Don't get left behind - learn how to create innovative loyalty programs and customer loyalty management strategies to stay ahead of the curve.
Customer loyalty is crucial for businesses as repeat clients contribute significantly to the brand’s revenue and reputation. Investing in solid relationships with them increases retention rates, overall profits, and client trust. Loyalty also generates valuable first-party data for marketing optimization. However, building customer loyalty is challenging due to competition, market dynamics, and evolving loyalty trends. Understand this concept to unlock the path to success.
Ready to dive into it? Let’s start from the basics.
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Customer loyalty is an ongoing, mutually beneficial relationship between a brand and its customer, in which the latter repeatedly chooses the brand’s services over other companies on the market. What makes customers loyal is a combination of many different – sometimes hard to measure – factors.
The key, however, is always a meaningful experience.
Regardless of how you define customer loyalty, clients choose brands they remember as worth investing in. Be it through product standards, great pricing, customer service, or even shared values – it’s the experience that drives clients to return. When clients are happy, they are more likely to engage with your marketing channels, bring attention to new promotions, and recommend your brand to their friends and family.
Customers have different reasons to be loyal to a brand. Some find price determining, while others prefer to look at the benefits.
Here are the most important critical types of loyal customers :
While truly loyal customers may sound like the ideal type to cultivate around your brand, certain business models may benefit more from focusing on other customer types. For instance, grocery stores, pharmacies, and gas stations may find value in customers who exhibit loyalty based on convenience. By offering essential products or services, these businesses can attract and retain clients who prioritize efficiency in their purchasing decisions.
It's also important to note that price-loyal customers have the potential to evolve into truly loyal customers through your proactive efforts. By analyzing your customer base and adapting to changes, you can effectively respond to their changing needs and preferences.
The importance of customer loyalty comes down to numbers. To put it simply, having loyal yields financial benefits. That’s because they usually spend more money on your business, have a much higher chance of converting, and it takes less effort to maintain them than it does to obtain new ones.
As Pareto’s principles state, 20% of your customers provide 80% of the value. While acquiring more new customers and clients is obviously relevant for your business growth, focusing on a customer retention strategy will bring the most significant profit to your company with the least effort required. That’s because the top 10% of your customer base is spending 3x more than your average customer due to repeat purchases. The most loyal customers are those with experience and knowledge of your brand, therefore, they will be more eager to trust your products and services.
Lower costs: It is easier, and consequently cheaper, to keep a customer rather than recruit a new one. It is approximately five times more expensive to acquire new clients. As a result, a retention strategy will allow your company to dedicate more resources to other initiatives.
Profits boosts: Studies have proven that increasing customer retention just by 5% can increase profits up to 95%.
Higher spending: Satisfied customers that already know your brand and its value are easier to sell to. Repeat customers tend to make higher-value purchases and shop more frequently.
Gaining brand ambassadors: Your loyal customer is the best person to talk to about your brand. One of the main goals of your customer loyalty strategy should be turning your loyal consumers into brand ambassadors. They will recommend your program, products, and services to their friends and family, growing your customer base through word-of-mouth marketing.
Increased empathy: A good long-term relationship develops empathy and understanding. This means that loyal customers will have a higher tolerance for mistakes and will forgive the brand if anything goes wrong. They know that excellent customer service, product quality, and overall experience will ultimately be worth it.
Better reputation: If you reward loyal customers, they will speak highly of your brand, resulting in reduced complaints and better optics.
To build true customer loyalty, you need to analyze your audience, understand their needs and create a loyalty strategy that fulfills them. You must address questions like: What are your customers looking for in your brand? What distinguishes your brand from the competition? How can your company satisfy your client’s needs?
One of the best ways to find out what your consumers want and their buying habits is to listen to what they have to say. It may sound obvious, but sometimes we forget about it. To build trust, we need stronger customer relationships. There are multiple ways to collect direct information, such as product and service feedback, reviews, or surveys. This data will allow you to personalize your communication and target your audience most efficiently. Also, it will help build the best shopping experience – both in-store and online.
How do you gather this information? By building a highly effective loyalty program. It’s a great way to not only collect but also leverage this data. And it’s the best mechanism to reward your consumers for staying with you. A good rewards system may be crucial for their satisfaction and will make them see that being loyal to you pays off.
When building a customer loyalty strategy, it is common to confuse customer loyalty with CRM (Customer Relationship Management). While both play a pivotal role in the customer journey, it is essential to remember the key differences that set them apart:
In terms of similarities, both customer loyalty programs and CRM support automation, personalization, and the creation of unique customer experiences. However, the communication in a loyalty program is more precise, relevant, and personalized compared to CRM. While loyalty programs may require more from your clients, they also deliver more value in return from your brand.
