It's what you hope to get from your significant other, your beloved house pet, and your paying customers.
I'm no expert when it comes to the first two things, but when it comes to customer loyalty, I have some useful insights to share about how it can help you grow your business — so read on.
(For more information about animal loyalty, please refer to the 1963 classic film, The Incredible Journey.)
Before we talk about loyalty programs, let's further examine how your company can attract loyal customers to your business.
How to Build Customer Loyalty
- Adopt a multi-channel customer service system
- Build credibility through customer interactions
- Deliver added value
- Share positive customer experiences
- Reward customer loyalty
Customer loyalty is not easily created. Customers are driven by their own goals and will be loyal to the company that can fulfill them best. It doesn't matter if they have a positive history with your brand, if a competitor puts a better offer on the table then the customer is going to take it. The steps below can help your company stay ahead of the competition and build a strong following of loyal customers.
1. Adopt a multi-channel customer service system.
If you want to build customer loyalty, then you need to be in tune with your customers' needs. Having a multi-channel service system is one of the best ways to stay connected with your customers, especially when they need help. Customers will have more access to your customer service teams, creating more customer interactions. The more often you can interact with your customers, the more chances you'll have to influence their customer experience.
Using multiple channels for customer service also presents the opportunity for you to create an omni-channel experience. Omni-channel experiences occur when the user's experience with the brand is consistent across different interfaces and devices. This increases customer satisfaction because it makes your customer service offer more user-friendly, which is exactly what you want when your customers are frustrated and in need of support.
Consider adopting help desk and live chat tools which can help your customer service team cover multiple channels at once. For smaller teams, AI software like chatbots can relieve the workload of organizing and distributing incoming requests without having to hire more employees.
2. Build credibility through meaningful customer interactions.
Research shows that about 60% of customers stop doing business with a brand after one poor customer service experience. In comparison, 67% of churn can be prevented if the customer service issue is resolved during the first interaction. This means that your business can't afford to make many mistakes, and if you do, you need to fix them immediately.
Loyal customers expect a positive experience from your brand every time they interact with it. They want to feel like you value them as much — if not more — then they value you. If at any point they sense their business isn't appreciated, you'll risk losing them to competitors who will be happy to have them.
A CRM can come in handy here as it can record the past experiences that a customer has with your brand. It stores messages like emails and calls, as well as customized notes that relay specific information about a customer. This helps create a more personalized experience as employees can leverage important historical data regarding a past interaction with a customer.
3. Deliver added value.
You're not the only one vying for your customers' attention — your competitors are too. Everyone is racing to show your customers that they can best fulfill their needs. So, how do you edge them out? Go above-and-beyond with exceeding their expectations.
thinkJar Research shows that 55% of consumers are willing to pay more for a guaranteed good experience. Other than offering a loyalty program — which we'll talk about soon — you can do this by building a relationship with your customers that extends beyond the moment of purchase. Adding value beyond the purchase point demonstrates to your customers that you're invested in their lifestyle, not just their money.
One way that your company can add value to the customer experience is to host events or contests that your target audience would be interested in. For example, the energy drink brand, Redbull, has built a massive customer following by sponsoring extreme sporting events and teams.
Another way to add value is to create a customer community. This could be simple like a knowledgebase or ideas forum, or it could be complex and include a devote network of loyal advocates. Take Harley Davidson, for example. They founded a community of brand evangelists who advocate for Harley Davidson at different dealerships throughout the U.S. These communities make customers feel like they're part of an in-crowd that possesses a social status that's exclusive to the members of the group.
4. Share positive customer experiences.
If you're doing a good job with generating positive customer experiences, then why not let people know about them? Gather customer feedback and share your reviews to inform others about the benefits that your company can provide. Use your omni-channel communication system to broadcast these stories across a variety of mediums. Customers tend to trust other customers more than your advertising, so it's important to leverage positive interactions to maximize customer value.
If you're not sure where to find feedback, participate in third-party review sites like Yelp, which give you access to large amounts of customer feedback in one thread. Consider adopting NPS® and other feedback tools that can help you gather qualitative information about your brand. You can also encourage customers to share testimonials which can then be uploaded on your website for other leads to see.
5. Reward your customers
Customers who are loyal to your brand are also the most valuable to your business. In fact, studies show that customers who have an emotional connection to your brand tend to have a lifetime value that's four times higher than your average customer. These customers spend more with your business, and therefore, should be rewarded for it. After all, you need them the most.
This is where a loyalty program becomes essential to building customer loyalty. Research shows that 52% of loyal customers will join a loyalty program if one is offered to them. Customers who join the program spend more at your business because they receive benefits in return for their business. They already enjoy buying from your company, so why not give them another reason to continue doing so?
