From data to devotion: The analytics of customer loyalty

Ashley Klimp:

Welcome to Resounding the Human, the Informs podcast. I’m Ashley Klimp. In each episode, we explore how operations research, analytics, and AI are shaping the world around us. Today we’re diving into something every one of us experiences but may not always think about strategically, customer relationships. Why do we stay loyal to some brands and leave others after just on frustrating interaction? How are analytics and AI helping companies predict churn, personalize experiences, and build trust in a world where customers have more power than ever before? Joining me today is Ankit Agrawal, whose work sits at the intersection of analytics, customer experience, and business strategy. We’ll talk about what companies are getting wrong about loyalty, how CRM has evolved, and why the future of customer relationships may depend as much on empathy as it does on algorithms. Ankit, welcome to the podcast. Thank

Ankit Agrawal:

You, Ashley. It’s a pleasure talking to you.

Ashley Klimp:

So let’s start broad. CRM can mean a lot of things to different people. How do you define customer relationship management in today’s business environment and why is it so important?

Ankit Agrawal:

Absolutely. That’s a really great question. And you’re right. CRM can mean very different things to different people depending on who you ask. At its core, CRM is about two things, data and relationships. So traditionally, when people thought about CRM, it was a system of records, one where you log all the transactions, interaction histories, manage sales pipelines, log user tickets and all. And make no mistake, those capabilities still matter. But I believe the role of CRM has fundamentally evolved from being a system of records to more of a system of insights, a system where organizations are having a strategic capability to manage the customer interactions and touchpoints that happen seamlessly. And it’s no longer about just managing those transactions. It’s about building the relationships with the customers and it’s all about orchestrating end-to-end experiences. And really that shift is driven by product changes in the economy, I would say.

So really what I consider a change that is happening is from moving from a transactional economy to more like a relationship-driven economy. So in the past, the businesses held most of the information about what information to share, what products and services they have. But now all that resides with the customer and the customers are incredibly informed these days. You have a lot of product reviews, you have the surveys, you can go on the Reddit and read the posts about the products and all those things. So what it enables the customers to have more information, the switching between brands is extremely, extremely easy. So really the power dynamics has changed and it has now shifted towards the customer. And in that environment, the companies can’t really just rely on one-off transactions. They really have to manage those relationships and make sure that they get that customer again and again through ongoing transactions, through building that relationship and make the customer feel that the brand understands you and values you.

So that’s where CRM becomes so critical. It ingests all the information, the contextual information, all the behavioral data, everything, and really produce insights for the company so that the companies can act on it and serve the customer in the need when there is a need for the customer.

Ashley Klimp:

So you mentioned relationships several times. Why do you think retention and loyalty are such major priorities for organizations right now?

Ankit Agrawal:

Wow, that’s my favorite question. And really there are two or three big things that are driving this change. First and foremost is the subscriber economics. So if we think about the subscriber economics, the cost of acquisition and the cost of retention, cost of acquisition is much higher than the cost of retention, meaning it costs more to acquire the new customer than to retain one. The channels these days are fragmented, you have so many, the marketing costs are increasing. So it’s not as efficient to acquire a new customer as it used to be. So what the smart organizations are realizing that once you have acquired a customer, it’s better to monetize them with ongoing loyalty and building that relation. Second, what’s important to note is that when you have the sticky customers, those provide a predictable revenue stream. The loyal customers provide a predictable revenue stream.

And why it matters is from a business planning perspective, we’ll have more confidence in the CapEx investments that we are making. We’ll have more confidence in the OpEx investments that we are making, or we might want to return the money to the shareholders, or we might want to reinvest the money in customer experiences and promotions. So really that is another advantage. Third is the growing recognition around customer lifetime value. When you think about loyalty and retention, you think about revenue preservation because that’s the first thing that comes to the mind because loyal customers obviously are repeat buyers. But one important thing to note over here is that once that customer has a brand affinity with you, they are more likely to buy ancillary products and services over a period of time and they often become brand advocates. So when you think from a customer lifetime value perspective, instead of just one-time transactions, that retention actually becomes a lever for revenue generation as well.

And that’s extremely important for any business.