That is also why CRM collects basic forms of information valuable customers – e.g., name, email, and contact number – while customer loyalty will be looking for a greater number of data points – e.g., money spent, closest store, and favorite product.
In addition to the standard customer touchpoints, loyalty programs will also be integrated with the POS systems, where communications will be sent to the customers in real time. The CRM tool will be generally limited to traditional channels with a special focus on email campaigns.
Now that we know what customer loyalty is, we can enumerate some of the strategies that will entice consumers and encourage them to purchase more and more often for repeat business.
Points-based Program: Creating a points-based program where members can accumulate points is a great way to incentivize them. The value of loyalty points will be perceived and exchanged for rewards, discounts, or coupons. They can even be donated to charity.
Intuitive Touchpoints: To efficiently record each member’s transactions and more, it’s beneficial to provide convenient touchpoints for customers, such as cards or mobile apps, which can be scanned during purchases.
Segmentation: Dividing your member base into different groups and defining your customer segmentation models based on demographic, psychographic, and behavioral characteristics is the most efficient way to target them with personalized messages that will increase your conversion rate.
Levels or Tiers: One of the best ways to make your customers feel special is by giving them exclusive benefits. This can be done through recognition tiers. The higher the tier, the better the perks. If these benefits are worth it, your clients will never want to leave the tier that grants them a higher status.
Refer a Friend: There is no one we trust more than our closest family and friends. That is why one of the best strategies for maintaining customer loyalty is a referral rewards program to reward your existing members for sharing your brand with others.
Rewards: More than 50% of customers say their primary reason for joining a loyalty program is to earn rewards on everyday purchases. These can go from physical prizes like electronics and merchandising to experiences, gift cards, or cash back.
Coupons and Discounts: Coupons and discounts can be part of the catalog or can be granted as part of a promotion. For example – you can give a 15% discount coupon on your client’s birthday. These will incentivize your customers to keep spending right away.
Partnerships: allowing your customers to earn and burn points through different companies helps increase your loyalty strategy proposition.
Feedback: To better understand how your customers feel about your brand, it is best to frequently ask for their feedback. This will show you what you need to work on to improve their experience.
The most effective customer loyalty programs include a very strong emotional engagement, high levels of personalization, robust rewards systems, and feelings of exclusivity. Additionally, the design of each program should be tailored to fit the specific industry and cater to the target audience.
Here are some examples of the best customer loyalty programs currently on the market:
One of the main goals of Amazon founder, Jeff Bezos, is to have the “most customer-centric company on Earth.” That is why Amazon prioritized caring for existing customers versus acquiring new ones. With a yearly subscription, two-day free shipping, and Prime Video, Amazon has reached the top consumers who spend almost double that of regular members.
Nike’s loyalty program is accessible through its website or any of its apps. They offer members exclusive access to sales, rewards, products, and personalized recommendations. The brand also promotes a sense of community where you can access experts' advice, free workout classes, and training content. Nike always tries to connect with their customers on a more emotional level.
Starbucks has one of the most successful loyalty programs. Customers earn stars for each purchase that they can redeem for products. The coffee brand allows to upload credit into the app, buy from the phone and pick up in the closest store. Starbucks also focuses on building important partnerships – as they did with Spotify. The music-streaming brand grew its subscriber base with a Starbucks incentive that earned members rewards such as free coffee. At the same time, Starbucks provided premiere coffee-shop music, incentivizing Spotify users to join their customer loyalty program.
Enterprise rewards program gives points for the money their clients spend. These points can be redeemed for free rental days. The rental car company operates on simplicity – they offer a very basic yet powerful experience, as well as easy program enrolment.
To create a customer loyalty program, you need to prepare a very thorough overview of your goals, resources, and client base. Then you can move on to specific components, characteristics, and tools your program will have – as well as choosing the right customer loyalty marketing solution provider.
How to get started? Here are the most important steps to help you build a loyalty program:
Organizations should clearly establish the goals of their program early in the project. These objectives can include increased engagement, customer retention, or repeat purchases. It’s crucial to align the program’s objectives with your business’s broader goals and vision. If market positioning or product differentiation is a primary goal, it will guide the creation of a loyalty program that effectively achieves those aims.
Understanding your customers is crucial for motivating them in the future. Analyze your target audience, their needs, and their perspectives. The customer experience team should determine what data to collect at multiple touchpoints. Gathering this data will give you insights into what fosters loyalty within your organization.
