“Customer satisfaction is worthless. Customer loyalty is priceless.”
– Jeffrey Gitomer
In the world of customer loyalty programs, building a reward system that stands out is a major endeavor for any company, and it can be a game-changing opportunity if created with care and precision.
“But where should I start?” “How long will it take to implement?” “What features should we include?” “Are there any common mistakes to avoid?” “What if my customers don’t like it?” — these are questions you’ve probably asked yourself while doing your research.
Still, if you’re reading this, then you’re undoubtedly determined to get to the bottom of things. And you’ve certainly come to the right place! This article is a definitive guide to customer loyalty/ reward programmes, which offers a wealth of information to anyone interested in retaining shoppers and driving their business goals.
Turning customers into brand loyalists is no easy feat. For one thing, you need a predictable and repeatable strategy for incentivizing customers to buy from you over again…
And that’s where customer loyalty programs come in.
As a customer retention solution, loyalty programs provide the means to change customer behavior and drive various business goals — when implemented with care and forethought.
With that being said, you’re required to hit a certain milestone in order to make it work. For instance, you need to realize the business goals beforehand, so you can effectively move them with the loyalty program elements.
So What is customer loyalty or Reward program?
Let’s dive deep to understand better.
A loyalty program is a marketing strategy designed to encourage customers to continue to shop at or use the services of a business associated with the program. Today, such programs cover most types of commerce, each having varying features and rewards schemes, including in banking, entertainment, hospitality, retailing and travel.
It is a customer’s willingness to repeatedly return to a company to conduct some type of business due to the delightful and remarkable experiences they have with that brand. In simple words, it is a type of rewards program that is offered by a company to its customers who make frequent purchases. A rewards program can be of many types and may include customer free merchandise, coupons, and rewards or in some cases, advance release of their product.
Customer Loyalty have been reviled in the business press as cheap promotional devices, short-term fads, giving something for nothing. Yet they’ve been around for more than a decade, and more companies, not fewer, are jumping on the bandwagon. From airlines offering frequent flier deals to telecommunications companies lowering their fees to get more volume, organizations are spending millions of dollars developing and implementing rewards programs. Rewards can and do build customers’ loyalty, and most companies now appreciate how valuable that loyalty can be.
Since, with the right initiative, you can turn first-time buyers into repeat customers, and keep your brand top of mind.
“A loyalty card program is an incentive plan that allows a retail business to gather data about its customers… A secondary goal of a loyalty card program is to build repeat business by offering participating customers something that isn’t available to non-participating customers.”
Why Are Loyalty Programs Important?
In recent years, brands and retailers have started building brand love as part of their retention strategy. And rightfully so: loyal customers not only have a higher purchase frequency and lifetime value, but they also help you acquire through word of mouth or, more formally, through friend referrals. Loyalty programs came into existence when companies realized that the competitive advantage that they once experienced due to product differentiation no longer holds good due to a proliferation of similar looking and “me too” products. Bringing forward the best-in-class brands showing how reward systems are helping them build, grow, and engage their communities.
Loyalty Program Types
Customer Loyalty Programs take a lot of different forms. Some businesses decide to use only one model, while others may combine two or more!
Customer loyalty programs are more prevalent than ever and across all sectors. The evolution of digital technologies has placed the customer in control, dictating to brands what they want and expect from them.
This has led to a shift towards data-driven marketing and customer-centric strategies, often facilitated through an integrated loyalty program.
A combination of technology and innovative marketing has seen the creation of many types of loyalty strategies, designed to engage and retain customers.
Although the strategies have different fundamentals the objectives are the same, Understand, Reward, Engage, Retain customers and in turn increase profits and frequency of customers purchase.
Some of the most popular loyalty programs include;
- Earn & Burn — Reward redemption :
This is the most traditional approach to loyalty: members can redeem customer loyalty rewards in exchange for spending money. These kinds of programs encourage people to keep purchasing to see that their spend is valued.
- Ease of use: The rule here is pretty straightforward: rack up the loyalty currency and redeem it. Customers can quickly grasp the rules and start participating.
- Incentivized customer identification: Since all kinds of purchases are rewarded, customers are compelled to identify themselves both online and offline.
- Fast implementation: As Earn & Burn loyalty programs treat all customers equally, there’s no need for further segmentation. The implementation process is also very quick and easy.