An easy retort to that question would be that it costs too much to offer incentives without getting anything directly in return. To be fair, this does appear to be true when you look at an individual purchase. However, loyalty programs offer benefits to your business that extend beyond just one or two transactions. If you question whether they're cost-effective, take a look at some of the key benefits that customer loyalty programs can provide to your business.
What Are the Benefits of a Customer Loyalty Program?
Once you've created your product or service and started generating revenue from your customers, you might start thinking about building a customer loyalty program. No matter what your industry or business vertical, you can find a way to reward customers for their loyalty (and their hard-earned funds) with additional, exclusive benefits.
You might already be a member of a few customer loyalty programs — for example, a frequent flier mile program, or a customer referral bonus program — but you might not know how to start one for your own organization.
In the increasingly competitive and crowded business space, customer loyalty programs could be what differentiates you from your competitors — and what keeps your customers sticking around.
Members of customer loyalty programs typically spend up to 18% more than other customers, but that's not the only reason to start a program.
1. Better Customer Retention
Customer loyalty programs help you keep customers engaged with your business — which plays a huge role in how likely customers are to stick around, and how much they're going to spend.
In this day and age, customers are making purchase decisions based on more than just the best price — they're making buying decisions based on shared values, engagement, and the emotional connection they share with a brand. Customer loyalty programs are a great way to engage with customers beyond just the point of purchase, to interface on shared values, and to provide even more value to customers — making them happier and more likely to keep purchasing from you.
2. More Customer Referrals
If your customers enjoy the benefits of your customer loyalty program, they'll tell their friends and family about it — the single more trusted form of advertising. Referrals result in new customers that are free to acquire, and which can generate even more revenue for your business — because customers referred by loyalty members have a 37% higher retention rate.
It's more cost-effective for your business to retain happy customers than it is to consistently churn and acquire new customers: Acquiring a new customer is 5-25X more expensive than retaining a current one.
4. User-Generated Content and Reviews
Almost as trustworthy as recommendations from friends and family are online customer reviews. Customer loyalty programs that incentivize reviews and ratings on websites and social media will result in lots of trustworthy and authentic user-generated content from customers — singing your praises so you don't have to.
So, now that you're on board with the value of customer loyalty programs, how do you get started with creating and launching one?
How to Create a Customer Loyalty Program
- Choose a great name.
- Create deeper meaning.
- Reward a variety of customer actions.
- Offer a variety of rewards.
- Make your "points" valuable.
- Structure non-monetary rewards around your customers' values.
- Provide multiple opportunities for customers to enroll.
- Explore partnerships to provide even more compelling offers.
- Make it a game.
1. Choose a great name.
The first step to rolling out a successful customer loyalty program is choosing a great name. The name of the program needs to incite curiosity and interest to urge customers to participate, and it needs to be distinguished from the myriad other loyalty programs they are probably already a part of.
The name should go beyond explaining that the customer will get a discount, or will get rewards — it needs to make customers feel excited to be a part of it. Some of my favorite customer loyalty program names include beauty brand Sephora's Beauty INSIDER program and vegan supplement brand Vega's Rad(ish) Rewards. These clever, unique names hint at benefits but don't give them away — making customers curious to learn more and join.
2. Create a deeper meaning.
Customers are cynical about customer loyalty programs and think they're just a clever ploy to get them to spend more with businesses.
Even if that's the goal of your customer loyalty program (because that's the goal of most businesses, to make money), it's your job to make it about more than the money — and to make it about the values — to get your customers excited about it.
Tap into the "why" behind your product or service to make your customer loyalty program as compelling as possible.
Amazon Prime costs almost $100 per year to join, but the value proposition of paying more money isn't just about the free two-day shipping. Amazon offers its members a ton of other convenient rewards — like free TV show and movie streaming, and free grocery delivery from popular grocery stores — that speak to the value for the customer (speedy delivery) in a broader context.
3. Reward a variety of customer actions.
Another way to demonstrate your commitment to customer loyalty beyond just purchases? Reward other customer actions.
Customers watching product videos, engaging in your mobile app, following and sharing social media content, and subscribing to your blog are still valuable signs that a customer is engaging with your brand — so reward them for it. It's what 75% of customers involved in loyalty programs want.
HubSpot's customer advocacy program, HubStars, lets customers earn points for a variety of different actions each week — like reading and replying to a blog post, or engaging with a video on Facebook — with more pointed earned for higher-effort actions on their part, that they can turn in for the rewards they want.
4. Offer a variety of rewards.
Another way to provide more value to your loyal customers than just discounts is to offer different rewards.
Customers who spend at a certain threshold or earn enough loyalty points could turn them in for free tickets to events and entertainment, free subscriptions to additional products and services, or even donations in their name to the charity of their choice.
Lyft does a fantastic job of this with its Round Up & Donate program. Riders can round up to the next dollar of the cost of their ride and donate the change to the charitable organization of their choice — making it easy and rewarding for them to make an impact while using their service as they normally do.
