Creating a customer loyalty program? Here's what you need to know...
We know what it’s like.
Attracting new customers is expensive, and there's always a chance they will visit once, make a single purchase and never return.
If, on the on the hand, you can persuade your customers to return multiple times, then not only will you make more money from each customer - but you also won't have to spend as much on attracting more new customers.
The best way to achieve this is by creating a customer loyalty program, so here's what you need to know...
Let’s start at the beginning.
We all remember the coffee cards, where you would get a stamp every time you bought a coffee. Then, if you managed to get enough stamps - and not lose the card in the meantime - you would get a free coffee.
It was a truly genius idea, which can be proved by the fact that it swept the world.
Of course, there were variations. Sometimes you had to give the company your contact details, which they then used for marketing.
However, the number one goal was always the same - to keep the customer returning, over and over again. Marketing people called this ‘building customer loyalty’ which, in some ways, it was.
Unfortunately, The cardboard card system also had a few weaknesses. For one, customers would lose them, all the time. Even when they weren’t lost, the cardboard would end up all tatty, and naturally so would your brand.
Then there’s the design and printing costs, as well as hiring data entry clerks and building a database, if you wanted to do anything with the data.
The biggest problem of all with cardboard and stamps is that it feels so 1980s. These days brands should be digital and dynamic - so you can throw the cardboard stamp idea in the bin immediately and move on to the bright, bold world of digital.
Digital loyalty programs are the future.
The wonderful world of digital loyalty. Now we’re talking. With a click of your fingers, you can choose from any number of eager loyalty companies to create a digital program that your customers will be falling over themselves to sign up to.
These loyalty companies have experience with this, so you can trust them. They’ll come in and pitch you a tailored program, just for your company. It’ll have a catchy name, and a cool, quirky design.
It’ll also be 100% digital, so you’ll collect customer data with every purchase. Your customers will be given a welcome pack when they sign up, with their own shiny plastic card - and later down the line you can add an app, to ensure you have a presence on their phone.
And instead of your customers collecting points, perhaps they’ll be collecting flowers, or bunnies, or snowflakes? The only thing for sure is that it will be relevant to your company - and adorable.
But, let’s take a step back for a second and ask a very important question…
Why do you want to create a loyalty program?
There are lots of excellent reasons to create a loyalty program - and there are also lots of different loyalty programs that all have their own strengths and weaknesses.
Here is a selection of just some of the goals you might be looking to achieve:
Increasing Life-Time Value (LTV)
Loyal customers tend to remain customers for longer, and therefore they will spend a higher amount with you over that time. A loyalty program can help you to achieve this, and unlike other benefits, this one is easy to measure and prove.
Raising average cart value
Another benefit of loyal customers is that they tend to spend more money than casual customers. There are a number of reasons for this, but most of them boil down to trust. If your customers like you, and trust you to deliver the service and product quality they expect, they’re more likely to place bigger orders.
Decrease time to second purchase
Another measurable metric, which has been proven to be a good indicator of LTV, is the time that passes between the first purchase and the second purchase. Customers who return soon are more likely to purchase more often - and one way to encourage a quicker second visit, is to sign the customer up to your loyalty program.
Acquire new customers
While the goal of most loyalty programs is customer retention, a pleasant consequence can also be increased acquisition. This happens when your loyal customers become advocates for your company and start telling their friends and family about it.
There are other reasons to create a loyalty program, but these are the main ones. Let’s move on to the types of behaviour you’re looking to reward.
Loyalty programs can change customer behaviour.
In order to change customer behaviour, you need to first identify the actions that you want to reward. By rewarding these actions, you’ll increase their frequency, while at the same time building customer loyalty.
Here are a few examples you might want to look at:
Spending a certain amount
Easily the most common form of rewards when it comes to loyalty programs. Usually, this will be based on receiving a gift or discount with purchases over a certain threshold or giving customers points when they spend with the company, which can then be redeemed for rewards.
Making a certain number of purchases
Some businesses are more interested in the number of purchases, rather than the amount spent. This can also be part of a loyalty program, where customers are encouraged and rewarded for the frequency they visit.
Social media engagement
Another way to reward your customers is by encouraging them to become advocates. This can be as simple as providing gifts or discounts when customers tag themselves or mention the company in posts - or this can be part of a bigger program that also includes other rewards.
Reviews are becoming increasingly important for businesses, especially in service industries like restaurants and hairdressing. By rewarding your customers when they leave reviews, you’re far more likely to receive the right kind of reviews that paint your business in the best light possible.
Now that we’ve covered some of the great things a loyalty program can do for your business, let’s take a look at the possible down-side - because there’s one big obstacle that loyalty programs stumble into over and over again… participation.
Ongoing participation is always the problem with loyalty programs.
Once the thrill of the launch has subsided, and your loyalty program is bobbling along, you’re going to start to see customers dropping off your program. It’s not necessarily because you’ve done anything wrong, but it’s also inevitable.
Why? Well, think of it this way. How many loyalty programs have you signed up for in your life? And how many are you a member of now? If you’re like most people, you would have signed up with 10-15, and you will currently be an active participant in 1-2.
The only way to ensure participation is to spend money promoting the program - or start offering more attractive rewards. Either way, it’s going to affect the profitability of your program. There is a solution, however.
Perhaps what you need is a digital loyalty platform?
Ok, let’s start by having a closer look at exactly what a digital platform is.
When it comes to music, you have millions of people who love music - and you have thousands of different bands. Spotify is a digital platform that introduces people to bands, and bands to people.
When it comes to delivery food, there are millions of people looking for dinner, and thousands of restaurants. Takeaway.com is a digital platform that introduces hungry people to restaurants and restaurants to hungry people.
When it comes to loyalty, there are millions of people looking for savings and rewards, and thousands of companies. A digital loyalty platform introduces these people to those companies.
Digital loyalty platforms have other advantages too
Being part of a larger digital loyalty platform gives your business most of the positives of a traditional loyalty program, but without the negatives.
- Accurate, usable customer data - Automatically collect valuable data which tells you what they like? How well different campaigns work? What promotions get the best response.
- Make collecting points easy - Digital platforms allow your customers to link their debit card to their loyalty account, meaning they collect points automatically, and you collect relevant data automatically.
- An ‘Open’ platform - Open platform members can collect points everywhere with a single account - but they can only redeem the points they collect with you, at your store. This ensures much higher participation and trust.
- Multiple tools and channels - You’ll have access to software that not only collects points and sets rewards, but also allows you to use multiple channels for promotion (email marketing, newsletters).
- Promote your loyalty program. Once you’ve made a decision, it’s time to promote your program directly to your existing and potential customers. Banner on site, socials, newsletter, promote it in the email after orders. Make them enthusiastic.
Don’t create your own loyalty program. There’s a better way.
Before you spend a huge amount of time and money on creating a loyalty program, why don’t you speak to a loyalty expert at Piggy?
Our team has been helping businesses build customer loyalty for 7 years, and they can quickly let you know if a digital loyalty platform is right for your business.
Create an appointment with a loyalty expert by clicking here.