All of the statistics exploring the issue point to one obvious truth: customer loyalty programs work. Your existing customers spend about two-thirds more than new patrons. Not only that, but it costs the average business up to 25 times more to attract new clients versus selling to existing ones. Therefore, your organisation must have a plan to keep consumers coming back. Below, we will explore the psychology behind customer loyalty programs and give you six examples of programs you can build today to drive sales.
How Do You Nurture Customer Loyalty?
The willingness of a consumer to work with or buy from a brand time and again is known as customer loyalty. There are three factors that affect loyalty: the value of the services or items the consumer gets from the transaction, customer satisfaction, and a positive user experience. Consumers will continue to buy from or subscribe to brands that offer great customer support. Yet, a brand’s success relies heavily on customer loyalty. You can build a business faster with loyal customers than with sales or marketing. When customers like a brand, they will frequent your enterprise more often and spend more. And, perhaps most importantly, they will tell their friends and family about their experiences. Advertising and branded content do not compare to word-of-mouth marketing when it comes to acquiring new clients. When customers are referred to your business by their friends, they in turn become loyal and will spend more. As a matter of fact, 8 percent of site visitors are repeat customers in the United States. However, they make up 40 percent of the revenue from online shopping. Now that you know your existing customers are your greatest profit-building resource, how do you transform your satisfied customers into brand evangelists? How do you propel the growth of your brand with Facebook shares, positive tweets, and five-star Yelp reviews? We’re glad you asked.
How Customer Loyalty Programs Work
Businesses offer rewards to consumers who make frequent purchases through a customer loyalty program. The programs might offer customers
- Advanced release items
- Free merchandise
On average, consumers are part of fourteen loyalty programs. However, they can only engage in seven of them. Customers do not get any more value from the enterprises to which they are loyal, and organisations lose money from fruitless time and effort. In order to provide enough added value to your programs to keep clients coming back, you need to build a smart customer loyalty program. To help you with this, here are six examples of programs that have a track record of success.
1. Create a Customer Loyalty Game
Since everyone loves fun games, why not make your loyalty program a game that rewards repeat customers. You can also solidify your brand’s image depending on the game type you pick. You do need to be careful that you do not leave your customers feeling like you are leading them on just to get more of their money. It is crucial that your sweepstakes or contest is not duping customers out of rewards. To mitigate this risk, you should have attainable purchase requirements, and the odds of winning should not be lower than one in four. And, before you go public with the contest, make sure your legal department is on board and fully informed. One company that does this effectively is the Swarm app from Foursquare. They encourage users to check in at various locations and let friends know what they are up to. In return, they can get deals at check-in locations. Also, each week they compete in challenges for bigger prizes, like shopping trips, spa days, or dream vacations.
2. Provide All-Inclusive Offers by Partnering with Other Companies
Coalition programs are incredibly effective customer loyalty programs that involve strategic partnerships. They are an excellent way to grow your enterprise while retaining clients. In order to determine which business would be right for a partnership, you need to have a good understanding of your customers’ purchase processes and everyday lives.
For instance, a cat food company might partner with a veterinarian to provide co-branded deals that will benefit customers and your business. You are showing your clientele that you understand their needs and care enough to go above and beyond to serve them. Additionally, your network will grow to reach the customers of your partners. The Plenti program from American Express is an example of this strategy in action. For over two years now, this program has allowed shoppers to pool their rewards from Hulu, Enterprise Rent-A-Car, Rite Aid, AT&T, Macy’s, and other retailers. By linking their Plenti account to their existing loyalty cards, they can redeem points at these stores and earn points through their Amex card.
3. Consider Non-Monetary Rewards that Align with the Values of Customers
You must understand your customers’ sense of worth and values to truly understand them overall. A consumer is much more likely to be loyal to your company if you share their values. According to one study from CeB, consumers were more loyal to beliefs and not companies. Your customer base might find more value in discounted or non-monetary rewards depending on your industry. It doesn’t take much to offer discount codes and promo coupons to your clients when you want to. On the other hand, you gain a one-of-a-kind opportunity to connect with your audience when you can provide value that cannot be measured in dollars. One of the most famous examples of this in action is TOMS Shoes. For every pair of shoes consumers buy, TOMS donates a pair to a child in need. And, this program has expanded as part of the company’s mission to improve lives. They have grown to help improve maternal health care and ensure clean water access. There are even elephant-dotted TOMS for which the profits are shared with the Wildlife Conservation Society.
4. Offer VIP Benefits for a Fee
At first, charging a fee to customers for a program that is meant to break down barriers between them and your business may seem counterintuitive. However, both customers and businesses can benefit from an annual or one-time fee that bypasses common buying barriers. Address specific obstacles that cause customers to leave by introducing a custom fee-based loyalty program. Across fashion, travel, and retail, cart abandonment sits at just over 75 percent. This is often due to shipping prices and taxes producing sticker shock. Companies that thrive on repeat, frequent purchases will most benefit from a VIP program. Clients can avoid inconveniences that could inhibit future purchases.
Perhaps the most ubiquitous example of this is Amazon Prime. For just £79, users get two-day shipping on millions of items for free with no minimum purchase. Plus, there are several other benefits. With the estimated $2 billion-loss Amazon endures because of Prime, they make up for it in more frequent transactions. Prime members spend about £1,500 on average on the site, more than twice what non-members spend.
5. Institute a Tier System
Most businesses who design loyalty programs face the challenge of balancing desirable and attainable rewards. A tiered system that rewards initial loyalty and subsequent purchases can combat this problem. For joining the program, you might offer small rewards, such as £20 off a purchase of £40 or more. Then, as the consumer moves up the loyalty tiers, you can encourage repeat business by increasing the reward values, like £40 off purchases over £60. When the time between gratification and purchase is too long, you face the problem of members forgetting to redeem their points. The tiered system solves this. The main difference between the tiered system and the points system is that clients get short-term value instead of long-term benefits from the program. Insurance companies, hospitality businesses, airlines, and other higher price point, high commitment businesses will get the most out of tiered programs.
6. The Classic Points System
Points systems are the most popular method for running a loyalty program. Frequent customers earn some type of reward by earning points. To redeem their reward at the point of sale system or online, members work toward a certain point total so they can take advantage of
- Special customer treatment
The problem with this system is when businesses make the connection between rewards and points confusing. “For every two pounds you spend, you get 4.75 points. And, once you get 60 points you can get 40 percent off a purchase of £30 or more in May.” Even if you put in the time to do the math, you’ll probably still lose interest in the program. Keep the conversions intuitive and effortless as you build a points-based program. And, keep in mind, the points system is not always applicable to every business type. Retailers that want to encourage short-term, frequent purchases will benefit most from this strategy. Any of these programs can boost your customer loyalty and drive sales, the key is to choose a solution that works best for your enterprise and track the success of your program. Best of luck!