- Convenient and easy-to-budget: These programs are easy to manage because the rate of reward redemption is determined by the available loyalty currency.
- High perceived value: Customers see the rewards as great deals, believing they have a higher value than the actual cost. This has a positive effect on engagement rates.
Earn & Burn loyalty programs build transactional loyalty only, which reinforces discount culture. Moreover, it’s difficult to add relevant personalization, and competitors can easily copy the formula with better discounts because it lacks a unique selling point.
(Best fit for: Services, hospitality, Electronics, Groceries, General retailers.)
2. Tiered programs — Progress & Benefit
With a tier-based loyalty program, customers gain access to greater benefits and rewards by advancing through the ranks. Tiered programs encourage customers to spend and engage more in order to reach the next tier level or, in the case of tier expiration, maintain their current tier.
- Add value to status: Tier levels are associated with benefits. The higher the tier, the more exclusive the brand experience is.
- Create more targeted experiences: Segment your customer base more effectively with tiers. Doing so improves the experience and provides targeted communication.
- Establish a long-lasting relationship: Tier-based programs keep customers engaged for a longer period of time. And it’s an excellent gamification element, because reaching a new tier feels like an achievement, pushing the customer to keep ranking up.
- Use behavioral science in your favor: Maintaining tier levels is just as important and desirable for customers as reaching higher ranks. Customers are willing to keep spending to prevent losing valued privileges.
- Shield yourself from the competition: Distinguish your customer experience from the competitors’ with great benefits for the highest tiers. Also, high commitment time discourages high-spenders from switching.
Tier levels represent an achievable status for customers. Once reached, they feel entitled to the related benefits, but this kind of sentiment can make it more difficult to adjust the benefits later on.
(Best fit for: Luxury brands and retailers, Fashion and lifestyle, Beauty, Athleisure, Home Décor.)
3. Perks — Join & Enjoy
A loyalty program based on perks grants benefits and rewards to all members, regardless of how long a member has been enrolled. The expectation is to generate emotional attachment with the brand, which could lead to recurring purchases.
- Support brand building: Associating your brand with a great shopping experience has a high potential to drive additional customer acquisition and promote brand awareness.
- Generate a sense of gratitude: Since benefits are granted unconditionally, members feel indebted, rather than entitled, to the privileges. This helps to establish an emotional connection.
- Easy to manage: Running a perks program isn’t difficult: there’s no liability due to the absence of points, and you’re free from commitments since there are no achievable statuses.
- High value for actual cost: Exclusive services and transaction-related privileges are seen as valuable, even though they represent a relatively low cost for companies in most cases.
- Highlight services unique to your brand: If your business is characterized by exclusive services that are hard to duplicate, it’s a great idea to put them in the spotlight with the help of a perks program.
There’s a lack of segmentation, which can lead to low personalization. Perks programs also suffer from a lack of customer investment. Since customers have no clear goal to work towards, their shopping behavior is slower to change.
(Best fit for: Fashion ,Fast Fashion, Beauty, Luxury Fashion.)
4. Gamified programs — Play & Unlock
Who doesn’t love games?
A good idea is to turn your loyalty program into a game application to encourage repeat purchases, increase customer loyalty, entertain customers and help strengthen your brand’s image in a more entertainment way.
This type of loyalty program is based on completing challenges or collecting badges to engage customers in a gamified way. The goal is to encourage members to interact regularly with touchpoints and repeat their behavior so that they don’t lose their privileges.
- Encourage repetitive behavior: Associate each challenge with a benefit. If customers wish to continue their progress, they need to repeat certain actions, fostering the creation of a habit.
- Engagement beyond transactions: Customers can also be prompted to complete other engagement actions, such as social media sharing, content creation or other brand engagement.
- Incentivize specific interactions: Since each challenge (or badge) is the result of a series of interactions, you can pick the ones that fit your business goals the most.
- Gamified customer experience: By associating incentives with a challenge or a badge, customers have to complete a mission in order to unlock a benefit, just like in a game.
- A safe choice to launch with: These programs encourage customers to follow your instructions in a fun way, without feeling restricted. Explore how customers respond to incentives and use that valuable loyalty data later on.
A potential issue with gamified loyalty programs if challenges become too complex, it can be hard to explain the rules, demanding additional communication efforts on your part. The system also requires regular updates, or else the concept becomes stale and customers abandon the program.