Ashley Klimp:

I like that term you use, sticky customer. It brings to mind a vision of somebody in like a Velcro suit stuck to a big brand logo. All right, where does analytics come into all of this? How can companies get ahead of churn and risk?

Ankit Agrawal:

Yeah, great question again. And all these topics are really, really close to me and I’m so excited to share some nuggets. So analytics really is the voice of customer at scale. And before we even get into analytics, what I recommend everybody even at my work is before you even roll up the sleeves and start crunching the numbers, it’s important to look at the qualitative insights first. Why it is important is because it sets a baseline for you and gives you something to action upon directly from what the customer is saying. Now, not every customer leaves a product review, not every customer is interacting through chat or through social media. So that’s where analytics really come into picture is when things go wrong, a lot of times customers aren’t going to tell you that. And so that’s where analytics plugs that gap. It provides you an ability to identify the pain points and friction in the customer journey and provide a solution in need that the customer has a need at that particular moment.

For instance, if you see a drop in engagement from a customer in a Sports or a software subscription company, the number of API calls over a period of time has reduced, you aren’t seeing that many logins. So that’s a trigger that one can use and analytics can actually help you set up that trigger so that you get those automated insights and you can most importantly action upon those. So that’s where the power of analytics come into picture. The whole idea is that you become, instead of being reactive, because churn is a lagging metric and by the time the customer’s out of the door, the damage is already done. So there’s very little that you can do to actually save that customer. But if you are looking at these signals and being proactive about it, you actually deter that customer for becoming a high risk so that you have to treat them later on.

So that’s the shift that analytics provides to you. Instead of being very late, it gives you a chance to react in that moment and help save the customers.

Ashley Klimp:

So speaking of the customers, I imagine that not every customer should be treated the same way.

Ankit Agrawal:

You’re right. One of the biggest straps, I would say organization fall is assuming that fairness means fairness means treating every customer the same way. The problem with that is not every customer is the same. They do not bring the same value to you in terms of the revenue that we are generating from that, plus every customer has a different need. So need is extremely important because every customer is different, every customer has a need. And for the longest time, the way CRM was managed or we managed things was we call it a segmentation. So segmentation is really bucketizing the customers based on certain attribut would see that their demographics, whether your behavior and all those things. And that was a good starting point. But what smart organizations are now evolving into is something called personalization. And personalization is really understanding that individual customer’s behaviors needs context and tailoring the experiences in real time.

So I’ll give you an example from one of our favorite streaming services, Netflix.

Imagine if you have a propensity to watch romantic movies. So what Netflix does is the thumbnail for Stranger Things would actually have two teenage kids like Nancy and Jonathan when you are browsing from the menu of options. But if CRM Dataminr that you have a propensity to watch other movies, then that same thumbnail actually changes to a demogorgon, meaning that it personalizes the experience for you in a way that is able to boost engagement. So really you’re monetizing the visual assets and boosting the engagement when the product itself is the same. So in a nutshell, a personalization is what the industry is moving towards and really it’s context-based, need-based and tailoring those experiences in real time. So

Ashley Klimp:

I’m not a romantic movie fan, but a huge horror fan. So my algorithm is a little scary, definitely with the demogorgan.

Ankit Agrawal:

Agreed.

Ashley Klimp:

What role do channels and customer service play in building loyalty today?

Ankit Agrawal:

Yeah, look, channel is an extremely important component in this whole CRM conundra. And customers actually don’t think about different channels individually. And the expectation, the baseline expectation is that the experience across each of the channels is seamless. So whether it’s app, whether it’s web, customer service, retail, even social media for that matter, really customers want a consistent experience so that they don’t have to repeat the information again and again. So really that consistency and experience across the channel becomes the reflection of direct reflection of the brand. And in order to improve the brand definite, that’s the first thing that the brands needs to understand. Now as far as specifically customer service is concerned, that’s an extremely important channel. And what I think about customer service is that another shift is happening in that particular channel. It’s a shift from being an operations centric organization with the focus there was on cost reduction to more of a strategic driver and value.

