Customer loyalty and retention is essential to the success of any business, but just because a customer likes your brand, doesn’t mean that they will be loyal to it. If a better offer comes along they may choose to leave you for a competitor. This is why it is important to incentivise your customers to become loyal to your brand.
Customer loyalty programs are the perfect vehicle to reward customers for repeat purchases with your business. It is an easy way to increase your revenue, as Invesp Consulting found that increasing customer retention by as little as 5% can lead to an increase in profits of 25% – 95%. It also makes it much easier to engage with customers for other reasons like upselling. If a customer purchases a suit jacket, for example, and uses the loyalty card, you could send a follow on email with a shirt to match.
Loyalty programmes also enable your ability to capture feedback from customers in brick and mortar retail, which is notoriously difficult. If you cannot capture feedback, it is difficult to measure and improve customer experience. A loyalty programme makes it much easier to contact customers who are otherwise anonymous. In addition, when a customer uses their loyalty card, it comes with plenty of meta-data, which allows you to better understand the context behind the customer experience. With a loyalty card, you can examine what the customer purchased, who served them, how much they have spent, and many other useful points of information. When they sign up to a loyalty programme, a customer will often opt-in to be contacted so you can get meaningful data for a Feedback or Voice of the Customer programme.
A successful loyalty programme will get your existing customers excited to continue doing business with you for a longer period of time, enhancing their Customer Lifetime Value (CLV). Heightened engagement and incentives will drive customers to spend more with your brand and spend more often, in turn, strengthening their lifetime value. Whether your programme offers loyalty points per spend, free shipping or exclusive offers, it can create a more certain and constant revenue stream without a high cost to your business. Below we outline a series of factors to consider when building a loyalty programme to suit your business.
Building a Loyalty Programme
Understand Your Customer Base
The first step to creating an effective loyalty programme is a fairly obvious one – figure out what your customers actually want. When you set out to determine the type of programme you are going to create, you need to consider how your customers will use it and why. What you choose will be entirely determined by the nature of your business and who your customers are. What types of rewards will they benefit the most from and appreciate?
Popular types of loyalty rewards include:
- Free shipping
- Coupon codes
- Early access to new products or services
- Exclusive items or sales
- Discounts off future purchases
- Invitations or access to events
- Birthday perks
- Freebies
To figure out what will entice customers to join your programme, examine the patterns of your frequent customers’ spending and your best selling products or upsells to see what will be the best fit. It can also help to ask customers what they’d like out of a rewards programme as an additional pulse question on existing VoC surveys you may send out.
Balance Exclusivity with Inclusivity
You need to make loyalty programme customers who join feel like VIPs who are privy to benefits that your non-loyalty programme customers don’t get to enjoy. You should have an explicit list of perks, rewards or benefits that will keep them feeling special and coming back.
That being said, you should not create a programme that requires a customer to sign their life away to join. Joining should be easy and only require pertinent details (name, email, etc.). If it seems too complicated or will take too long to join, your customers won’t. Oftentimes stores will offer long handwritten forms at the in-store checkout to sign up to a loyalty programme which is a really ineffective way to get new customers or members on board.
Offer Varied Rewards
It is a good idea to have a programme that is flexible and versatile, so repeat customers can choose how they use their rewards and can earn rewards at a variety of touchpoints. Your programme should be engaging in a way that isn’t pushy, so customers don’t feel pressured to spend. It will really encourage spending and enthusiasm from customers if they know they have freedom of choice or variety when rather than being restricted to a discount or benefit that doesn’t interest them. This will also attract a wider variety of customers with different interests or priorities to join. Incorporate a variety of ways to benefit from being a loyalty programme member, such as double points days, exclusive deals during specific times of the year, and offer points in exchange for friend and family referrals or event attendance. And also incorporate a variety of opportunities to gain points or rewards besides buying things – such as social media shares and engagement, downloading your mobile app, or rewarding good deeds like donations in your stores.
Instil a Deeper Meaning
Customers are bombarded with offers to join reward programs, so set yours apart by making it count. If customers just see your programme as an opportunity for you to make more money, they won’t care to join. 2/3 of customers are more likely to spend with a brand that takes a stance on issues of importance, so use your loyalty programme as an opportunity to show customers what your business cares about. Link your loyalty programme to your CSR initiatives by giving additional loyalty points for donations made when a customer spends with you or recycles in-store. Align your programme with your values, so whether you care about clean water, recycling, healthcare, animal welfare, or giving back to those in need, show customers how they too can help get involved, rather than making your programme about pushing customers to spend more. Brands like TOMS and Warby Parker have championed this by giving shoes or glasses, respectively, to children in need. Customers are jaded, so show them why spending with you is more meaningful than it could be elsewhere.
Keep the Rewards Coming
A one-time benefit offer isn’t going to keep your customers loyal as they won’t see any value from your programme. If a customer only gets a reward when they first sign up or find it too challenging to meet the requirements to gain more points or benefits, you won’t be able to cultivate true loyalty. You need to set out rewards that can be earned repeatedly and frequently without the customer jumping through hoops. Otherwise, you run the risk of having your customer even forget that they ever signed up to your programme at all. Offer bonus points for continued spending or early access to deals and sales so that loyal customers can continually reap the benefits of shopping with you.
To learn about how CX Index has been able to leverage loyalty programme data to deliver winning outcomes, please see our case study here.
