Businesses – good businesses – are always looking to evolve. This may be due to technology, customer needs, competitive advantage etc. One key facet that has undergone significant transformation is the concept of customer loyalty. Loyalty touches almost every aspect of a business, which is why it is imperative to treat it as an evolutionary change piece for best results.
The evolution of customer loyalty
Customer loyalty has shifted dramatically over the years, primarily due to digital advancements and changing consumer expectations. In the past, loyalty was tethered to brand trust and long-standing customer relationships, often nurtured through personal interactions and consistent product quality. Today, however, factors such as convenience, personalisation, and seamless digital experiences have taken precedence.
The proliferation of technology and digital platforms has introduced consumers to a world where choices are endless, and switching costs are low. As a result, businesses must go beyond traditional loyalty programs, offering customers more tailored and engaging experiences. The integration of data analytics and advanced CRM systems has enabled companies to analyse consumer behaviours and tailor offerings to meet unique customer needs, so redefining loyalty from transactional interactions to a relationship based on personalised value.
However, this evolution brings its own set of challenges. As companies race to innovate and adapt to technological advancements, the risk of losing customer loyalty due to service disruptions or unmet expectations becomes a significant concern. This is why the role of change management in maintaining and nurturing customer loyalty becomes crucial.
The importance of loyalty during organisational change
When businesses undergo organisational changes such as mergers, acquisitions, or strategic pivots, maintaining customer loyalty is more crucial than ever. Such transitions often bring about uncertainties and disruptions, both for employees and customers. Without effective management, these changes can erode trust and lead customers to seek more stable alternatives.
Why is change management important?
Change management is the structured process of planning, implementing, and executing a new way of operating within a business. It ensures that changes, whether in company culture, technology, or products and services, are executed smoothly and align with business objectives.
Success in change management could be seen as enhancing profitability and building on current success. However, studies reveal a stark reality: approximately 70% of change initiatives fail to deliver expected results, often due to a lack of structured planning and execution. For businesses introducing or updating their loyalty programs, which represent transformational changes impacting multiple business areas, change management principles are essential.
Principles of transformational change
1. Vision: Establish a clear vision and compelling case for change.
2. Map the journey: Document the program’s impact from customer and organisational perspectives.
3. Leadership: The change must be led by senior leaders who demonstrate commitment through their actions.
4. Engagement: Involve all levels of the organisation in the change process, fostering a sense of ownership.
5. Support: Develop a network of allies and change agents to support the initiative.
6. Resistance management: Identify potential obstacles and address concerns decisively.
7. Systems thinking: Adopt a holistic approach, drawing in necessary resources for successful change.
8. Learning and adaptation: Incorporate feedback, manage risks, and adapt as needed for continuous improvement.
9. Cultural adaptation: Embed the change into company culture, ensuring alignment with organisational mindset.
10. Accountability: Hold individuals accountable for their roles and financial aspects of the change initiative.
11. Timing and boundaries: Carefully consider when to implement changes and delineate what is out of scope to maximise success.
Impacts of change management on loyalty programs
It is important to understand how change management practises can impact a business when a loyalty programs being updated or introduced into businesses:
1. Operational efficiency and internal alignment: Effective change management ensures alignment across departments like marketing, IT, customer service, and finance, crucial for the coherent execution of updates to loyalty programs.
2. Resource allocation and cost management: Efficient resource allocation and budget management are vital to avoid operational inefficiencies and cost overruns during the implementation of loyalty program updates.
3. Technological integration and digital transformation: Integrating new technologies like CRM systems requires comprehensive change management to address risks, manage complexities, and ensure smooth transitions.
4. Cultural adaptation and employee engagement: Changes often necessitate shifts in company culture to embrace new ways of working and support loyalty program goals, which change management facilitates.
5. Strategic alignment and long-term planning: Change management ensures that loyalty programs align with broader company goals, supporting long-term strategies like international expansion and digital transformation.
6. Tracking success and continuous improvement: Change management establishes mechanisms for monitoring key performance indicators (KPIs) such as customer engagement and ROI, allowing for data-driven program refinements.
Learning from past examples
The experiences of companies like Blockbuster, Kodak, and HMV offer cautionary tales about failing to adapt to market changes. These businesses failed to innovate and evolve, which led to their decline. On the other hand, Lego’s success story showcases the power of strategic change management, which transformed them into the world’s most profitable toy company.
Key takeaway
Customer loyalty is not merely a luxury but a necessity. As businesses navigate through changes prompted by technological advancements and shifting consumer preferences, robust change management becomes a vital tool to maintain and even enhance customer loyalty. By understanding the integral role of change management in adapting loyalty programs, businesses can ensure they are not just surviving but thriving in the face of change. This understanding is crucial for sustaining competitive advantage and achieving long-term success.
In the next blog we will go through theories that can impact how you approach change management.
Blogs in the series:
- Understanding loyalty in the context of change
- Mastering loyalty programs with change management theories
- Harnessing change management psychology in loyalty programs
- Navigating loyalty transformations: The role of leadership and communication
- The key steps to seamlessly integrate a loyalty program
- Adapting to change in the future: Why microchange strategies are the future of business evolution
Sources:
Andersen, E. (2022). Change is hard. Here’s how to make it less painful. Harvard Business Review. https://hbr.org/2022/04/change-is-hard-heres-how-to-make-it-less-painful
Bertini, C. (2019). Leading Change in United Nations Organisations, Chicago Council on Global Affairs
Thejendra, B. (2024). Practical IT Service Management: A concise guide for busy executives, IT Governance Publishing, https://www.jstor.org/stable/j.ctt7zsxdc.12
Barsoux, L. Nov-Dec 2017. What everyone gets wrong about change management. Harvard Business Review. https://hbr.org/2017/11/what-everyone-gets-wrong-about-change-management
Satell, G. (2014) A Look Back At Why Blockbuster Really Failed And Why It Didn’t Have To, Forbes, 5th Sept 2014, https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/
Mui, C. (2020). How Kodak Failed, Forbes, 14th July 2020, https://www.forbes.com/sites/chunkamui/2012/01/18/how-kodak-failed/
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