Surprising Facts About Customer Loyalty Marketing
Ask any business owner or manager and they will tell you the importance of marketing.
After ensuring that your product or service is of high quality, marketing is the next most important thing to focus on.
Failing in your marketing efforts is disastrous. You may get few or no customers, which results in little profit or huge losses. What follows this is disappointments and frustration.
82% of small businesses fail due to cash flow problems. Issues with cash flow are largely connected to revenues and revenues are directly affected by the success of your marketing campaigns.
You might know about the various forms of marketing.
From the traditional and still powerful word-of-mouth marketing to the more recent social media marketing.
But do you know about customer loyalty marketing? If you do, are you using it?
WHAT IS CUSTOMER LOYALTY MARKETING?
Customer loyalty marketing is based on a very important factor in business: customer retention. This is the effort you put in your business to ensure that once customers buy from you, they keep doing so.
There are many ways of ensuring your customers keep coming back.
Customer loyalty marketing is one approach and when used well, it’s a pretty powerful tool. You also have the opportunity to utilize this tool regardless of the size of your business.
You simply gather information about your customers and their shopping habits then use that for marketing purposes.
When using this approach for marketing, your marketing efforts will be towards these same customers and not your leads.
This kind of marketing uses personalized messages which the customers are able to identify with and respond to. This is opposed to the generalized marketing messages often sent out to all customers hoping that a good number of them get moved to the point of taking action.
At the very basic level, you just need to collect the name and maybe mobile number of the customer. You can also get their email address if you intend to communicate with them through email.
With the right system in place, you can have the records of your customers’ shopping attached to their profiles. You then use this information to make better business decisions as you also send them relevant marketing messages.
Apart from marketing, which we will look at in detail in a while, there are three other benefits of such a system.
The below can however also be achieved by analyzing your sales data without necessarily putting up a customer loyalty system.
- Avoid excess inventory – your sales data can help you reduce your levels of inventory. Your sales reports can show you patterns which will help you know the best frequency at which to restock.
When you see that you only sell thirty pieces of a product in a month, then you know there is no need to stock fifty. If it takes three days to get the ordered goods, then you can safely buy forty pieces instead of fifty. The ten pieces will be your buffer stock.
This reduction in inventory levels will also help reduce cases of theft and unnecessary damages.
- Avoid expired inventory – the same excess stock can end up expiring before it’s bought by customers. This is especially true for foodstuff. When foods get close to their expiry dates, you may need to reduce the prices to help sell them faster.
Though a good strategy to avoid total loss, you have reduced your margins thus your profitability. In the worst case scenario, you may have to sell at a loss in an attempt to at least get something small and not lose everything.
- Improve cash flow – the worst nightmare for any business is having cash flow problems. No matter the size of your business, you will always need some cash for daily, weekly or even monthly use. Not having this money has been the cause of many business failures.
As long as you have unsold stock, your cash flow is stuck. You spent money to buy the goods but haven’t sold them quickly enough to make the money you expected. Sales data is critical in determining the movement of goods thus helping forecast your cash flow needs.
FACTS ABOUT CUSTOMER LOYALTY MARKETING
And what about the marketing bit?
This is probably the most exciting part, especially if you are a marketer.
Having collected the information you need to start your targeted marketing campaigns, it’s now time to get things rolling.
If you have heard about marketing to your loyal customers, here are some facts to get you started on your own loyalty program. These will guide your strategy and increase your chances of success.
1. Brand Purpose Determines Brand Loyalty
There is one thing you need to find out before running your customer loyalty marketing campaign. It is the one thing which will give you direction on even who to target.
What you need to find out is what makes customers loyal to your business. This should form, at least in part, the basis on which you communicate your message.
To understand the reason for this, consider that 89% of customers are loyal to brands which share their values.
For example, your business values may include transparency. Guided by that principle, you always give information about your business practices. You have videos showing how you go about your operations, some of the ingredients of your products etc.
When customers get to trust you and see your effort towards helping them know you more, you will easily earn their loyalty. They will see themselves represented in your company.