(Best fit for: Retail, Beauty, Fast Fashion, sportswear, Activewear, Retail)
5. Loyalty Communities — Target & Engage
Communities are smaller clubs within the loyalty program. They are based on specific topics, interests, or values that are important to your customer. Therefore you can strengthen your relationship with them.
- Add an unlimited number of communities: The goal of setting up communities is to provide each of your customer segments with an experience that goes beyond transactions, setting you apart from the competition.
- Connect with customers via their interests: Communities can be centered around a popular product, such as a gaming console; a lifestyle or hobby, for example running or wellness; or even ethical values, like sustainability.
- Support brand building: Associate your brand with a sense of belonging by attracting customers with specific interests. Community membership can be free or tied to access criteria.
- Highly personalized experience: By targeting a smaller audience with a common interest you’ll get to know these customers better and be able to provide targeted offers that really resonate.
Communities aren’t standalone loyalty programs, but are instead an add-on to another loyalty program structure, such as Earn & Burn, allowing you to add new touchpoints to your original framework.
(Best fit for: Retail, Beauty, Fast Fashion, sportswear, Activewear, Retail)
6. Hybrid loyalty programs
A hybrid loyalty program merges two or more types of programs together, because mixing multiple elements is often the key to adapting a loyalty scheme that fits your business strategy.
- Select the best from each program type: Bypass the limitations of each type of loyalty program and reach your full potential. Start with some functionalities from one type, and mix things up later on by adding exciting new elements.
- Move the most important KPIs: Each program type contributes to moving KPIs in its own way. With a mixed program, you can easily drive non-commercial goals, such as supporting your brand positioning.
- Cater to your target audience: Reach your audience more effectively by optimizing your loyalty program over time. Introduce elements from various loyalty program structures that really resonate with your customers.
- Connect with your customers’ values: Make a lasting impact by introducing features that support your brand’s message. Reward sustainability or an active lifestyle to connect with customers who share your brand’s values.
- Flexibility from the start: Play around with various elements from different program types and see what works. You don’t need to commit yourself to one idea alone — you can always introduce something new.
(Best fit for: Retail, Beauty, Fast Fashion, sportswear, Activewear, Retail)
7. Coalition & umbrella loyalty programs
Although not exactly loyalty program types, it is still worth talking about coalition and umbrella loyalty programs. These programs aim to unite multiple brands under the same roof. On one hand, coalition programs speak to independent brands. On the other hand umbrella programs bring together brands that belong to the same corporate group. Just think about PepsiCo’s portfolio of brands.
The downside of this approach is that the planning phase takes much longer than one-brand rewards programs. Brand dilution is another risk: there’s a lot left to be desired in terms of making the experience more personal from each individual brand’s standpoint.
Coalition programs are interesting in that they are operated by more than one business.
In theory, these programs are appealing. They seem like they will elevate a brand’s transaction levels. However, they aren’t efficient at creating actual loyalty. Coalition programs promote loyalty to the program itself rather than the actual partner brands.
Loyalty programs need to be customer-focused and brand-aligned. They need to be used to differentiate. Collation models lack delivery on that because they are one-size-fits-all programs. The focus becomes on the program itself and not the retailers.
That’s why coalition programs have been largely successful in the U.S.
- Customers can earn rewards more quickly and have more choice on where to use them
- Each brand gets access to an expanded customer base
- Many of the operational costs to run the program including marketing and the rewards funding are shared with other partners
- The rewards redemption liability is managed by the coalition itself rather then the individual brands
- The data collected is usually owned by the coalition and siloed away from the individual retailers
- No ability for individual retailers to differentiate their loyalty program
- Coalition programs do not give you a competitive advantage or differentiate your company in the marketplace.
- Risk of customers earning points with your brand and redeeming them with a competitor
In theory, coalition loyalty programs seem to make sense. Members can earn and redeem points at any of the participating member brands. However, these programs engender loyalty to the program itself and not the actual brand. Given that differentiation is crucial in today’s marketplace, brands are better off investing in their own loyalty programs to stand out from the competition.
If you’re simply trying to get as many consumers to sign up for your loyalty program as possible, then a traditional free program might be the best fit. These types of programs don’t have many barriers to entry, but they’re universal and by nature don’t do a good job at differentiating your brand.
On the other hand, if you’re concerned about getting your most committed customers to engage with your brand even more, premium loyalty could be exactly what you need to elevate those relationships to the next level.
