What is Customer Loyalty?

Customer loyalty describes a customer choosing to keep buying your products or services rather than your competitors.

It’s about retaining existing customers and stopping them from churning. It’s about growing customer value and taking a bigger share of the customers spend. There are many benefits of customer loyalty. A loyal customer:

1.     Will spend more than an infrequent or new customer.

2.     Will save you money as retaining customers is cheaper than customer acquisition.

3.     Will drive word-of-mouth marketing and build brand reputation.

However, it is possible to be a regular or repeat customer but not be loyal - see our previous blog. Purchasing is a behaviour whereas loyalty is an emotion. Loyalty means that the customer has also developed a positive emotional relationship with the brand as a result of the experiences they have had with the company.

What is a Customer Loyalty Programme?

One of the ways you can build customer loyalty is through a customer loyalty programme. A customer loyalty programme, or rewards programme, is a customer-retention strategy that motivates customers to continue buying from your brand instead of a competitor’s.

Loyalty programs are designed to reward customers for their continuous purchases from a business. They offer rewards, discounts, or other special incentives and are designed as a reward for a customer’s repeat business. According to Accenture, over 90% of companies have a loyalty programme. By rewarding customers for their loyalty, brands can maximize their lifetime value.

However, sometimes, loyalty programmes fail or they do not produce the results that a company wants. Here’s some tips to get your loyalty programme back on track.

Ten Tips to Improve Loyalty Programme Performance

1.     Set Clear Objectives

You need to be clear from the start about what you want to achieve with your loyalty programme and what business issues you are trying to address. For example, is your primary objective to generate short term sales or are you trying to reduce customer churn?

2.     Know Who You Are Rewarding

Who is the loyalty programme primarily aimed at? Is it your best customers who purchase frequently and spend a lot or is it your infrequent customers who need to be encouraged to purchase more often and spend more?

3.     Keep It Simple

Don’t make your customer loyalty programme too complicated. Your programme should have a clear objective and be easy for customers to understand. For example, if customers get points or rewards for performing specific actions, they should know what they’ll earn. You need to ensure that your programme has simple, straightforward rules.

4.     Make Rewards Quick To Redeem

Another key factor in a successful loyalty programme is making it easy and quick for customers to earn and redeem rewards. If you set the threshold for reward redemption too high and it takes too long to redeem a reward your customers will quickly lose interest.

5.     Offer A Variety Of Rewards

Another important factor in creating a successful loyalty programme is offering a variety of rewards. This could include things like discounts, free products or services or special access to events or products. By offering a range of rewards, you can appeal to a wider range of customers and encourage more of them to participate in your programme.

6.     Let Customers Choose Their Rewards

Letting customers choose their rewards is one of the most attractive benefits of being in a loyalty programme. As we have already said not every customer is motivated by the same reward. By giving customers a choice, you increase the chances they find value in the programme.

7.     Make Sure Your Loyalty Programme Is Promoted

There is no point having a loyalty program which customers do not know about. Many loyalty programme fails because of a lack of awareness. If customers do not know about the programme how they are going to participate? Make sure the loyalty programme is integral to your CRM Marketing strategy and activity.

8.     Create An Emotional Connection

A loyalty programme must be far more than just incentives and benefits you are offering to your customers. The rewards should be adding value and making a strong connection with your customers. So, if your programme is not adding value, it will not last for a long time. When customers feel valued from the loyalty rewards they emotionally get attached to your brand.

9.     Measure The Value Of Your Customer Loyalty Programme

Measuring customer loyalty programmes properly is critical. Loyalty is an emotion, so knowing how many customers hold an emotional connection with your brand is key. Net Promoter Score (NPS) is a customer loyalty score that measures how willing your customers are to recommend your product or service to others. You will also want to look at retention rates, re-purchase ratios and Customer Lifetime Value (CLV).

10.  Listen To Your Customers

In addition to looking at metrics, you can also understand how customers feel about your loyalty programme by simply asking them. Create a satisfaction survey asking customers to point out the parts of the programme they like and the ones they don’t.

Conclusion

Customer loyalty programmes are an invaluable tool for growing your business. With a strong loyalty programme, you strengthen your emotional connection with customers, improving retention and lifetime value in the process.

Further Reading

If you would like to find out about ways to generate more income from your best customers with a VIP Loyalty Programme - then read this blog.