Loyalty marketing is the most powerful marketing strategy that you can prioritize for your business. Most people think good marketing is all about courting attention at all costs. But this is a paradigm that doesn’t jive with every brand. After all, what if the attention isn’t good attention? And if it is good attention, what if that attention is too fleeting to leave a mark?
A more powerful paradigm is loyalty marketing. In loyalty marketing, you set your brand up for long-term success by looking for metrics that reinforce your brand and keep it at the top of your customers’ minds.
According to McKinsey, customer loyalty isn’t guaranteed. About 30 to 40% of consumers frequently switch brands or retailers. This means that if you do court attention without emphasizing long-term loyalty, you’re still going to deal with problems like customer churn and low CLV (customer lifetime value). That’s where loyalty marketing comes in.
Loyalty marketing is a form of advertising or lead nurturing with the aim of reducing the churn rate of your customers. But let’s switch that definition to the positive. Loyalty marketing is all about keeping customers happy enough to keep buying your product or service.
Take Cora, for example. They launched a referral program with Friendbuy with the simple premise that the more friends you refer, the more money you make. However, they instilled a sense of deeper reward with tiers that enhanced the reward as you unlocked new achievements.
That’s a recipe for a relationship that goes deeper than business-customer. A customer who engages on that level becomes a brand advocate, and their long-term value is far greater than the average customer.
Ever choose one store over another because of a loyalty card? “Just three more purchases,” you thought,” and I get a freebie.” Voila. You’ve experienced loyalty marketing.
It’s that ever-enticing prospect of getting the gold at the end of the rainbow that inspires customer loyalty. From the business’s perspective, the goal is simple. Keep the customer shopping with you. Because customers are about 5 times more expensive to acquire than to keep, this can generate ROI for your marketing that’s unlike any advertising campaign meant to introduce your brand. In loyalty marketing, the name of the game is getting customers to stick around.
The trick? Loyalty can take some time to cultivate. It’s rare to find instantly loyal customers. Consider that about 88% of customers say they tend to start feeling the pull of loyalty after about three purchases with a brand.
This is more of a rule of thumb than a genuine law of nature, of course. But it’s a good way to rethink your marketing: it’s not just the first interaction that counts. It’s every customer touchpoint along the way.
You’ll be hard-pressed to find a business that would turn away loyal customers. Of course, any business would like it if customers kept buying from them. But there are specific types of businesses that might benefit especially from loyalty marketing, or turning long-term custom loyalty into their goals.
Customer loyalty isn’t some vague concept without a source. You can define it easily, usually by identifying the customers who provide the highest CLV in your business.
Variables like Net Promoter Score (NPS) evaluate customer satisfaction by having customers fill out surveys. In those surveys is a key question: how likely are customers to recommend your product or service to a friend or colleague?
Assuming a rating scale of 10, customers who rate 9-10 become “promoters,” or those who actively campaign for your brand on your behalf. 7-8 are considered “passives.” They may buy from you, but they’re not going to rave all about you at their next book club meeting. And finally, 0-6 are detractors. They may have purchased from you in the past. But if your brand comes up in conversation, their thoughts may first go to a bad experience they had.
Needless to say, you’ll want customers rating 9-10. But let’s look at some other ways to measure just who is a loyal customer.
We don’t have mind-reading devices. But we can gauge customer loyalty based on the actions they take. And although there is no single variable that will always measure customer loyalty, you can define loyal customers with a combination of these variables:
Finally, your NPS is the total percentage of promoters minus the percentage of detractors among the customers who answered your surveys. Keep track of all of these variables, and you’ll have a sense if you’re gaining or losing loyal customers each month.
We have an interesting guide on the different types of loyal customers and how to attract them to your loyalty program.
Every customer is different. But not that different. After all, we all like it when brands please us by delivering exceptional product quality, customer support, or a convenient loyalty program that incentivizes us to return. But here are a few things to consider:
Want to know more about building customer loyalty? Our recent guide on how to build customer loyalty will walk you through it step-by-step.
