eStar chief client officer Richard Berridge discusses why loyalty is important and not all about discounts.
Building a loyal customer base is one of the key foundations to retail success.
Customers who are loyal to your brand spend more, and more frequently.
They refer more customers than those who are brand agnostic. They are your greatest advocates, your greatest revenue driver, and your greatest source of feedback.
Historically, the old adage is that it costs 5 times more to acquire a new customer than to retain an existing customer.
Whether or not this exactly holds true in your business, there is no debate that engaging and retaining existing customers and building enduring loyalty is a more efficient growth path than focusing entirely on introducing new customers to your brand.
Nurturing a loyal customer base is even more important where retailers have a higher Customer Acquisition Cost (CAC) that needs to be rewarded with a higher Lifetime Value (LTV).
Loyalty is more than discounts
When building out a loyalty programme, some retailers tend to focus too heavily on discount tiers – using price as the sole reward for loyal customers.
Yes, discounts, free shipping, or giveaways are, and always will be key drivers but ultimately if your loyalty programme only provides a discount, you are simply competing on price.
Loyal customers want to feel valued by your customer, recognised for their repeated decision to shop with you rather than the competitors.
This means you need to engage these customers differently, making them feel part of an exclusive club:
- Consider ways to differentiate the service to loyalty members. Air New Zealand is a good example of this differentiated service, checking each Elite tier flyer prior to takeoff
- If you run in-store events, establish some of these to be exclusive to loyalty members
- Provide early access to limited edition products, or promotions with limited supply.
- Use the rich data gathered through your loyalty programme to precisely segment your email campaigns so that messaging can be very personalised and ensure that emails going to loyalty members acknowledge their status and are visually differentiated.
- Donate and support social and community causes through loyalty member purchases. This provides your loyalty group with a sense of worth. Toms have built their business model around social impact which has fostered a loyal community around their brand and supported numerous worthy causes.
There are many ways to give loyal customers that exclusive feel, the important component is to closely tie to your brand positioning, so that it feels like a natural interaction for your customers.
Loyalty programme considerations
Beyond the technical solution for your loyalty system, you should consider how customers will earn and redeem, and how they will be communicated to at key customer touchpoints.
Think beyond customer spend, encourage the creation of social proof – a social media share, the posting of an image or video with their purchase, a review, a referral.
All these activities provide value and allow customers to earn between purchases.
Consider loyalty at each point in the customer journey to ensure it is kept front-of-mind.
On the product detail page or swing tag communicate the corresponding reward, throughout the checkout process communicate requirements to promote to the next tier, on post-purchase email flows encourage earning through feedback.
Personalise the content with their current status, any earned rewards, and requirements for the next tier. All this information should be accessible on their account page.
Provide customers with a seamless loyalty experience as they transition between online and in-store.
Make it easy by removing any need for a plastic card and identify your customers through email or phone number.
Lastly, make the entry-level reward easily achievable to get customers buy-in without a significant hurdle.
If you don’t run a loyalty programme the great news is that you have a fantastic growth opportunity ahead.
Recognising and rewarding your most valuable customers builds a positive feedback loop, encouraging your top spending brand advocates to refer other likeminded customers.
But fostering this depth of loyalty without a loyalty programme is challenging - according to Econsultancy, 84% of millennials say they wouldn’t be loyal to a brand if they don’t offer a loyalty programme.
So the development of a loyalty programme designed to recognise, reward, and nurture this customer group needs to be a core part of your customer engagement strategy.