And a lot of that shift is actually happening because of automation because as organizations are getting smart about automation and removing that mundane repetitive task from the reps, the real value that they are unleashing is giving the reps right tools to do what they’re supposed to do, which is empathizing with the customer and resolving the need of the customer. So that is an extremely important shift that we are seeing. And I’ll give a quick example. Suppose a disguntled customer calls you, he has had billing issues for the last couple of times, he has been calling you again and again for two, three times and imagine that you are a customer and customer service rep is trying to figure out, hey, what the issue was, why did this customer call several times to us in the past? What can I do about it? That will leave you even more frustrated and that will make you feel that, hey, this brand does not know what they’re doing.

Despite calling them multiple times, I’m still having to explain again and again, and the rep is having to find out what’s going on. Now flip that scenario. If you have automation and tools in place, the rep and the systems, the CRM systems are talking, the rep now knows that, hey, this is a tenured customer who has called three times because of a billing issue that happened because of some kind of billing issue from the system migration. So that’s the context that you have already given to the rep. And if you augment that with the actions that, hey, offer this customer to enroll in Autopay so that the billing issues are resolved, plus give them a 20% inconvenience credit.That will leave a good experience with the customer and it will make the customer think that, “Hey, this brand really knows what they’re doing and they really know they really are trying to resolve that issue for me.

” So that’s the shift that we are seeing in customer service. So again, it’s the end-to-end experience orchestration from the beginning of all the channels, seamless experiences to our live interaction, everything has to be seamless.

Ashley Klimp:

So I think it’s no secret that AI is everywhere transforming nearly every industry right now. How is it changing CRM and customer experience?

Ankit Agrawal:

Great question and AI is absolutely everything and obviously CRM I think it’s in the forefront of that revolution. And one of the reasons is we are not talking about five or 10 customers or five or 10, 20 accounts. If a company is dealing with same millions of customers, 100 million, 120 million, that volume of customers really AI unlocks a lot of hidden potential with the data and it helps companies understand the customers even more. So what the behavioral triggers are. It uncovers patterns with respect to the usage, with respect to the transactions that they have been making, all those things. And really it helps us to predict the likelihood to churn, the likelihood to upsell, cross-sell, and really understanding those sentiments in real time, which is extremely important. That real-time, that’s something that I’ll keep on focusing in the moment. So instead of being reactive, it helps the companies become proactive.

Second, we already talked about personalization through the Netflix example and I’ll again focus on that personalization because that’s what it enables. It enables personalization at scale. When you’re doing things manually, I might know all the things about an eight to 10 customers when you are talking about millions of them. Obviously we need an automated and a machine learning tool to help us enable that whether we go to banking and if the bank knows what my spending patterns are, life events, demographics, whether I have kids or not, they can obviously recommend me opening a savings account or a kid’s education account and all those things. So those are some of the things that you’ll see more and more as organizations get mature, you’ll see a lot of personalization. And it’s not just writing your name in the email, but it’s going beyond that and really understanding what the need of the customers are.

And third, what I would say is transforming the engagement. So we talked about the customer service example right before this. There are other things that are happening that is truly transforming the engagement. And I’ll give you an example.

You have millions of transactions and calls that happen in the channels. Now the reps are trained to understand what the sentiments are, but they have to do a lot of things at the same time. They have to look at the account, they have to look what the customer is here for, all those things. But what if you are able to transcribe the call in the real time and a machine actually predicts and tells what the sentiment is, is the call going good? Is the sentiment of the call negative? Is it positive? All those things. So once you ingest all that information and provide that to the reps in the real time, I think that will make those conversations even more fruitful and that is where things are headed. I’m really excited about it. But one thing that I’ll caution, as AI is ingesting all this data and everything, it’s the responsibility of the companies to make sure that they judiciously use the data for the customers and they’ll build the trust that whatever data they are using, it’s actually for the benefit of the customer and not being used otherwise.

All

Ashley Klimp:

Right, Ankit, I want to switch gears for a minute here for our Ask AI segment when we ask artificial intelligence in this case, ChatGPT, my unofficial co-host, a big- And see what it has to say. Okay. Today’s prompt was, what is the biggest mistake companies make when trying to build customer loyalty? And the response that ChatGPT came back with, “The biggest mistake companies make is confusing loyalty with rewards. Points and discounts may attract customers, but they rarely create lasting relationships. Real loyalty comes from trust, consistency, and making every interaction easy and helpful. In the end, customers may remember the perks, but they stay for the experience.” Ankit, I would love to get your thoughts on that.

