Your Comprehensive Guide to Customer Loyalty
Introduction to Customer Loyalty Programs.
Customer loyalty programs are a fantastic way of stimulating and triggering desired behaviors in customers. However, building loyalty using a program can be a daunting task when you’re starting out. Don’t worry, we’ve got you covered.
Customer loyalty programs can take many forms. Typically, businesses opt for the old reliables: discounts, coupons, point collection, rewards, bundles and more. We’re here to show you what works, what to watch out for, how you can use your loyalty program, top strategies and more.
Why is Customer Loyalty Important?
The average return customer will have an average purchase value of +67% in months 31-36 of their relationship in comparison to months 0-6.
Loyal customers are generally worth over 10x their original purchase.
Increasing customer retention processes and efforts can increase profits by as much as 25-95%.
Maintaining customers can increase your customer database by up to 100%, while this data can be used to boost your CRM efforts.
Existing customers make up to 80% of the revenue of your company.
Loyal customers spread the word about your company.
So, Why Choose a Customer Loyalty Program?
Loyalty programs have been around forever. Why? They just work.
That doesn’t mean everything will be easy. If you’re embarking on a loyalty mission, the first step is to figure out exactly what your goal is. This can range from customer acquisition to customer activation, gaining referrals to increasing purchase frequency.
Looking to build loyalty? You’re in the right place. Looking to increase revenue or grow in new markets? Look no further.
Whatever your goal is, we’re here to give you the rundown on how to use a custom loyalty program to take your business to the next level. Check out some of the facts and figures below for some opportunities to capitalize on!
Why You Should Care about Customer Loyalty Programs.
Twist their arm.
83% of people reported that discounts and coupons change their purchasing behavior. Show your customers a deal they can’t refuse.
There for the taking.
As much as 93% of people use coupons throughout the year - you have to get in on that action somewhere. Introducing discounts can be immediate, and getting started with coupons can take less than a few clicks.
A fair price motivates 64% of consumers to try a new brand. You’d be amazed how much setting prices a few points below competitors’ can change things.
A whopping 41% of consumers said that free shipping would convince them to try a new brand. Time to make free postage a reward!
Consumers are on the Lookout.
87% of consumers said they actively search for deals on a regular basis. Make sure your deals are readily available and visible to maximize conversions.
Companies have shown to sell up to 73% more by selling bonus packs. Did somebody say 20% extra free?
Bump up your CTR.
Research has shown that 83% of people are likely to click on an ad containing a discount or promotion. Start by simply including links to discounted products or promotions in your regular emails.
Get your priorities straight.
When 90% of businesses say that expanding their loyalty program is a priority, you know it’s time to take notes. Starting your own loyalty program can be simple if you use no-code software.
Engage with your customers… then say thanks.
In a 2021 survey, 80% of millennials and 75% of baby boomers said they prefer to be rewarded for engaging with brands. Start providing rewarded social engagement prompts to stay top-of-mind and keep business booming.
Consumers aren’t afraid to switch it up.
Switching brands and trying new products in order to maximize discounts and rewards is something that 66% of customers do on a regular basis.
Coupons make you money.
Consumers using coupons spent 46% more at checkout than those not using coupons. I think it’s time to take a look at coupons, don’t you?
It’s an everyday thing.
Over 40% of millennials look for coupons or discounts on a weekly basis. Coupons shouldn’t be a one time thing for your business, they should be a regular occurrence to keep customers coming back.
A Word of Warning.
While loyalty programs - discounts, coupons, points and everything in between are great ways to boost sales or loyalty, these things don’t come easily. There are some things you should be sure of before offering any perks:
Watch your Numbers.
Make sure you’ve calculated the cost of offering any reward, discount or perk. Your profits will now be less redemption costs of any perks, discounts or rewards. Taking a hit on your margin can be worth it if you want brand awareness, but it shouldn’t be something happening frequently. The goal is to bring customers in with discounts and then reward the loyalty that comes after.
