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What is Customer Loyalty Programs?

Years ago, to create successful customer loyalty programs, companies would just enroll customers and give them some discounts and maybe occasional free shipping. But today, customers have become more sophisticated and demanding. They expect a higher level of personalisation and engagement that recognises who they are and what they want. And they also expect brands to listen to them. In other words, today’s consumers increasingly want to be both seen and heard.


Direct-to-consumer (D2C) brands, which are enjoying phenomenal growth, are at the forefront of personalising their customer loyalty programs, successfully building customer loyalty through interactions in multiple channels. Larger companies have noted the growth of D2C brands and want in on the action. For example, Nike’s D2C sales were $6.6 billion in 2015 but are expected to be $16 billion by 2020.


But it’s not easy to build your brand with D2C relationships. You need to deeply analyze your customer relationships and strategically determine the best ways to manage them. Let’s look at some basics of customer loyalty programs today.


But what is Customer Loyalty?


Customer loyalty is achieved when customers purchase your product or service repeatedly, enthusiastically, and without much consideration of your competition. It’s typically the result of offering a terrific product, combined with authentic branding, personalized marketing, and excellent customer service. Most importantly, customer loyalty is the ultimate goal of nearly every company.


Who Are Your Loyal Customers?


Who exactly are we referring to when we talk about loyal customers? Who do you want to reward? Loyal customers are often defined as those who make repeat purchases, perhaps those who come back to purchase five times or more. But 38% of consumers say what they dislike most about many customer loyalty programs is that the only way to earn points is through making purchases. Although you should definitely be accounting for the people who purchase repeatedly AND those who make larger, less frequent purchases, I’d recommend exploring other ways to determine customer loyalty.

Beyond purchases, customers engaging with your brand in the following ways should also be considered loyalists:

  • Those who follow you on social media, and better yet, engage with your brand on social media or post photos of themselves with your products on their accounts

  • Those who refer other consumers to you. You should have an active referral program that both promotes and tracks referrals.

  • Those who review your products

  • Those who engage with your products in other ways


Why Is Customer Loyalty Important?


Loyal customers are one of the most valuable assets of any business. They provide a stable revenue stream, ongoing referrals, and strong social proof that are the lifeblood of any successful company. According to business.com, returning customers also spend 67% more than new customers. Some other advantages include:

  • Savings on marketing costs: Attracting new customers requires market research, advertising budget, time, resources, and strategy. On the other hand, existing customers are already in your email list, and many are engaging with your brand on social media.

  • Sell new products: Assuming that they enjoy their previous purchases, it should be relatively easy to convince them to try other products as well.

  • Build referrals: According to HubSpot Research, 81% of customers trust recommendations from friends and family. When you build customer loyalty, you’re also building essential referral networks. They’ll help spread the message about your brand, get more eyes on your offerings, and boost conversions.

  • Increase sales and profits: 65% of a company's revenue comes from existing customers. A 5% boost in your customer retention will help increase profits by 25% to 95%.

Customer loyalty is incredibly essential for both online and offline businesses. Now, let's take a look at how to build customer loyalty.


How to Build Customer Loyalty and Retain It


Provide outstanding customer service

Excellent service can help to create lifelong customers. According to American Express, about 60% of customers will consider switching brands after two to three instances of poor service5. Listen to your customers' needs and provide a solution to their requests and concerns in a timely manner. Also, make it easier for your customers to get in touch with your business by leveraging available technologies. Many companies are starting to employ AI chatbots to provide 24/7 assistance to website visitors. These chatbots can provide relevant product recommendations that help to boost conversions and even upsell consumers.


Reward customers with special offers and discounts

Keep your customers coming back by giving them special offers, sales, and discounts as a “thank you” for their business. Ensure that the special offer or discount is relevant to the needs of each particular customer to increase success rates. Regardless of your preferred strategy, always make an effort to help them feel appreciated.


Leverage user-generated content (UGC)

Businesses can build and maintain customer loyalty by promoting user-generated content (UGC). The UGC strategy helps your audience feel seen — like they’re part of your brand. To create an effective UGC campaign, you can develop a hashtag that people use to participate in your program. Many customers will take part just to see their images or stories shared on your company page. Or, they may join in on the fun if you provide an incentive, like a giveaway. Examples of UGC includes photos of customers wearing their favorite items from a new clothing drop and Instagram Stories from people showing how they use a beauty brand's skincare products in their cleansing routine.


Create a unique customer loyalty program

Many businesses, including airlines and coffee shops, implement customer rewards or loyalty programs that serve as powerful tools for enticing previous customers to return. Customers can accumulate points through the loyalty program, which can be converted to shopping vouchers, exclusive holiday rewards, and more. It's also an excellent way to upsell — patrons could earn more points with higher values.


You could also discount new products and those items in need of promotion. Also, consider offering rewards for reviews of your products to build loyalty and attract new customers with your rave reviews. Referral programs are also a must. Give an award to customers when someone they refer makes a purchase.


Know your customers

When contemplating how to build customer loyalty, you must take the time to understand your customers on a personal level. Listen to them, share your values, and build a relationship with them. If you want loyal customers, you need to develop a customer-oriented mindset. Let your customers understand that you have their best interests at heart. Also, ensure that you reflect this in your actions.


Create a sense of community

Take advantage of the numerous social media platforms to create a community for your current and potential customers. Through the community, you can start a conversation with your existing customers and target audience. You can also encourage them to post photos or videos of themselves with your product to launch a UGC campaign, as discussed above.