Coming up with a hybrid loyalty program could potentially appeal to your customers at all levels. A free transaction-based program could get casual customers in your loyalty ecosystem. Once they’re in, it’s much easier to demonstrate the value that a premium tier could offer which will ultimately lead to increased engagement and brand love.
One thing is for sure with any type of loyalty program: It’s not going to be successful unless the customer is at the center of it.
Benefits of Customer Loyalty Programs
- Increase revenue: Increasing customer retention helps boost profits simply because loyal customers already have trust in your brand and therefore are likely to spend more. According to the research referenced above, increasing retention by just 5% through customer loyalty programs can boost revenue by 25 to 95%.
- Save money: While creating and implementing a loyalty program is an investment, customer retention strategies are often less expensive than attracting new customers. Acquiring new customers can be 25% more expensive than retaining current customers.
- Gather valuable data: Most modern consumers prefer a personalized experience. So by encouraging your customers to fill out profiles as part of your loyalty program, you can get the data so you can not only personalize the customer experience, but to also create targeted marketing campaigns, increase your bond with customers, and even implement your referral program.
- Make consumers feel appreciated: A comprehensive, personalized loyalty program will make your customers feel like they have an emotional connection with your brand and will increase customer patience in case of mishaps. You can increase appreciation by incorporating “surprise and delight” points or rewards for special occasions such as a customer’s birthday.
- Increase sales: By personalizing the consumer shopping experience through gathered data, you can make better suggestions to your customers, which will then increase the likelihood that your customers will purchase a suggested product.
- Measure loyalty through engagement: Program data allows you to track analytics and view reports, measuring the efficacy of customer loyalty on your sales. Measure important retention metrics like program engagement, repeat customer rate, and purchase frequency.
- Better communication: Loyalty programs give you a direct way to communicate to customers, which can be particularly useful in an emergency such as a recall. By matching purchase dates, you can email relevant customers about a recalled product instead of sending out a generalized email which will be ignored. In addition, you can utilize your loyalty program to promote sales, special events, and showcase new products.
- A good program is self-sufficient: While it takes a bit of work to structure a strong loyalty campaign and to find the software that fits your needs, the program itself is self-sufficient. While it is advised that you monitor its metrics, the program will continue to run on your chosen settings.
- Attract new customers: A good rewards program can attract new customers in several ways. First, if you offer points or discounts for signup, you will automatically be able to add new customers to your mailing list simply because customers want to take advantage of discounts. Meanwhile, if a customer sees a good loyalty program where rewards are within reach, they are more likely to try your brand simply because the rewards are easily accessible.
On the other hand, customers who are satisfied with your brand may share their experience with friends even without a referral program. Of course, it is fairly easy to incorporate your loyalty and referral rewards into an omni-channel platform in order to further boost referrals and attract new customers.
- Plenty of room for growth: A good loyalty program doesn’t need to be stagnant. While loyalty programs are fairly self-sufficient, you can also change and improve your loyalty program by incorporating even more marketing aspects, including referral marketing and visual commerce. For instance, if your company needs a stock of customer photos featuring a new product, your loyal customers will be your go-to source. After all, who better to promote your brand in a photo than someone who is already familiar with your products?
By creating a comprehensive loyalty program that allows for modern marketing techniques, you can turn your customers into advocates for your brand. Since modern consumers trust peers over advertising, fostering loyal customers who will then speak out on your behalf is simply a smart business move.
While loyalty programs do take a bit of work and planning, they are certainly worth implementing and will help ensure future business success.
How to set up a loyalty rewards program?
Loyalty programs have a number of advantages such as increased company revenue and the ability to collect new customers. They are an important marketing tool and a valuable weapon for your company to differentiate itself from its competitors.
A good loyalty program can further the impact of a good customer experience- however, it will not compensate for a bad one. Companies need the right metrics to measure customer experience in a multichannel retail marketplace and they need to make that experience the starting point for strategy. The loyalty program, as part of that experience, also needs metrics including Key Performance Indicators. A great loyalty program uses the customer data it acquires to drive value across the entire business.
The first step in implementing a successful loyalty program is to choose a great name. The name of the program needs to arouse curiosity and interest to encourage customers to participate. It also needs to be easily distinguished from the numerous loyalty programs that consumers are probably already a part of. Create a deeper meaning for the program. It’s your job to make it more about values and less about the money, getting your customers excited about it.