Who are you Rewarding?
Watch out for customers that avail of discounts and don’t remain loyal. Many consumers are chronic switchers - constantly availing of promotions and discounts without remaining loyal to anyone. It’s in the name - ‘rewards’ - so don’t hand them out to just anyone.
Breakage is a funny one - many people see high breakage as a good thing, while others see it as a sign of failure when it comes to loyalty programs. Whatever your perspective is, you should come to a conclusion about expected breakage rates and the minimum breakage rate you can afford before getting started.
Your Loyalty Objectives.
Okay, you should be convinced by now that loyalty programs are a good idea. But what can they do for you? How can they help you to reach your goals? We’ve outlined some of the top uses of loyalty programs below.
Acquisition and (re)Activation.
Using a loyalty program for acquisition of new customers or reactivation of dormant customers can be very effective. Some customers know you - some might even like you - but you need to give them a push to get them on your side. Using loyalty programs in the form of discounts, coupons, or even handing out promotional products can be the final factor in convincing some consumers.
Referrals also come in here, as they can be one of the most efficient ways to introduce new customers to your business when your referral program is set up effectively.
Loyalty programs can be fantastic for boosting revenue, particularly when used to target existing customers. This is low cost but high reward, as you cut down on acquisition costs but maximize shopping cart value. Keep it simple here, a discount or a coupon can be persuasive enough to get customers reaching into their pockets.
When it comes to increasing revenue in a less direct sense, building a connection between your brand and your customers will always be a big help. Make sure you’re careful of who you give your rewards to, however. Focus on giving rewards, discounts and more to the customers that will make it worth your while - avoid the chronic switchers.
Increasing Customer Loyalty.
Seems like a pretty obvious goal to have when launching a loyalty program, right? Increasing loyalty among your customers will lead to increased referrals, increased revenue, increased brand awareness and advocacy, increased purchase frequency - the list goes on. But there’s a catch.
While loyalty programs are built specifically for building loyalty, this is a marriage of multiple strategies and processes. Within a loyalty program, you can collect data, bundle stock, increase revenue, expand your customer base using rewards and referrals - the list goes on.
However, fostering loyalty among your customers is a longer processes that involves all of these components - you have to excite customers with rewards and gamification, stay top-of-mind with email marketing and campaigns, become part of their routines with automations and triggers, and ultimately target them effectively in order to achieve total loyalty. This can take some time to master, but we promise it’s worth it!
Bundling or Shifting Stock.
Have some stock that you need to move as quickly as possible? Loyalty or rewards campaigns targeting that specific product will help you get it off the shelves. Simple things such as a small discount or coupon could be the difference between making a sale or not.
Bundles can be difficult to get right - you have to find the right balance between more and less expensive items, along with ensuring that you maximize customer interest. After all, the initial intention with product bundles is often to expand customer interest to anyone interested in one of any of the bundled products.
Filling in the Blanks.
One aspect of loyalty and rewards programs that many companies are yet to tap into is using them to build a more vivid picture of their customer base. Using promotions, you can give customers - either existing or potential - access to a reward, such as a discount or coupon, in exchange for some of their information. This information will then allow you to target them more directly, frequently and effectively.
Another aspect of this is letting your customers pay with data. This will help you to get a more rounded picture of who exactly your customers are - who are the best, who are the not-so-good, and who are you wasting your time on.
Referrals and Socials.
Using a loyalty campaign or rewards can really boost your referral rates. This is also a fantastic way to increase social shares or likes on social media. Organize your campaign such that customers receive a reward upon clicking on a certain link or completing a certain action such as signing someone up for a referral link.
Creating a strong connection with your customers is the best way to make them comfortable with initiating referrals themselves. Customers have to trust your brand before they’ll give you a referral, so remember that.
Using your Loyalty Program throughout the Customer Lifecycle.
Awareness and Acquisition Phase.