In that case, supporting your business will for them be similar to bringing a necessary change to the world. This is what makes them unwaveringly supportive and will even stand up for you.
This can be very beneficial especially in the social media world where negative reviews and comments can tarnish your brand’s name in an instant.
It should however be obvious that consumers aren’t just drawn to words spoken or typed as part of your vision and mission statements. They have to see the evidence of what you claim to stand for.
As such, you need to find out what you have been communicating to your customers. If they feel that you truly believe in the same things they do, then you have a partnership.
Not only will they buy from you, they will embrace your marketing efforts and gladly refer others to you.
2. Personalization Breeds Loyalty
You know that you have some loyal customers and you endeavor to treat them exceptionally well. But did you know that they can still leave you for your competitor?
There are cases of customers sticking with a brand through thick and thin. But in today’s world of numerous options with freebies to entice them, many are disloyal. And you can’t blame them.
Customers everywhere are seeking the best experiences and they are getting them. Customer experience is making huge differences for many businesses and you need to tap into it too.
According to research, 88% of consumers who rate a brand’s customer experience as “very good” are likely to recommend the brand.
With customers being unique, it’s important to understand that you can’t offer all your customers the same package. Every one of them would prefer something tailored to their own tastes.
Ironically, very few customers will give you all the information you need so as to be able to offer them personalized treatment.
Ask too many questions and you’ll appear ignorant of privacy preferences. Fail to provide the right kind of messaging or treatment and you’ll get shunned.
In your quest to have a customer loyalty marketing program, keep this fact in mind. The more personal you can get with the customer, the more loyalty you’ll get from them.
So put in the effort to know them well. The better you know them, the more they’ll embrace you and become loyal to you.
3. Smartphone Apps Make It More Attractive
Loyalty programs are not very new; they’ve been there for a while. Still, there is always something new and refreshing you can add or do depending on your creativity.
One thing has however changed through the years. And that is the means of connecting with your customers.
From signing them up for the program to communicating with them about the benefits they are eligible for, things have gone mobile.
Smartphones brought many benefits with them and the biggest is the use of social media. But these same devices are used for may other tasks. Including signing up for loyalty programs.
Watch the below video of a loyalty program running entirely on a smartphone. It’s easy for customers to sign up and provides lots of insights for better decision making.
Traditionally, you would have had to print forms to be filled. In the current digital age, all you have to do is let the customers download an app for the same purpose.
Of course, there is the danger of them not downloading the app despite promising to do so. And even after downloading the app, if there are too many steps to be followed, they may not sign up.
Apart from simplifying the process, you can take more steps towards ensuring they sign up and enjoy doing it.
One option is to develop an app for your program then have something like a QR code printed on the receipt. Since QR code readers are common in smartphones, the customer can then scan it and be directed to the app download.
You can go a step further and make it even easier than that. If you keep a printout of the QR code or a version of it in a tablet at the POS, the customer can scan it during check out. As the cashier handles the billing, the customer can be registering.
If your program gives points, then the purchase made can earn the customer points immediately.
4. Fights Apathy in Customers
Here is one surprising though proven fact about customer loyalty marketing.
Running these campaigns have the effect of making apathetic customers change their attitude towards your business. If you run your customer loyalty program well, you’re bound to cause some excitement among your customers.
You see, there’s nothing as exciting as being recognized.
Even among employees, recognition is one of the most important things to receive. Your customer loyalty program should provide the means to this excitement.
There are two things about the program that will be the reason behind this excitement.
The first one is the messaging used in marketing. The second is the personalization of the message.
Did you know that mentioning someone’s name makes them feel good and more likely to connect with you?
There’s a real difference between saying to your friend, “Hi” versus “Hi Mike.”
In mentioning your friend’s name, you create an atmosphere of friendship and trust. Your friend Mike will feel invited to connect with you at a deeper level as opposed to if you just said a plain “Hi.”
To see how this works, think of a situation where someone forgets your name.