In a general sense, we already know that keeping existing customers is far more affordable than acquiring new ones. But let’s get specific about loyalty marketing and the benefits it creates for brands.
Take the example of Sephora. The brand has one of the most renowned loyalty programs in existence. The key: offering tiered rewards to people who continue to shop there. In other words, the more you explore your relationship with Sephora, the more likely you’ll get rewards at a higher rate.
The result is a loyalty rewards program with some 25 million members. That’s consistent revenue the company can return to, time and again, with minimal churn and minimal dips. Any time there’s a new product to promote or campaign to launch, Sephora can always turn to its loyal customers and count on their engagement.
Or take another national brand, Starbucks. The company attributes 40% of its overall sales program to loyalty-based marketing and rewards programs. Their strategy is to award points for every dollar spent at Starbucks. People can, after all, get coffee anywhere. But when they know every purchase builds up towards a bonus, people are more likely to choose your brand over the one down the street.
Read our breakdown of the main revenue-driving benefits of loyalty programs to see just how impactful it can be for your business.
It’s tempting to take the examples above and recreate them at your brand. But you might work in a different industry. That means customers with different tastes and expectations. What works for a daily coffee purchase might not work for a product that people only buy once every few years, for example.
In fact, that are tons of different types of customer loyalty programs.
How do you set up a loyalty marketing strategy that suits your needs? Here’s what you need to know.
These steps will give you a solid foundation for building your loyalty program. But once you’ve inspired some customer loyalty and reduced churn, your attention will naturally start to move to the next step: attracting new customers into the same program.
If you build a brand with solid customer loyalty, you’re off to a good start. If you’ve inspired customer loyalty, it means you’ve started earning a reputation for quality. Customers aren’t going to give their loyalty to just any brand that incentivizes it, after all.
This means you’ll get some word-of-mouth marketing off the bat. That’s good, since 92% of consumers in a Nielsen survey said they’d take the word of family and friends over conventional advertising. But supercharging word-of-mouth marketing requires a systematic approach similar to the way you build your loyalty program. Using the right loyalty program software, here’s how you can turn that loyalty program into a growth machine.
Gathering customer feedback is an essential part of any successful business. By regularly collecting and analyzing customer feedback, you can gain valuable insights that can help to shape the direction and success of your business.
Here are the easiest ways to gather customer feedback quickly and automatically:
People love to share fun concepts with their friends and family. Take Sephora’s tier-based loyalty program as an example. There’s a reason it has 25 million members; unlocking deeper rewards can be a downright viral concept. So have fun with this choice. If you’re using points-based rewards, what kinds of fun perks can you “bake” into your loyalty program? If you’re a brand with a unique focus, what about a value-based loyalty program that donates rewards to charity?
See our favorite loyalty program ideas to see how you can use loyalty marketing for your business.
Try to get inside your customers’ heads. What are the key phrases and steps you can deliver in different aspects of the customer journey that promise them your brand will deliver?
Rewards points are great. And they can be highly effective. But don’t be afraid to offer additional rewards as a “cherry on top” that could inspire even more word-of-mouth success for your brand. Consider adding other rewards for loyalty, including:
What reward is most rewarding? If it sounds a bit like a philosophy question, that’s the trick. You may not know until your loyalty program’s rewards build some experience with your customers first. Consider testing the following rewards to see which tend to spur the most action among your customers:
You can do all of the above and still struggle if you’re missing this one key point. You don’t want customers to be unclear about how to achieve the rewards they’re after.
Make it clear to customers which actions trigger what rewards. For example: “Sign up to our newsletter and receive a 10% discount on your next purchase.” It’s that easy. Make sure you incorporate this language at other key points, as well. This includes:
…or is it the other way around? Your loyalty program can be a powerful tool for keeping customers around, to be sure. But if you build it the right way, it can also be a powerful attractor. When word gets around that signing up for your website or loyalty program is one of the best values on the web, you may find it difficult to deal with the influx of new customers.
That’s how you put the power of word-of-mouth marketing in your corner. And once you use a platform like Friendbuy, you’ll find it even easier to build a loyalty marketing program that keeps your customers staying.