In the awareness and acquisition phase, you’re at a disadvantage in the sense that you usually don’t have any data on the customers. This makes it difficult to adapt your coupons and discounts in accordance with your target audience.
When you’re in a position in which you’re unsure of what to offer consumers, your best bet is to choose either the stock you want to get rid of or the stock that you think will sell the best, always keeping it low risk. This is due to the fact that customers prefer to receive a discount as opposed to receiving points - nothing beats instant gratification.
In the reactivation phase, you have a better chance of succeeding than in the awareness and acquisition phase. Why? Data is on your side. True, you might not have heaps of data on inactive customers, but what you have is valuable.
Discounts are great in this scenario, because disengaged customers will be much more responsive to immediate discounts. The easy part here is that you have some data on what these customers like.
Don’t forget that honesty can be the best policy sometimes - telling customers you’re sad to see them go can often be more effective than you’d expect.
At Risk Customers.
Customers that are at risk are very similar to customers that have become inactive. The good news is that at-risk customers are more likely to be receptive to playing the long game with you. This means you have more room to incorporate gamification or point collection, but don’t forget about discounts either.
The key is to remember that this isn’t an isolated event - rewards, discounts, coupons and other loyalty incentives should always be available to your customers. Boost at risk customers’ interest with an immediate discount and keep them engaged by allowing subsequent point collection or progression through gamified tiers. This ensures engagement while protecting you from giving perks or rewards to chronic switchers.
Active customers that are not yet absolutely loyal need to be engaged. Your strength here is that these customers are already convinced by your brand and product. Now it’s time to form a connection with these customers. Get them to play the long game - loyalty programs including gamification, levels, tiered rewards and more.
Another great promotional activity to engage in with active customers is inviting them to like, follow, or share your content on social media and providing a subsequent reward. This acts as engagement while also giving you positive word of mouth. Customers can then use their reward with you and you generate more revenue - win-win.
You’ve done it. You’ve achieved true loyalty within your customer base. It’s now time to spread the loyalty using the right promotional campaigns and programs. The customers you have that are loyal should first be rewarded on a regular basis. It’s in the name - rewards should be used to reward loyalty, not to give new customers freebies.
Now that you have loyal customers, engage them further with a gamified loyalty program. Within this loyalty program, offer badges, achievements, tiers and more. An excellent way to get the most out of your loyal customers is to ask them to take part in an incentivized referral program. This ensures positive word of mouth and a high success rate with referrals.
This is when you’ve mastered things. You have ample loyal customers, and a structured way of rewarding them and ensuring they get the treatment they deserve - so much so that they’re paying you for it.
When you’ve got strong promotional campaigns and have perfected your loyalty program, you can make one more level to it: subscription level. An example of this is Amazon’s Prime membership - customers pay in order to get VIP access to certain features and products, and have the benefit of free express shipping. This doesn’t always work for every business model, but it’s a great step to take when possible.
10 Customer Loyalty Rules to Live By.
Make Participation as Easy as Possible.
Participation is the lifeblood of any loyalty program. If you have engaged customers, you can expect a good return on investment for your loyalty program. The more you invest in your program, the better your rewards can be and the more tailored the program experience can be on an individual level.
Failing to make participation as easy as possible means there is at least one unnecessary barrier to entry for your loyalty program. While having a clear idea of who your customers are and sticking to it is a positive action to take, there should also be some room for others in your loyalty program - at least without significant barriers to entry.
Make it Clear and Simple.
Tiers, rules, triggers, gamifications - they’re all great. Loyalty programs should be fun, engaging, multifaceted, always keeping members entertained and on their toes. However, there’s no need to complicate things.
You wouldn’t slam on the accelerator during your first driving lesson, so don’t try to hit top gear in your program aspects right from the beginning. Base your program on solid fundamentals - a good rule base, well thought through rewards, strong campaigns and a sprinkling of automations. Not only that, but this will be a huge help in getting customers used to how things work before incorporating levels, gamifications and more.