Another important step are the rewards. Your customers should receive rewards for their purchases, as well as for other actions like: watching product videos, engaging in your mobile app, following and sharing social media content, and subscribing to your blog. Offer more than discounts, customers who spend at a certain threshold or earn enough loyalty points could turn them in for free tickets to events and entertainment, free subscriptions to additional products and services, or even donations in their name to the charity of their choice.
In today’s customer-centric and data-reliant business landscape, a loyalty program is often only as good as the technology that supports it. The main goals of any good loyalty program (customer acquisition, customer retention, gathering customer data and insights, building brand affinity etc.) all rely on technologies to be realized. Companies often lack the resources and expertise to implement the technological capabilities needed to optimally reach customers. This makes choosing the right loyalty technology partner one of the most important decisions a company can make.
It is also important that each department within your business fully understand, support and embrace the loyalty strategy that you’re going to unveil. Once your plan is in place, provide training at all levels within your business. The training program should be an ongoing employee obligation. This will offer the highest possible success rate to impact your company’s loyalty program.
Deploying a loyalty program is a great first step. However, measuring the results you are generating for your business is vital. With this, you can detect what is right and wrong and always have the ability to improve it. An analysis every three months will provide the insights needed for the program adjustments.
Customer loyalty programs are crucial to building a better business, no matter how big or small your enterprise is. By creating a program that is attractive to your consumer, analyzing your results and training your employees correctly, you can insure that both your loyalty program and your business reach their full potential.
The Winning Formula for Loyalty
This new trend of customers resisting the price war is something savvy retailers can capitalize on. To give you another perspective, think about customer loyalty as friendship. Buyers who are also brand advocates will stick with you even when the competition is offering a bigger discount.
But what are the factors that play a role in developing friendship? According to the Friendship Formula, there are four aspects: proximity, frequency, duration, and intensity. Let’s see these in the context of a loyalty program.
- Proximity: In order to be easily reachable by members, a loyalty program should be present on all available channels — on the website, on social media, on their mobile, in the store, and even in the customers’ daily life. Moreover, these channels should be seamlessly tied together with a sound omnichannel strategy
- Frequency: One big takeaway from customer lifecycle marketing is that true loyalty cannot be formed if people are only engaged when they buy something. Step beyond transactions and develop touchpoints outside of the buying cycle
Frequency is important, but the best buckets would be based on customer lifestyle preferences — which is probably why personalization efforts in loyalty typically remain poor.
- Duration: Design your loyalty program with longevity in mind. Launch with a solid MVP, and add some spice later down the line with gamification, customer profiling, and holiday campaigns.
- Intensity: Make sure that the incentives are memorable. Forget the discounts; people want experiences. These can be experiential rewards, VIP perks, special interest groups, etc.
Common loyalty program mistakes:
Simply having a loyalty program doesn’t guarantee instant success, there are several defining characteristics you need to take into account in order to maximize the value. Here’s a list of blunders to avoid:
- Restrictive cost focus: Redemption limits are necessary to prevent customers from exploiting the loyalty program. But putting in too many rules or setting expiration dates that are too strict can turn the experience into a chore and lead to customer dissatisfaction. Aim for a balanced approach and let people have fun!
- Overconfidence: Everyone wants to launch with a bang, but stuffing your loyalty program full of features don’t always work out. Following the launch, the performance should be closely monitored — more on that in a later chapter — but biting off more than you can chew makes it more difficult to identify what resonates with your audience. And it’s always better to add features later on than to remove them.
- Contradictory business objectives: In a similar vein, pursuing multiple KPIs that go against each other only leads to brand dilution and customer confusion. Imagine a loyalty program, trying to increase purchase frequency and average order value for the same audience simultaneously.
- Missing data strategy: Customer data is the bedrock of any loyalty program. Without it, you won’t be able to set up customer segments and effectively A/B test your loyalty campaigns. Think about it: if data is not considered from the very beginning, there will be no benefit to the core marketing performance!
- Misalignment with the brand position: Not every loyalty feature is beneficial for every brand. By introducing an overly simple points-based loyalty program as a luxury brand, you may risk disappointing affluent buyers who were looking for exclusive experiences and VIP treatment.