Get personal

Get personal by creating customised emails and messages for each recipient. Personalised emails are known to deliver 6x higher engagement rates than impersonal emails. In the email, address the customer by their name, and include a personalised message that appeals to their unique interests. For example, you can send special greetings and offers on their birthday and customer anniversary to treat them to something fun. This type of gift builds emotional ties and positive feelings toward your brand.

Beyond customised emails, don't forget to use personalisation in retargeting campaigns to existing customers, as well. A remarketing campaign focusing on past customers can encourage them to come back and make a purchase, and even upsell them to higher-value products. Since you already have information on what they are interested in based on past purchases, you can easily create tailored product recommendations that will entice them to engage and convert.


How to Tailor Your Loyalty Rewards


Sure, look at what other businesses are doing with their loyalty programs, but you won’t achieve ultimate customer loyalty by just copying them. It’s all about connecting with YOUR customers. Develop a customer loyalty program that’s tailored to your audience. Here are some possibilities.


The usual — discounts and free shipping: No doubt about it, many customers will always appreciate discounts and free shipping. But you can engage your customers on a more personal, emotional level by getting a little creative.


Gifts: Earning points that can be redeemed for gifts is part of many customer loyalty programs. 45.8% of consumers expect this in a customer loyalty program. You might offer products not available to everyone, such as creating a special color for your VIPs. The more you can personalise gifts to your VIPs, the more loyalty you’re likely to gain.


Special access: Something that customers love and won’t cost you anything is granting your VIPs exclusive access. Give them first dibs on products going on sale. Invite them to VIP-only online or offline events.


Added convenience: If you can save your VIP customers time or grant them other conveniences, you’ll undoubtedly increase their loyalty. This might be a helpline with no waiting. In a physical setting, it might be a fast VIP check-out line, such as those commonly used by airlines and car rental agencies.


Encourage Emotional Bonds


Customer loyalty programs enable companies to recognise customers who are already loyal to one or more of their products and amp that loyalty up even higher. In a recent survey, 59.5% of consumers said they would like to join a customer loyalty program of a brand to which they’re already loyal. They want to become more deeply involved with your brand, not just get discounts. 39.4% of consumers are willing to pay more for a brand they love.


Some brands, such as Apple, even achieve cult status among their followers. For example, at one Apple conference, people vied for the opportunity to spend their time being interviewed about how they loved their Macs. It was this kind of emotional attachment that enabled Apple to successfully expand into a variety of niches and take a base of loyal customers with them. Extreme brand loyalty has also allowed Amazon to grow into much broader areas without losing their customers or their credibility.


Enable Credit Redemptions Across Channels


Some loyalty programs don’t let their customers use loyalty points across channels. In other words, they only let online buyers use their points online and not in brick and mortar stores or vice versa. This feels stingy to customers and can set back any loyalty you might have gained with your points program.


Regularly Ask Your VIPs for Feedback


Your VIP customers want both respect and personalisation. Give them both by asking for their opinions in surveys and giving incentives for reviews.


Consider a Brand Partner


Partnering with another brand is one way some brands gain a quick infusion of loyal customers. However, you must be sure your partner’s brand complements your own. You could offer incentives from other brands for members of your customer loyalty program. Or sometimes a store will have a pop-up partner store on their premises, a store within a store. The lesser-known, newer brand might gain from the name recognition of their larger partner, and the older brand might gain a trendy buzz factor from a startup partner.


There are many ways to partner with other brands, but they all demand strategy and rigorous follow-up analytics. Some retailers, such as Footlocker, integrated a Nike app into their brick and mortar stores. Shoppers could use the app to scan products and get product information, win free merchandise, and get access to exclusive releases.


How Does Customer Loyalty Improve Brand Image?


Loyal customers often share product and service feedback with your company and their networks. This type of social proof is a crucial part of the buying decision process for other consumers. You can share these testimonials, customer reviews, and feedback on your website or social media platforms.


Honest feedback can help you to improve products and service delivery, gain consumer trust, and boost sales. All of these activities will help retain customer loyalty and strengthen your brand image.


How Does Customer Loyalty Minimise Costs?


Serving loyal customers is very cost-effective. These returning customers are already familiar with the products and services you offer. They can help market them to their friends and family using word-of-mouth and social sharing. This free promotion will help minimise service and marketing costs. Since you already have their contact information, and they are likely following you on social media, it is free and easy to communicate with them about new products, sales, or other company information.


How Does Customer Loyalty Improve Forecast Accuracy?


Forecasting is a vital part of planning and running your business. Accurate forecasting makes it easier for companies to calculate growth rate, determine expenditures or discounts, and plan for emergencies. The feedback and testimonials from loyal customers will provide your business with valuable information about your product or service pricing, areas that need improvement, and the type of products these customers expect in the future. Since they purchase regularly, loyal customers can help you to set realistic expectations of sales and stabilise or offset variations in buying patterns.


Why Doesn’t Amazon Have a Loyalty Program?


You may be wondering if customer loyalty programs are so great, then why doesn’t Amazon have one? To get increased access, a free new book every month, free shipping, and other benefits, you must pay for Amazon Prime. Yet Amazon has very high brand loyalty. How do they do it? They do it by putting the customer first in every aspect of their organisation. Every decision made involves strategy about how it'll impact customers. Gaining customer loyalty isn’t just following a template. It’s considering the customer first in all your decision making.


Go the Extra Mile


Loyal customers are at the core of every successful brand. These customers are always ready to spend their money on your products and services as long as you keep delivering the quality they expect. Loyalty means ongoing revenue and less demand on your marketing budget, ad spend, and acquisition costs. This is why you need to go the extra mile to retain existing customers and encourage commitment to your brand. By following the tips provided above, you can reap the rewards of building and maintaining customer loyalty.


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