A great first step in making things easy and natural is to take advantage of as many integrations and automations as possible. Once you've found your feet and your loyalty is beginning to grow, it’s time to start incorporating tiers, levels, gamifications and more - that’s where the fun really begins.
Don’t Gather Unnecessary Information.
As it stands, loyalty programs are a fantastic way to gather valuable data on your customers. The focus should be on getting customers on board comfortably rather than bombarding them with complicated onboarding information - then the data starts to come.
Everyone values their privacy, but very few people value it more than when a company is asking them for information. Don't make yourself the bad guy - start by collecting only the data you need from your customers.
This can work perfectly when loyalty members are able to sign up with a phone number or email address. Once they’re on board, make your loyalty members aware of how adding more information may benefit them - such as adding their date of birth for birthday perks.
Be Engaging and Consistent.
Consistency is key in your loyalty program. It’s not exactly dramatic to say that the success of any given loyalty program (other than subscription based) essentially hinges on how well you maintain engagement. If you struggle to engage your customers, you most likely won't succeed.
So, how do you optimize engagement? The first step is consistency. Before you can tailor rewards, personalize, gamify or anything else, become consistent. You need to become part of your customers’ routines in order to truly excel - consistency is the first ingredient of success here.
Reward, Don’t Just Hand Things Out.
One of the worst mistakes companies make within their “loyalty” programs is not rewarding. Not that they forget to reward necessarily, but they actually go beyond rewards. They give things away.
It’s in the name - rewards. This means deciding on what behaviors or actions you want your customers to take and then rewarding them for said actions. Many companies make the mistake of “rewarding” people that are first-time customers and never fully subscribe to the loyalty program. Using instant discounts can sometimes be effective for acquisition, but watch out for who you’re giving your rewards to.
Set a Budget.
Following on from the last point, budget is absolutely essential. Loyalty programs can be a huge cost center when you start out, as increasing customer engagement through discounts can become costly. You need to decide what you can afford to lose before anything else.
That sounds terrible. But when you think about it, your margins will be cut due to the initial discounts, but your revenues will soon overall increase due to the increases in average cart value and purchase frequency among loyal customers.
Determine your Goals.
Before ever setting up a loyalty program, you need to set your goals. The reason for this is because you should be using your loyalty program to encourage and reward customers for taking certain actions or purchasing certain products. Without a plan or a set of goals towards which your loyalty rewards can contribute, you’re wasting valuable time and money.
Building loyalty is not enough of a goal. There should be strategy involved in your loyalty program, how it's set up, the rules involved in it and beyond. Loyalty programs can also be a great way to contribute towards your current strategy, as they help to reactivate inactive customers and shift stock while growing your brand.
Measure, measure, measure. If you’re failing to measure the success of your loyalty program, you may be wasting money, missing opportunities and failing to fully satisfy your customers. This ties in with goal setting, as you should be closely tracking how well you’re performing relative to your plans and forecasts.
It’s worth noting that you shouldn't expect to achieve crazy numbers during your first month or two - this is a growth process, not a quick fix.
Make It Exclusive.
This doesn't mean making your program subscription based or making people fit a certain criteria before they can participate. This simply means that you should entice people to join your loyalty program by making things exclusive to your loyalty program.
Great ways to add an element of exclusivity include offering products that can only be purchased using loyalty points, or products only available to those that are part of your loyalty program. This does not create any barriers to entry for your loyalty program, but creates a great incentive for non-members to get involved.
Keep Customers Entertained.
When it comes to keeping customers active, it’s keeping them entertained that makes the difference. A great way to combat this is to decide periods for which certain rewards will run and a certain timeframe within which you consistently update your rewards, introduce new gamification or rules, or launch new campaigns.
The only direct way to reactivate inactive customers is through offering them a reward or discount to get them back into the swing of things. However, without consistent rewards thereafter to keep them engaged, they’ll fall into inactivity once again. Keep things consistent.