Finance

Building Customer Loyalty Programs That Work

If you were preparing to order dinner from a local restaurant, what factors would drive your decision? Obviously, the type of food is important—let’s say you’re craving sushi. You’d probably think about which restaurants offer your favorite sushi rolls, which are located nearest to your location, which have the best prices, and which have the best service.

After filtering your city’s sushi restaurants based on those 4 considerations, are there very many left to choose from? It’s not likely, as there can’t be many sushi places nearby that also have the desired menu, prices, and service.

Let’s say it comes down to 2 options: Sushi Garden or Royal Tiger Sushi. Then you remember that Royal Tiger Sushi has a loyalty program and you’ve already accrued points from past purchases. If you were to order your meal from them tonight, it might push the point total over the edge and earn you a free roll in the future.

Done deal, right? When the value of your options is otherwise even, you’re obviously going to make a choice that will also bring additional loyalty benefits.

Now consider the incomprehensible amount of business parity available via the internet. Instead of only having a couple of solid options as in this restaurant scenario, most ecommerce customers have thousands of viable options. Even when the desired product is niche, there are still probably dozens of stores to choose from.

Did you know that there are 8 million online stores in the world? This means there are more choices than ever before. So a loyalty program, such as the one that might sway you to order your food from Royal Tiger Sushi, is crucial to stand above the crowd so you’re able to effectively connect with customers.

How to Build Customer Loyalty Programs That Get Used

There are about 2 billion shoppers perusing the world’s ecommerce sites, and most of them are interested in loyalty programs. In the United States alone, shoppers belong to 3 billion such programs. So it’s no wonder that 90% of businesses are offering them these days.

But with loyalty programs becoming as common as coupons, consumers have changed their behavior accordingly. Yes, they belong to lots of these programs. But that doesn’t mean they’re active in all of them. With an abundance of programs comes the inevitable need to be more selective.

As an entrepreneur who cares about delivering a great experience and building a legacy, you’ve never been one to simply check boxes off a list. And this is a situation where you really need to hold on to that standard of quality. Because a shockingly high number of business owners create mediocre loyalty programs just to say they’ve done it.

These undesirable loyalty programs then just lie around gathering dust, much like the blogs that these same business owners created in 2010 (but haven’t updated since 2014). So if you’re going to do it, do it well. Otherwise, save your energy and spend the money elsewhere.

Remember how there are millions of other ecommerce options for customers to choose from? You have no control over what those other businesses will do. They might offer sales that you simply can’t match or shipping speeds that are unattainable from your location.

The one thing you know they won’t offer is your loyalty program. The best programs provide a unique experience that users recognize and gravitate toward. At the heart of this experience should be a feeling of being valued. How do you deliver this? First, you need to connect customers with unexpected surprises. If you can delight them, you’ve won them. Second, these perks should be tailored to the individual.

A recent survey reveals some examples of what global consumers are craving:

We asked survey respondents in 2019 and then again in 2020 what they wanted out of a loyal program other than free shipping and discounts which, in today’s world, are considered a low bar. Two distinct responses, “early access to sales” and “early access to new products,” shot up considerably from 2019 to 2020 — 42.0% to 60.1% and 30.3% to 50.8%, respectively. “Offers and recommendations tailored to you” also went up, from 32.7% to 38.9%. The main takeaway? Your customers actually do care about more than just free shipping and discounts when it comes to your loyalty program; for many, getting a VIP experience — early access and personalized recommendations — has become significantly more important since 2019.

These findings shouldn’t be surprising. When you’re just one among billions of the world’s shoppers visiting one of the millions of ecommerce websites on the internet, it’s hard to feel special. So when a brand reaches out to you and demonstrates that they not only care about your business but care about your experience, you take notice.

Given the massive amount of information that customers passively give up on a daily basis via social media platforms, website cookies, and search engine tracking, it’s downright heartwarming for them to suddenly find themselves receiving something in return. As modern web users, we’ve sadly become accustomed to being used. It’s powerful anytime you can flip the script and reward someone.

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Hallmarks of the Best Customer Loyalty Programs

While the essence of your program is experiences, the main takeaway needs to be value. Too many entrepreneurs think they can cobble together a loyalty program that’s nothing more than a glorified collection of coupons. This approach is actually more harmful than having no program at all, as it exposes your low regard for your customers. If you want loyalty to exist, you need to foster it with value.