Top takeaways to increase customer loyalty and retention
To stay relevant and keep your best customers happy, it’s super important to continuously optimize and update your customer retention strategies. Everything from customer marketing with campaigns based on shopper feedback to improving your omnichannel strategy can help you boost customer retention and increase trust and loyalty.
In many ways, improving retention and increasing sales comes down to creating and maintaining a bulletproof customer experience that focuses on customer communities and the social proof shared within them. Here’s a quick recap of the top 10 customer retention strategies:
- Create peaks in customer experience: A few unique, low-cost initiatives can go a long way to delighting your customers and building loyalty. Think of the last time you received a welcome surprise, it is probably easier to recall than its unwelcome counterpart. Find milestones in the customer relationship and find ways to reward customers that they won’t expect. For example, imagine a customer orders their third pair of shoes. A week later, they receive a pair of socks that match with a handwritten note thanking them for their business. These type of unexpected displays of appreciation could go a long way (especially in the social sharing world) to improve customer experience and offsetting the cost of the item many times over.
- Continually test email strategies : In addition to using the data you already have on your customers — like what they have purchased or browsed — to tailor the content and product recommendations in your email marketing campaigns, be sure to also constantly test incentives and other factors to see what is most effective. For example, find out which subject lines elicit the most opens and what cadence of email increases customer engagement for your audience.
- Create a VIP program for your customers: Customer loyalty and retention are not one-size-fits-all. The best loyalty programs incentivize the actions that matter most to your brand. For example, if you’re looking to boost lifetime value, you’ll want to base VIP tiers on spending behavior, like the total amount a customer spends or the number of times they purchase. But if you want to incentivize brand engagement, you should focus on actions like social shares, writing reviews, or referring friends.
- Be where your customers are: Consumer behavior has undoubtedly evolved. It’s the consumer who now dictates to brands where, when, and how they want to engage. Therefore, it’s incumbent upon retailers to provide a consistent and seamless experience on all channels, particularly when something goes wrong and customers need help. Research from Zendesk suggests that 87% of customers think brands need to put more effort into providing a seamless customer service experience.
- Be passionate and engaged: Truly care about your clients! For us, as an agency, that doesn’t mean smiling at your meetings and sending them little gifts (though you should do that too!), but actually doing your due diligence to constantly learn about new technologies or options that might benefit them. Be responsive to their needs and proactive in bringing ideas to the table — gathering and engaging with your customer feedback is the key to customer retention for any business.
- Offer time-limited promotions: Top eCommerce brands often present banners highlighting a time-limited promotion — visitors must complete the purchase within a preset amount of time, determined by the audience segment they belong to. In addition, you can automatically add the promotional gift card to the visitor’s cart and highlight the promotion during the checkout process. The benefit is twofold: the time-sensitive promotion boosts conversion rate and the gift card brings customers back to the website to make another purchase.
- Be transparent and honest with your customers: As an agency, we don’t hold anything back from our clients and work hard to establish a relationship built on transparency. Unlike some agencies, we work out of our client’s ad accounts so they’re always able to look into the work being done and will always own the data. We also find it important to have healthy, unambiguous conversations about ideas and strategies brought to the table. For eCommerce brands this translates to being open and upfront about everything from payment and return policies to any causes you support through your sales.
- Don’t over-promise: Align expectations with your customers regularly. Keep in mind that they only know what you tell them. Over-promising and under-delivering is an easy way to lose credibility. Improving customer trust goes a long way towards getting shoppers to love your brand — so keep everything from product descriptions to promotional offers as accurate as possible.
- Create a customer community around your brand: People don’t actually connect with your brand, they connect with the other people that connect to your brand. Give those people a voice on your website to remind your guests they aren’t buying a “product” they are buying their way into a community of like minded people, or people they want to be more like
- Incentivize social shares: Clients are often high-potential returning buyers who just need a sense of urgency, or a point of connection to your brand to come back for another round. Social sharing competitions that feature customer photos and offer great prizes are the perfect way to establish that connection in a time-sensitive way. But not all incentives are equal. Some serve as pure retention tools, while others can entice brand ambassadors to do some word-of-mouth marketing. The latter, which saves on marketing expense down the road, allows you to justify a more significant reward for your most loyal customers when they share your brand and products on social. This increases customer engagement, while bringing you high quality traffic that you would work hard to reach otherwise.
How Rewards Help Build and Engage Communities
It’s a common misconception that rewards are a great tool for building new brand communities but can’t do much to help strengthen an existing one. However, this couldn’t be further from the truth!