5. Make "points" valuable.
If you're asking customers to make the effort to enroll in your customer loyalty program, make it worth their while — points-wise. Just like with inbound marketing, if you're asking for more of your customers' money, you need to offer them something valuable in return to make sure the reward matches the effort expended.
For example, if you're offering cashback rewards as part of your customer loyalty program, assign a monetary value to your points so customers can visualize what they can earn (and spend) by continuing to purchase from you.
Credit cards do an excellent job of this by illuminating dollar-for-dollar how points can be used — just watch any commercial offering points in exchange for dollars, airline miles, groceries, or gas.
6. Structure non-monetary benefits around your customers' values.
Values are important to customers — in fact, two-thirds of customers are more willing to spend money with brands that take stances on social and political issues they care about.
So make sure you tap into those values as part of your rewards program, too.
TOMS Shoes donate a pair of shoes to a child in need for every purchase their customers make. Knowing that providing resources to the developing world is important to their customers, TOMS takes it a step further by launching new products that help other important causes — like animal welfare, maternal health, clean water access, and eye care — to get customers excited about helping in other ways.
7. Provide multiple opportunities for customers to enroll.
Once you've launched your customer loyalty program, make sure you're hammering it home whenever possible how to join — and the benefits of joining.
If customers get rewards from purchasing from your online store, next to the price, share the points they could earn from spending that much.
You might have experienced this when flying on an airline that offers a loyalty rewards credit card. The flight attendants might announce that you could earn 30,000 miles toward your next flight — if you apply for the airline's credit card.
Other ways to do this include promoting the program on social media channels and adding on-site push notifications when customers complete an activity that earns them points.
8. Explore partnerships to provide even more compelling offers.
What's better than one reward? Two rewards, of course.
Co-branding customer rewards program is a great way to expose your brand to new potential customers and to provide even more value to your own loyal customers.
Brands might offer loyal customers free access to co-branded partnerships they've launched — like T-Mobile's offer of a Netflix subscription with the purchase of two or more phone lines by their customers.
9. Make it a game.
Everyone loves games and competition — so use that winning spirit to get your customers interacting with your brand more frequently.
Lots of brands gamify their customer loyalty programs to earn valuable engagements within an app, website, or at point-of-purchase.
Points are easily translatable for gamification. Take Treehouse, which teaches coding and app development, and rewards engaged users with more and more points leading up to a badge — which users can then display on their websites and social profiles to impress colleagues and potential employers with their skills.
If you're operating with a smaller business, you may not have much flexibility when it comes to your budget. However, you can still offer an attractive rewards program that fosters customer loyalty.
Customer Loyalty Programs for Small Business
While small businesses don't have the same financial influence that bigger companies have, these organizations can still create incentives that motivate customers to return to their stores. When developing their rewards program, smaller businesses need to be creative and come up with a unique system that mutually benefits both the company and the customer.
Take a look at a few common ways that smaller companies leverage rewards programs to build customer loyalty.
1. Punch Cards
Punch cards are one of the most commonly used rewards programs for B2C companies. Customers receive a business card that gets a hole punched in it after every purchase they make. Once a customer reaches a certain number of holes, they receive a special perk or reward. The benefit of this system is that the business can guarantee that the customer will visit them a certain number of times before issuing a reward.
2. Opt-in Email
Opt-in email solicits the customer's email address for communication with your brand. Once the customer opts in, your company can send them offers or promotions via email. Emails are cheap to compose and distribute and can be sent at almost any frequency. You can also use email automation tools to deliver mass amounts of emails in an efficient manner.
3. Free Trials
Free trials are typically thought of as incentives used to convert potential leads, but they can also be utilized in rewards programs as well. For example, say you have a new product or service that's about to be launched. You can release a free-trial to members of your loyalty program. This not only acts as a reward for customer loyalty but it also works as a marketing tactic that primes your customers for a future sales call.
4. Partner Programs
One way to add value is to look externally to businesses that you could potentially partner with. By combining your resources, you can create an offer that benefits both you, your partner, and your shared customers. Credit card companies like Visa and MasterCard do this all the time by offering a card that's sponsored by a specific brand. While having a credit giant on your side is nice, start by looking for local, non-competitive businesses that you can partner with to add more to your offer.
5. Referral Program
Why track down new leads all by yourself when your customers can help do that for you? You can incentivize loyal customers to become advocates by offering them an attractive reward for customer referrals. Research shows that 70% of consumers are more likely to recommend your brand if it has a good loyalty program. This means that if your offer is good enough, customers will be happy to take the time to network your business to other potential leads.
Customer loyalty programs are crucial to building customer loyalty no matter how big or small your business is. Following the steps above should help any business develop an effective loyalty program regardless of its size.
To learn more, read about customer loyalty trends.
Originally published Jul 10, 2019 4:46:00 PM, updated November 25 2019