A baseline inclusion for your program is providing a perk on your customers’ birthdays. This is something that most consumers have come to expect, but you shouldn’t treat it like a checklist item that you have to include. Instead, view it as an incredible opportunity to interact with each customer on their special day. You’re trying to provide delight, so it makes sense that you’d want to reach out to them with a surprise on their birthday.

What will you send them? Perhaps it’s a 50% off coupon, accompanied by a fun birthday note. Or you might want to give them exclusive access to content that normally has a paywall. Or you could even offer them a voucher for a free item from your collection.

Of course, loyalty programs are much more than just a birthday touchpoint. You should be providing year-round value and moments of delight. Here are 5 attributes that your program must have in order to succeed:

1. Personalized

Your program shouldn’t feel like a default pool that all past customers get thrown into. Instead, strive to make your base feel that they’ve been given a special opportunity based on their unique experiences with your brand.

Building off this individualized approach, the program should feel tailored to each customer. The aforementioned birthday rewards are a great place to start, but you can also save their past orders to make reordering or returns faster. Or if you’re going to send out a voucher for a special gift around the holidays, you could designate a handful of potential options and match them with buckets of customers whose past purchases most resonate with one of those options. This personalized approach would enable you to send the holiday gift and say, “Based on your distinct style, we thought you’d enjoy this.”

2. Unique

Given the vast number of loyalty programs that your customers belong to, even a good program can sometimes get lost in the shuffle. So make sure that yours looks and feels distinct.

Creating a unique program starts with the brand elements you’ve spent so much time developing. Your color palette should be front and center. Likewise, use your logo and other special brand elements to ensure that the program doesn’t just feel different from the rest, but it feels like you.

3. Accessible

People throw around the mantra, “If you build it, they will come,” all the time. But it’s not entirely true. You must build your program, then make it easy to access. Why? Because even your most loyal fans will lose steam if numerous user actions are required to get in and use your program.

For example, let’s say you create an app for your loyalty program. You and the developers are thrilled with the vibrant design, but it quickly becomes apparent that there are some critical flaws. First, the app forces users to log in each time they use it. Second, the reward points section is buried in the navigation and is difficult to find.

Unless you fix these issues, expect users to remove the app from their phones or simply relegate it to their “never used” section. After all, who wants to navigate a labyrinth just to use something that is supposed to provide positive experiences?

4. Rewarding

Sounds obvious, right? But too many businesses revert to the “collection of coupons” approach. Not only do such discounts feel pedestrian, but they can put an unhealthy focus on your pricing. When a competitor drops their prices on a similar product, which they certainly do from time to time, your customers might follow the price away from your business.

So what rewards can your business offer? Let’s say you have an online jewelry shop. You could offer free shipping to your loyalty program members. And you could extend the window for product returns, providing a higher level of confidence for customers that can lead to more sales. Finally, you could offer discounts each year on their birthday where they get 25% off any jewelry item with their birthstone. Yes, this would technically be a coupon. But it’s personalized and unique in a way that your competitors probably couldn’t match.

5. Consistent

Some loyalty programs start out with a bang, then fizzle out once the welcome reward has been delivered. Others are hit and miss, based more upon the whims of the business owner than any sensitivity to the user experience.

If you want your loyalty program to have staying power, it’s got to be consistent. Users should know what they’re going to get and how it can be redeemed. Mind you, this doesn’t mean it should always be predictable. Adding an unexpected perk to the mix from time to time brings delight to your base and can spur a corresponding lift in sales.

The Costs of Building Customer Loyalty Programs

Retaining your precious customers is never cheap. But you didn’t just get into this business to find cheap solutions—you care about quality. And the right investments at the right time will always bring a good return.

To make sure that the value of your loyalty program is symbiotic, you must balance the offerings with the cost of the program. Consider the following formula:

your incremental revenues – your incremental costs = loyalty program cost

The formula is based on projections for customer response to the program. The incremental revenues to consider in these projections include increased customer referrals, decreased turnover, and higher sales.

After completing this side of the formula, you’ll need to account for the corresponding costs. Examples might include the cost of the program’s rewards, vendor contracts, app development, support from IT, and advertising.

Will your incremental revenues justify these expenses? If so, you should launch your program as soon as possible, capitalizing on the support of your customer base. If not, reassess your plan and make the necessary cost-saving refinements before moving forward.

Looking for additional insights to help build your customer base and achieve better sales results? Our free masterclasses are taught by entrepreneurs who have walked this same road and discovered solutions that you won’t find anywhere else. From attracting new customers through Instagram to achieving better business efficiency, these courses are designed to help you reach your goals faster.

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