Incentivizing existing customers can be achieved through various methods, such as discounts, money returns, or free products. The key is to choose the most suitable option for your audience. With this in mind, you can select the right type of loyalty program. Here are some examples:
Systematic data gathering leads to valuable insights, informed decisions, and program performance optimization. Determine the type of data that should be collected through registration forms and purchase history, and establish a CRM for efficient data management. Ensure that the data of your customers is secure and that the loyalty program complies with local data processing policies, such as GDPR or CCPA.
Once you have chosen the appropriate type of loyalty program, you can determine tiers, rewards, and achievable milestones for your customers. Utilize customer data to create a more relevant experience. For example, consider using purchase history or demographics to offer rewards that align with the interests of individual customers. Targeted communication and an omnichannel approach will help build a stronger connection with your brand.
Personalizing the customer experience can be as simple as allowing members to select preferred reward options, customize interface layouts, or choose their preferred touchpoints.
Implement measurements of success for your loyalty program, such as key performance indicators (KPIs), including:
These metrics will allow you to make data-driven adjustments and improvements after the program’s launch. Utilizing KPIs and data analysis tools helps your company track the success of the strategies implemented to achieve your goals.
Creating a truly successful customer loyalty program doesn’t end with its launch. It is essential to maintain communication with your clients through channels such as live chat, email campaigns, or regular surveys. Gathering customer feedback will help you further improve your program and build a positive brand image that continually adapts to meet customer needs.
Building customer loyalty is possible through a profound understanding of your client base, robust personalization, and creating a feeling of value. Loyalty programs are great tools to achieve these results. Here’s how to make more people interested in them:
71% of consumers expect companies to deliver personalized interactions and 76% get frustrated when this doesn’t happen.
Customer loyalty metrics include triggered promotions, issued points, and redeemed rewards. There are many factors and variables at play, so you need to implement a very good tracking system to quickly collect customer loyalty statistics.
What are some other KPIs that prove your program is working? Here are indicators you can use when measuring customer loyalty:
As you can see, building and cultivating customer loyalty can be very beneficial for your business. However, no one ready-to-use recipe will ensure you’ll do it successfully. Even with all the abovementioned ingredients, creating a solid base of loyal and engaged clients can be very difficult. Why?
Here are the key challenges you may come across while striving for customer loyalty:
Modern customers can choose from a variety of brands and products. They constantly come across new ads and promotions, which makes them believe there’s always something better. They often jump from one loyalty program to another because of the rewards they can get during enrollment. A recent study says that the average American consumer belongs to more than 16 loyalty programs. The customer churn rate is now higher than ever – all it takes is one bad experience or even a negative review for a client to look elsewhere. That’s why investing in the most effective loyalty management system will help you overcome this challenge, and the obstacles listed above are so significant.
As a leader in the loyalty industry, Comarch can help you optimize your resources and start your journey toward customer loyalty. Our strategy and consulting experts will guide you in selecting the best techniques and technologies. Our cutting-edge customer loyalty solutions will provide you with all the features your business needs to stand out – including tiers, referrals, and rewards.
If you want to learn more about how Comarch’s loyalty management platform can grow your business, contact us today and start expanding your loyalty program!
Data is a crucial tool for optimizing your loyalty program. By analyzing customer behavior and preferences, you can tailor rewards and promotions to their individual needs and interests. You can also use data to track program performance and identify areas for improvement.
Types of data that customer loyalty programs typically utilize include:
Compliance with data privacy regulations (such as GDPR or CCPA) is critical for any loyalty program. To ensure compliance, you should work with legal and data privacy experts to develop policies and procedures that align with relevant regulations. You should also provide clear information to customers about how their data will be collected, used, and protected.
To make your loyalty program stand out, focus on creating a unique and memorable customer experience. This can include personalized rewards, special promotions, and exclusive access to events or products. Additionally, make sure your program is easy to use and understand, with clear instructions and a user-friendly interface.
To provide your customers – regardless of their region and language preferences – with a truly seamless experience, a global loyalty system should distinguish itself with several key features that warrant scalability, customization, and efficiency. Here are some of the most important ones:
A loyalty management system can track customers’ behaviors, spending habits, and program interactions to identify members with the highest CLV, indicating frequent purchases or significant spending. That way, you can offer those high-value clients exclusive benefits, such as early access to products and services or personalized offers, fostering their ongoing loyalty. The right software can also provide insights into the preferences of high-value members, enabling you to develop strategies explicitly tailored to their needs.
AI tools can improve loyalty programs by providing personalized recommendations, predictive analytics, and marketing automation. We can use them to study customers’ data and habits for generating incentives that resonate with each of them individually. AI can also predict consumer behaviors (e.g., churn rates or purchase patterns) to recognize potential issues or opportunities for improving the program’s effectiveness. Moreover, artificial intelligence can automate management tasks – such as reward distribution, tracking, and fraud prevention – to save you time and resources.
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