Ankit Agrawal:

Absolutely. Great question. And actually that AI prompt got it absolutely right. When I think about discounting, I think one of the biggest things companies get wrong is equating loyalty with discounting. And discounting can really drive short-term behavior, but a lot of times it attracts customers who are not really loyal, but they are loyal to the promos I say. And as soon as the next company offers a better discount, a better promo, they’ll move. So really with discounting, the issue is that there’s no differentiation that is happening and it can be mimicked within a couple of hours actually. It’s the easiest way a different organization or a company, a competitor can mimic. So really it’s a race to the bottom and it erodes the margins for the company. And I think when companies think about loyalty and retention, the best way would be to A, make sure that the experiences are seamless.

That’s the most important thing. We talked about app, chat, all those. So experiences should be seamless. Secondly, there is a need to look at the customer journey and end-to-end journey and map the journey. And what I mean by the customer journey is you have various areas. You have the pre-sales, you have the onboarding, you have the engagement and you have the renewal or repeat purchase. It’s important to set up the right expectations during the pre-sales and make sure the value prop that you have really resonates with the customer. That’s the most important thing because setting up the right expectations is half the battle. You have one half the battle. When it comes to the onboarding phase, make sure that the customer watches the training videos, whatever you might have, or set up the account correctly, meaning they’re providing all the information so that they can receive the communication preferences of their preferences, all those things.

So once the customers complete these two stages, the third stage, which is the engagement, that’s where it’s the make or break. That’s where you should determine whether the customer’s engaged or not. If there is a drop in usage, if there’s drop in engagement, then you have to trigger. Then you need to have those triggers in real time that tell the company that, hey, there is a drop in usage and probably there should be reinforcement training or understand what’s going on, whether there are product issues or anything like that. So once the companies figure out that thing, the fourth stage, which is the renewal stage, that becomes automatic. Once you get these three things right, the fourth things already happens. But if you don’t get these three things, and if you’re trying to save the customer at the fourth stage, which is at the renewal stage, damage has already been done in the first three and it’s probably too little too late.

So that’s what we need to get into. Discounting sometimes it’s required, especially for cost-conscious customers or if there is a real need in the moment for that customer, but it should not be the norm.

Ashley Klimp:

All right, Aki, last question. Are companies measuring the right things when it comes to customer experience?

Ankit Agrawal:

Well, absolutely. They’re measuring some of the right things, but I believe not all of them are actionable. Metrics like net promoters go churn, they are after the fact when the damage has already been done. So a lot of focus and shift that you’ll see will be on metrics that you can actually influence in the real time. Engagement really comes to my mind and I’m really focusing a lot on engagement because that’s what drives loyalty from being reactive to proactive. If you are in the onboarding stage and onboarding training completion rates, when you’re talking in a customer service environment, repeat call rates and really understanding those metrics that actually you can drive in the real time are the ones that will provide the organizations an operational edge instead of something that you can only look in hindsight. All right,

Ashley Klimp:

Ankit, I lied. I have one final, final question because it’s come up a couple times and this one’s just for fun. You mentioned Netflix a few times. What is your favorite movie genre? When you log into Netflix, is it romance or is it Demagorgons or is it something else?

Ankit Agrawal:

I would say romcom. I’m a big Adam Sandler fan, so pretty much all the movies that we have on Netflix, I’ve watched all of them. 51st dates is actually one of my favorite. So I would definitely say Romcom.

Ashley Klimp:

I wondered if that example hit close to home. I’m happy to hear that it did. Ankit, this was such a fun and fascinating conversation. I loved how you framed CRM, not as software but a strategy for building trust and how analytics can turn data into more human experiences. And thank you to our listeners for joining us for another episode of Resoundingly Human. If you enjoyed today’s conversation, be sure to subscribe, share the episode and visit resoundinglyhuman.com to learn more about how analytics and operations research are helping organizations make smarter decisions for a better world. Until next time, I’m Ashley Klimp, and thank you for listening to Resoundingly Human.