What does that tell you? Will you not conclude that you were not important enough for him to remember?
There is a lot of power in calling people by name. The same applies in using it in a message.
But there is more to it than the greeting. The message communicated is equally important.
One of the reasons you should have a customer loyalty program is so as to get data about your sales. It’s this data that you’re supposed to use in communicating offers to your customers.
Personalized message example
For example, you may have a customer called Shirley who buys an aloe vera shampoo every week. Armed with this information, you can make her look forward to her next shopping by telling her about an offer.
Since aloe vera is medicinal, you can tell her that you have some exciting news for her scalp. Promise her that her hair will be better-looking and her confidence will increase.
Inform her about discount prices in the conditioner section, including the aloe vera conditioner.
This is a good example of cross-selling.
You can then craft a message such as the one below:
We have good news for you. Our Aloe Vera sale is on this weekend. Apart from the great discounts on individual products, you can save more than 10% when you buy two or more products. For your hair, combine our Aloe Vera shampoo and conditioner and get healthier and shinier hair. Say goodbye to hair breakages and welcome more confidence. See you on Saturday.
If Shirley shops over the weekend and you send her such a message on Thursday, you will have her counting down towards Saturday.
On that Saturday, for Shirley, it won’t be the normal shopping day. There will be something exciting about it. And as long as a customer is excited, the chances of buying more from you increase.
And who knows, she may even tag a friend along. That’s double benefit for your efforts.
5. It’s more profitable to sell to existing customers than new ones
Like many businesses or marketers, you may be fixated on lead generation and qualification. Indeed that’s necessary and even crucial since you have to gain new customers.
The more customers you have the higher the chances of increased profits.
But just how much do your lead generation efforts cost? In comparison, have you considered the cost of customer retention?
Building your current relationships is cheaper and more beneficial. Consider the below figures.
It’s likely that the biggest reason you haven’t been focusing on customer retention as with lead generation is the time factor.
Granted, working on these relationships takes time for the efforts to pay off. But in the long run, your loyal customers are more beneficial to your business.
The reason is quite simple: they have developed a friendship and trust your brand to treat them well.
As a marketer or business owner, you obviously know that relationships are the backbone of a profitable business.
A good relationship with suppliers gives you better credit terms. A good relationship with your employees gives you more productivity. So, what would a good relationship with your customers give you?
Still on new customers, apart from the financial costs, how much time do you spend looking for them? What about qualifying them in the hope that they will buy just one product?
While you think about that, remember that there are other businesses looking for the same customers. Both established competitors and startups are fighting to appeal to the customers not loyal to any brand.
If the loyal customers are harder to get, don’t you think it’s better to make it difficult for the competition to get your customers?
6. Loyalty point exchanges work best
If you’re in touch with customer loyalty marketing trends, you may have heard of or seen some partnerships. These are called loyalty point exchanges.
These exchanges are formed by several businesses coming together to market their customer loyalty programs to more people than their current customers.
One of the clearest benefits is the awareness created when your program is co-marketed on your behalf by another business.
Since these are partnerships, you will also be creating awareness about the other business.
This will not necessarily be by you talking about the other business. You’ll just be telling your customers that they can benefit from the other business due to the partnership.
For example, you may be running a bakery. A reasonable business to partner with could be the nearby coffee shop. When talking to your customer about your program, you can tell them that the points earned at your shop can get them some free coffee in the partner’s shop.
For the customers involved, they will have been provided with a great convenience since they won’t have to sign up for multiple programs.
More than that, they get to enjoy more offers. And if all these are courtesy of being your customers, then they have more reasons to love your brand.
FACTORS TO CONSIDER BEFORE STARTING A CUSTOMER LOYALTY PROGRAM
If you have not yet set up a loyalty program for your business, consider doing so.
There will be some costs attached. However, the benefits will easily cancel out the costs involved.
To help you get started, here are some things to consider as you design the program.
One of the biggest and foremost questions to ask yourself is, “Should the program be open to all customers or only a select few?”