“Rewards don’t just help you start a brand community — they also help you sustain one.”
To build an active, authentic community — for employees and/or customers — it’s important to “offer the kinds of rewards that lead to true customer loyalty.” Reward programs need to reflect the needs of consumers with features like:
- Personalization: This is vital at every stage — from the powerful moment of reward delivery and ongoing communications with program updates and messaging. Technology makes this level of personalization possible today, so your rewards should reflect this and stay ahead of the recipient’s expectations. Give them choices and make the program their own.
- Technology forward: Wielding technology deftly and with forethought can make the reward process more powerful for everyone involved. From an API platform that offers efficiencies from initial implementation all the way to instant, digital reward delivery on the recipient’s platform of choice (think mobile first), technology can have huge impacts on the success of communities.
- Build Relationships: Because of the way digital rewards are delivered, there is an opportunity for limitless communications. Relationships can be built and maintained through regular outreach containing things like reward program updates, additional offers and other pertinent information. With rewards, brands, employers and market research companies can keep target audiences engaged for longer periods of time…building relationships that last!
The right rewards program can empower communities and give brands important touchpoints with target audience members. Choosing the right digital reward can create a more meaningful, personalized experience for the consumer, as they benefit from relevant messaging and the marketer benefits from greater satisfaction equaling ongoing future engagement.
Loyalty Program Strategy: Best Practices to align with your Business Strategy:
Customer loyalty programs are at their core tactical mechanisms for altering the behaviors of specific customers. The behaviors you most want, however, might be quite different, depending on your business model and competitive situation. If you can’t now identify your customers across channels or stores or business units, a loyalty program can help you do that. If you can track your customers individually, but you have little opportunity to interact with them, a loyalty program can provide more opportunities to do that.
A great loyalty strategy runs in sync with the business and permeates virtually every customer-facing aspect.
Implement these best practices to optimize your loyalty program strategy to better match your overall business strategy and to increase customer retention.
- Data insights to better understand your existing customer base: Never waste an opportunity to gain insights about a customer, as it can drastically improve customer experience and customer satisfaction. Best-practice loyalty programs do this by offering a choice of services or treatments, and this choice itself will reveal something about a customer.
The point of gaining insight, of course, is to use it. So the best loyalty programs are connected seamlessly to their owners’ customer databases, and are managed in such a way as to ensure that useful customer information is not only collected, but utilized to increase sales and improve the customer journey. For example, customer data can also be used to increase sales opportunities by creating statistical models to identify the best customers and prospects and the most effective touch cadence throughout the customer lifecycle.
- Open-ness to make your rewards program stand out from the crowd: Consumers value openness; that is, they want your service or program to work with others. The more open your system is, the more beneficial it is to existing customers. Openness is inevitable in loyalty programs of all types, from retail reward programs to frequent flyer miles.
All customer loyalty programs are evolving into more and more open architectures, driven by customer demand. A coalition loyalty program involves an array of companies from which points can be earned and redeemed. Because such programs offer participants more opportunities to earn points, and more places to redeem them, they are generally well regarded by consumers. However, many coalition programs run by third-party intermediaries fail to make detailed customer transaction information available to points issuers, which significantly undermines their benefits to the companies that participate in them.
The main benefit of a loyalty program for the marketer is insights on individual customers, so the more choices the consumer-member has, the better — but only if offering these choices doesn’t undermine the marketer’s ability to gain customer insight. Transferable points and rewards offer loyal customer the greatest flexibility in using program earnings. By showing customers that you understand what they want, you can increase their loyalty to your brand, above and beyond just providing rewards and points.
- Modularity to enhance customer service : An effective loyalty program must be structured in modules, enabling participants to mix and match aspects to their own preferences. Modular offerings are a practical way to allow for customer-driven personalization without going to the extreme of full (and costly) customization. Organizations can develop several alternatives to key aspects of a program, like member qualification, for example, and can offer customers a set of guided choices to select from.
Modularity is also critical if a loyalty program is to operate efficiently in multiple channels, such as online, mobile app, and in a physical store.
Additionally, a sophisticated marketing approach to a loyalty program improves customer service by offering different sets of choices for different groups of customers based on their value — so everybody wouldn’t be choosing from the same set. Anyone who’s ever reached a gold or platinum level in an airline frequent flyer program, for example, knows that the prizes offered at these levels are different than those offered at the basic level.
