communications between their customers and even led to their marketing messages becoming part of the “background noise” for lots of consumers – just something one filters out when it comes to getting serious information. Of course there are exceptions, especially considering that retail businesses reacted to this threat. For retailers it is about being where the customers are. This started with setting up transactional web sites (web shops) to drive additional sales, using more and different ways to address customers, e.g. setting up and participating in communities, building fan pages on Facebook, Twitter streams, keeping in touch with exciting new services like Groupon, building capabilities to monitor and participate in discussions in forums, creating loyalty programs, and so on. Quite some of the challenges facing retailers have the potential of being disruptive to their business models. Take Groupon as an example: Groupon is the successful implementation of a scheme that shifts the power balance drastically to the buyer (consumer) side; the scheme is similar to the earlier development of retailer purchase organizations that intended to counter the power of their suppliers (e.g. the expert group). Another example is yourbus, a German startup company that organizes long distance bus services, if the demand is high enough. Yourbus has the potential to really hurt the German railway. Another main challenge is that fending off possibly disruptive attacks and staying in the minds of customers is a costly exercise – and retailers often run on slim margins. This means that activities need to be organized and efficient while making sure that the customer experience is consistent across all channels or touch points, like radio, TV, store, point of sale, web site, general marketing collateral, and, yes, of course, Facebook, blog sites, Twitter, and so on and so forth. The key word here is consistent; the experience does not need to be the same, actually cannot be the same; just imagine the differences between radio and TV, or between Facebook and Twitter. The current buzzword for achieving and maintaining this consistency is customer experience management. There are a lot of good approaches towards keeping in the minds of customers. There are interesting reactions to Groupon, e.g. Wal-Mart’s CrowdSaver on Facebook or Uniqlo’s Lucky Counter that does the same via tweets on Twitter – offering a discount if enough positive voices are there. Social commerce and F-Commerce (e-commerce via Facebook) are definitely on the current hip list. The need to integrate topics like CRM, loyalty, mobile, e-commerce is definitely there. What currently inhibits retailers (and other companies) from more effectively pursuing this necessary integration is lacking integration into back end systems. Gartner identified more than 100 vendors with Social CRM offerings in their first Magic Quadrant on Social CRM that dates June 2010. In the same research they assessed that only in 2011 social CRM suites will emerge, which then will be rapidly evolving. I do not say that there is nothing out there – that would not be true. Salesforce.com, Oracle, SAP, Microsoft, Sage, RightNow technologies and Netsuite, also SugarCRM, they all have some or the other functionality, but there is no real breadth yet. Of course this list of vendors is not complete. Let us focus in on SAP as an example. I do not single out SAP here; it is just that I know SAP a little more. SAP has all the necessary technologies, including an engine that is capable of measuring sentiments and StreamWork, a highly interesting tool. But neither SAP nor its partners do have a compelling integrated social CRM solution yet. There is SAP consulting themselves with their Social Media Cockpit, which effectively does some integration of CRM and Twitter as a marketing and service support tool. SAP consulting, too, has an add-on to CRM that extends loyalty management to Facebook. Then there is movento who have a Social CRM add-on that provides information about business partners from online communities directly in CRM. And CIBER is one of few companies bringing an integrated solution to organizations managing consumer marketing across multiple websites, having more a process than a product view. So, what are avid retailers doing in these times? The market even now offers tools and technologies to support most important business processes that involve the social web, from (community) platforms via monitoring and listening tools, towards more business process orientated tools that support marketing, sales and service processes. Today retailers pick and choose the tools that best support their social CRM strategies. They implement them as spot solutions, in silos, and increasingly also with custom integration into business systems. Tomorrow we will see that they also have the option to choose pre-integrated software. This post is a re-post of the original post on blog.ciber.com with the permission of the author.