Loyalty Marketing 101
If the COVID19 pandemic is teaching us anything, it’s that loyalty marketing is the best way to ensure the long-term survival of your company. According to data from the Gartner Group, a mere 5% increase in customer retention can boost your profits by as much as 125%. That’s because a loyal customer is up to 14 times more likely to make a purchase than a new customer.
Businesses with a loyal, committed customer base are able to weather the storm better than anyone. It’s the reason why McDonald’s continues to have drive-thru lines around the block and Amazon is able to increase their hiring efforts as other businesses report layoffs. If you can build a loyal customer base incentivized by rewards programs, you’ll be in a position to weather any economic storm that comes along. It all starts with effective loyalty marketing.
What Is Loyalty Marketing?
Loyalty marketing is a strategy that focuses on acquiring customers and incentivizing them to purchase from you again and again.
New customers are hard sells. You have to overcome their skepticism and convince them that what you have to offer is better than the company down the street. But with loyal customers, the work is already done. They already value you over the competition, and they already have confidence in what you’re offering. You simply need to stay on their radar and incentivize their interactions with you.
Customers need to develop memorable, positive associations with your brand. With stiff competition across all channels, marketing and advertising costs no longer justify getting a single purchase from an individual. Whenever a customer thinks of the product or service you offer, your company should jump immediately to mind. Loyalty marketing makes this possible.
What Is a Loyal Customer?
When you think of a loyal customer, you probably imagine someone who frequents your business. But there’s more to it than that. In fact, some loyal customers rarely make purchases. But they all help your bottom line.
A loyal customer might be:
Someone who buys from you on a regular basis
Someone who subscribes to your service, newsletter, or other digital assets over an extended period of time
Someone who sends you referrals via social shares, affiliate marketing, your referral program, or even word of mouth
In short, it’s any customer who stands the test of time even when they have other options to choose from. For businesses, customer loyalty is the holy grail.
Loyalty Marketing Strategies
Loyalty marketing takes time. Only in rare cases will you turn new customers into loyal customers overnight. But with the right multifaceted approach, you can promote long-term customer loyalty in less time. The following strategies should provide you with a strong foundation.
Introduce a Customer Loyalty Program
A customer loyalty program incentivizes buyers to come on a regular basis. It’s a way to reward customers for making purchases while also establishing an edge over the competition. This is a staple of any loyalty marketing strategy.
Consider Sephora as an example. This wildly popular beauty brand has over 25 million members in its loyalty program. Each time a customer makes a purchase, they earn points. When enough points are earned, the customer can cash them in for free products.
Loyalty programs like this are effective because they get people excited about making purchases. If you’re someone who’s interested in beauty products, why would you buy from competitor Ulta if you already have 220 points with Sephora?
When implementing your own customer loyalty program, be sure to heed the following golden rules:
Keep it simple. A straight-forward point system works best for most businesses. Each dollar is associated with a specific point value, and specific point values are associated with discounts or freebies. If you make it any more complicated than that, customers may be too confused to get excited.
Offer value & variety. Your loyalty program will work only if you offer something of value. Converting points into dollars is a guaranteed crowd-pleaser. If you decide to offer specific inventory in exchange for points, make sure to provide a range of items that your customers really want. Don’t offer cheap token gifts or use this as an opportunity to liquidate unsold inventory.
Offer additional perks. While the point system is great, you can further incentivize customers by offering additional perks for loyalty members. These may include access to occasional members-only discounts, free gifts in the mail, or early access to new products. Create an email list just for your loyalty members, and use it to stay connected and keep your members engaged.
Promote the loyalty program. If you follow any brand that offers a loyalty program (Starbucks, Cafe Rio, Sephora, and Lululemon, for example), you’ll notice that they’re very aggressive about marketing this incentive. Some companies have entire marketing campaigns just to promote their loyalty program—and so should you. Make sure that every prospective customer is not only aware of the program but also educated on the specific reasons why they’d be foolish not to sign up.
Customer loyalty programs are one of the simplest ways to turn new customers into repeat customers, even if they’ve never previously heard of your business. Best of all, these programs are easy to set up. You can just use a loyalty program app like TapMango, Kangaroo, or FiveStars. Many of these apps integrate easily with shopping cart platforms like BigCommerce, Shopify, and WooCommerce.
Introduce a Referral Program
While we’re on the topic of incentivizing customers, referral programs can also have a major impact. According to Nielsen data, recommendations from friends are the most trusted and effective form of advertising. In fact, 83% of consumers report that they will make buying decisions based on the recommendation of a friend or family member.
A referral program allows you to tap into this phenomenon and create trust early on. For example, you might allow customers to send a custom promo code to a friend for $10 off their first purchase. When the friend cashes in the promo code, the sender also gets $10 off as a reward.
There are many ways to operate a referral program, but the key is to reward existing customers for referring family and friends. The existing customer has a reason to keep shopping, and the new customer is introduced to your brand by someone they trust.
Leverage Social Media
Much of a company’s branding now happens on social media like Instagram, Twitter, and YouTube. These social platforms allow you to do more than just highlight your latest sale. They allow your customers to stay connected to your brand daily.
Here are just some of the ways you can use social media for loyalty marketing:
Run regular contests and giveaways. This keeps your fans interested in your content, leading them to subscribe to notifications about your recent posts, which helps to further increase your presence in their lives.
Post on a consistent basis. If customers are exposed to your brand more often, they’re more likely to become loyal. Just be careful not to overdo it. Nobody wants to have their social media feeds flooded with promotional content.