It may seem more beneficial to have as many customers in the program as possible but that doesn’t have to be the case.
In making the program open to all, you increase your marketing reach thus increasing the potential benefits. However, it’s possible that not all customers will embrace the idea. Some may even criticize it. If that happens, stay positive and focus on the benefits to come.
You may also opt to sell the idea only to your top customers. You may need to decide how to define “Top customers.” Are they those who buy most goods or those who buy the most valuable goods?
For most marketers, top customers are picked based on value.
As such, the customer who buys a $200 product once a week is a top customer depending on your total weekly sales.
This is in comparison to the one who buys twice a week, five items per shopping with the total being $50.
If you target the high-value customers, you will need to be careful how you advertise the program.
You cold try something like, “Shop over $200 and become a premier customer.”
2. Types of Benefits
The type of benefits you’ll give your registered customers also matters. You can come up with many different options though three are common.
You could offer coupons, gift cards or redeemable loyalty points.
To decide on these, you may have to understand your customers. It would be best to give them what they prefer. Still, you could avail a combination of these options.
For example, you could offer points which can be redeemed for coupons, gift cards or product purchases.
3. The Reward System
The reward system should also be well thought out during the design period.
A popular option is to have the same rewards available to every registered member. However, there’s another option gaining popularity and it’s for a good reason.
This is the multi-tier reward system.
It separates customers into categories. The customers can themselves choose where to belong if it’s based on a regular fee or purchase value.
You then outline the benefits offered to members of the various categories. That can come in handy in showing customers why they should aim to be in the higher category.
Here is a snapshot of the way Sephora is implementing this strategy.
4. Information to Collect
The amount of information to collect is also a critical part of the program design.
It would be best if you can collect as much information as possible. That way, you could send your customers birthday wishes and the like.
If you believe your customers can give you their dates of birth—just the day and month—then go ahead and ask for it. You can tell them it’s for sending them birthday wishes.
However, it has been noted that not many customers are willing to spend time answering many questions. The shorter the process, the better. Others are also privacy-conscious.
In that case, seek to only collect the most important information.
As long as you will have a way of connecting a customer to their shopping records, then their name and mobile number should be enough. That will enable you to know them more and communicate your offers.
In case you want to use email communication, you can also ask them for email addresses. If you do so, assure them of the safety of their email addresses. No-one likes being spammed.
5. Program Partnerships
Remember what we said about loyalty point exchanges?
Try as much as possible to give your customers real value. Connect with several businesses in related niches and form a partnership. The more your customers can get from the program, the higher their excitement and loyalty.
Since integrating systems can pose a challenge, these partnerships are best formed with businesses which have no loyalty program already in place. This provides the opportunity to build one together.
In case the partners you want to work with already have these systems in place, you can still work it out if they agree to it.
If the developer of their POS and yours or your IT guys can utilize any available Application Programming Interfaces (APIs), then you can have the different systems communicate with one another.
The costs of taking this route might be high and so you’ll have to do a thorough cost-benefit analysis before going for it.
6. Sign Up Method
After all considerations, customers will have to sign up. How will they do it?
Do you want them to fill online forms, printed forms, scan a code or download an app?
The answer to this question depends on the demographic of your customers.
That said, going digital will prove easy and convenient for both you and them. You can have one of your staff help in the process of signing up.
Any customer with a smartphone can be directed to scan a code which instantly downloads the app onto their phone. They can then be taken through the registration.
If the process is easy, then no help will be required after the download. You can just wait to get the sign up confirmation.
For any customer without a smartphone, an easy-to-fill and attractive-looking form can be used for the registration.
Whatever you do, ensure the process is short and simple.
With the heightened business competition, you cannot afford not to have a customer loyalty program. If you intend to retain your current customers, then this is the only way to go.
You’ll be able to learn their shopping habits and thus run more personalized and relevant marketing campaigns.
This reduces your overall marketing costs, increases your revenues and guarantees that you’ll be staying in business for longer.