A modular structure should allow partners, prizes, and currencies to be added to or subtracted from a program through a kind of plug-and-play method, without requiring a rewiring of the entire program.
- Relationship Management to quickly reward loyal customers: All loyalty programs should be managed around the customer relationships involved in the programs, rather than the products offered, channels used, or regions served. Chief marketers should align their loyalty program’s goals with their organization’s goals by making sets of customers the direct responsibility of particular managers or management groups. Then they should measure those managers by the positive impact they have on customer behavior.
Organize a loyalty program’s marketing efforts so the customers whose behaviors are targeted for change are taken care of by people whose annual evaluations are based on improving the numbers with respect to those customers. This will not only be a catalyst for genuine successes with a loyalty program, but it will also send a clear signal that it’s necessary to make progress in each customer segment.
Relationship management also implies paying attention to customers in real time, rather than in mail-order time, or on a billing cycle. For a retail business this means linking the point-of-sale system to the loyalty program, so real-time offers and messages can be delivered to the customer during actual purchase transactions. And when a service glitch occurs, an apology (perhaps sent via personalized email) to those customers affected by the glitch is more necessary than ever. This apology could include an offering of a loyalty program’s currency as compensation to help soothe the wronged customer. Studies show that when a customer has any kind of service problem immediately redressed, or an apology rendered, the relationship can improve, and the more immediate the response, the more dramatic the improvement.
One way forward-thinking companies are linking immediacy to their customer interactions is through social media. These firms use social media tools to enhance relationships with their loyalty program customer-members, even building communities of customers with similar interests.
- Simplicity to improve the customer experience: A program with fewer rules and restrictions is more engaging for the customer, and it’s more trustworthy. It’s better to narrow your rewards offers to those that can be delivered dependably, rather than including elements that can’t be relied upon, simply because they may not be available. Every time a frequent flyer tries to redeem miles and is frustrated by the lack of “mileage” seats available, his trust in the airline’s brand declines — and so does his likelihood of repurchase.
Companies that can’t deliver reliably on what their loyalty marketing strategy promised risk undermining trust in their brand. So, while it’s important to manage the provision of free and discounted products in an economical way, businesses will be better off not offering deep-discount prizes at all if they can’t make them available to the vast majority of loyalty program members who will be seeking them out.
Building successful loyalty programmes
As today’s customers want value, service and rewards; merely a competitive price strategy is not enough to retain existing and acquire new customers. Competition has forced telecom operators to validate their sales and marketing strategies with loyalty programmes. Thus, customer retention is as important as customer acquisition to stay ahead of the competition. In this context, operators are focusing on how to build an effective loyalty program.
A successful loyalty program:
- Must share an equal value it earns in proportion to the value consumer gets.
- Should be aligned with companies’ objectives and goals.
- Must cater to the interest of the customers.
- Must be attainable, meaningful and relevant to the customers.
- Must have a capability to entice new customers to change their behavior’s simultaneously retaining existing customers by rewarding present behavior.
Business strategy and loyalty program strategy go hand in hand
A successful loyalty program strategy delivers insights and helps to build customer relationships by being open, modular, and simple — and by offering rewards that not only interest individual customers, but also encourage those customers to take specific actions that align with a company’s business goals. When the above loyalty program best practices are put in place, your loyalty program marketing strategy can improve the customer experience, increase customer retention, and ultimately, drive real business results
Customer Loyalty Programs empower companies and brands by offering them a way to differentiate themselves without discounting. Offering customers tangible incentives for repeatedly choosing your brand strategically increases repeat purchase rates and lifetime value.
“A loyalty program is essential for every product & service provider to build a deeper emotional connection with customers in more meaningful ways — outside of the buying cycle, through content, service & experiences. It’s also a tool for supercharging your marketing efforts with additional customer insight, which increases relevance.”- Loyalty programs should go beyond simply rewarding purchases to foster brand love that doesn’t rely on the temptation of discounts.
“Loyalty” itself is not a program, but rather an outcome based on the perceived value each customer gets from your business. It is ideal tools to incentivize profiling, allowing businesses to segment their customers better and increase relevance through personalization.
I really hope you find this extensive guide useful. Don’t forget, customer loyalty programs are excellent customer retention tools. So I wish you plenty of luck and success on your endeavor to build and run your own program.
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