Work with social media influencers. Just a few microinfluencers can widen your fan base and promote positive associations with your brand.
Engage with your social followers. Converse with your followers by answering their questions, addressing their concerns, and everything in between. This creates a personal connection with your brand and establishes its focus on customers.
Share your customers’ positive feedback. You can use Stories and Retweets to showcase customers’ product demonstrations, reviews, and shout-outs. This fosters additional trust in your product or service while also creating a community atmosphere that builds long-term loyalty.
Support Worthwhile Causes
You can set yourself apart from the competition by supporting a worthy cause as part of your mission. Many consumers will be happy to shop with you regularly if they feel like their purchase helps make the world a better place.
The apparel brand Sevenly is a good example of a brand that promotes loyalty by supporting causes that people are passionate about. A portion of each sale goes to one of the brand’s partner charities. They work with charities related to heart health, social justice, ending world hunger, suicide prevention, and more. Customers can even choose the causes that are most important to them.
You might want to avoid controversial causes so that you don’t risk alienating customers. If you want to appeal to the broad market, stick with universally lauded causes like cancer research, suicide prevention, and child advocacy. Avoid anything politically charged or faith-based, unless your business is rooted in those ethics.
Put the Customer First
It might sound obvious, but this is the single most important thing you can do for the purpose of loyalty marketing. In their aforementioned research, the Gartner Group found that a commitment to customer experience results in up to 25% more customer retention than sales or marketing initiatives.
Consumers become repeat customers because they feel valued and because their needs are being met. If you truly put the customer first, you will see retention as a result. Here are a few ways to do it:
Solicit customer feedback. Use the information you gather to improve your product and services.
Prioritize customer service. Customers should have multiple ways to contact you (phone, email, live chat, social media) and they should be able to count on prompt, friendly correspondence that addresses their concerns and overcomes their frustrations.
Be more reliable than the competition. This applies not just to customer communications but to delivery times (if applicable), return policies, product quality, and even the user-friendliness of your website. Going above and beyond can be as simple as throwing in a free gift with your customer’s order.
How to Create a Loyalty Marketing Strategy
Your own strategy will depend on the type of business you run and what you’re hoping to achieve.
Set clear goals. Are you looking to increase your sales? Retain clients over longer periods of time? Increase your social media engagement? Determine exactly what you hope to achieve, and by how much.
Use appropriate loyalty programs. Not every loyalty program will be right for every business. For example, a customer loyalty program based on points is excellent for B2C e-commerce, but it has no value for a B2B professional services brand.
Get everyone on the same page. Your marketing team, social media manager, SEO agency, customer service, and everyone with any connection to your sales process should be made aware of their role in the loyalty program. They should be trained to support your strategy & goals.
Track customer loyalty. For this, you’ll need to determine what standard meets your criteria for loyalty. More on that in the next section.
How to Track Customer Loyalty
As you dedicate time and effort to loyalty marketing, you’ll need to keep up-to-date analytics to determine how well your efforts are paying off.
If you run an ecommerce business, tracking customers’ loyalty is easy. Your shopping cart platform should record much of the data you need, even accounting for customers who checked out as guests (so long as the address or credit card information was the same for multiple transactions).
If you’re a service provider who accepts payments offline, you’ll need to track this data manually. Your accounting or billing software should keep track of the number of transactions per customer/client, and you might also be able to refer to your database software or client records, depending on how you organize your information.
You’ll want to keep track of your repeat customer rate. The most basic way to do this is to calculate the percentage of total customers who have made two or more purchases. If you’ve had 1,000 customers and 250 of them have made multiple purchase transactions, your repeat customer rate is 25%.
Depending on the size of your business, you’ll want to track several metrics. For example, you might separately track the number of customers who have 5 to 10 transactions, 10 to 25 transactions, 25 to 50 transactions, et As long as these numbers trend upward over time, your efforts are making an impact.
Depending on your goals, you may also want to track the following metrics for individual customers:
The number of purchases made within a given amount of time (monthly, quarterly, annually)
How often the customer visits your website or engages with your content
How often the customer opens your marketing emails
How the customer’s behavior trends overtime (spending more or less money, making more or fewer purchases, etc)
Keep in mind that you don’t have to settle for your standard analytics software. You can use platforms like SurveyPlanet or SurveyMonkey to create quick polls and surveys to solicit feedback and determine what your customers think.
Ask them about their purchase history, whether they would purchase again, whether they have other brands that they prefer, and how they would rank your business overall on a scale of 1 to 10. Ask them to be specific about what they love about your business and what they find disappointing. The data you receive is usually worth its weight in gold.
Why Loyalty Marketing Is Vital
It costs five times more to acquire a new customer than to sell to a loyal customer.
When your brand has a loyal, dependable customer base:
You enjoy an automatic competitive edge. Customer loyalty means customer satisfaction, and that’s something that businesses struggle with in every industry.
You can consistently achieve a greater ROI, as you generate more revenue while spending less on marketing & advertising.
You can continuously grow your customer base on autopilot, as your loyal customers will spread the word to people they know.
You can enjoy greater online visibility; search engines track user behavior and reward popular websites with higher rankings.
Perhaps most importantly of all, loyalty marketing is essential if you truly want to be recession-proof. The economy ebbs and flows, but trusted brands are best able to stand strong regardless of the economic climate. The COVID-19 pandemic has made this fact abundantly clear. Make sure your brand is one that consumers can always rely on.
