Understand that loyalty comes from creating a positive emotional connection with a person (or brand) through a series of positive interactionsor transactions that build affinity and become habitual over time. So logically for over 35 years companies have been utilizing consumer loyaltythrough rewards and loyalty programs. The average American belongs to seven rewards programs and 70% of consumers are willing to join more programs.
Consumers mainly sign up for rewards programs with:
- Gas stations
- Grocery stores
- Car rental agencies
- Credit card companies
Research shows that over 50% of those surveyed modify purchases on a when-and-where basis to maximize loyalty benefits. Not surprisingly, respondents choose brands to optimize a specific reward programs value. Loyalty marketing, marketing to your loyal customers is the smartest strategy you can utilize for your business. We all know that keeping an existing customer is far more cost effective than drumming up a new customer.
Building and sustaining customer loyalty includes:
- Value exchange
- Emotion-driven brand loyalty
- Experience-driven brand loyalty
- Stimulus-and-response conditioning
The dynamic mix of rational and irrational elements in the context of macroeconomic factors (recession) and micro-factors (poor experience with a company representative) may change at a moments’ notice.
Marketing Strategies to Increase Customer Loyalty
Marketers and retailers should focus efforts on integrating three core marketing strategies to increase customer loyalty. Marketers that operate programs integrating these strategies will see measurable increases in rewards program enrollment—and a better lifetime value from customers:
- Limited-Time-Only Promotions: Attract customers to the store with an effective promotional strategy (acquisition).
- Rewards for Purchase: Provide customers with an incentive to repeat store visits and increase average order value (growth).
- Points-Based Rewards Program: Enroll customers in a simple points-based retention/rewards program that builds tangible value (retention).
Limited-Time-Only Promotions – Marketers continue to test various pricing and promotion strategies, for example the everyday-low-price strategy. Some experts believe the low price strategy is more effective than other pricing strategies because studies indicate customers want the purchasing process to be easy because the customer wants the product now. Customers are motivated to purchase when they believe the promotional price is temporary (limited time only). On top of that, customers are unsure when that product will be discounted in the future. Limited-time-only promotions are effective, however this strategy will not be successful for the long-term because a long-time bond between customer and business is not usually realized.
Rewards for Purchases – Recently one retailer compared a reward-for-purchase promotion against an instant-discount-at-the-register promotion. The reward-for-purchase strategy resulted in 14% increase in sales.
The promotion strategy was initially intended to increase store traffic by having the reward-for-purchase offer redeemed at the same retailer. This strategy resulted in customers performing one to two incremental store visits within 30 to 45 days of the initial purchase. The instant-discount-at-the-register promotion returned zero under the instant discount promotion offered at the register.
So you have seen that the additional store visits led to an incremental 14% in revenue over the initial purchase (compared to 0% in the instant promotion), with 4% representing additional out-of-pocket purchases made by customers. The remaining 10% was initially provided by the retailer to the customer as a Reward for Purchase the customers spent back to the retailer at full value. Interestingly, more than 50% of the rewards were spent back at the retailer within 60 days of the initial purchase.
Points-Based Rewards Program – This strategy was also intended to generate two to three additional point-of-sale transactions. The additional generated revenue allowed the retailer to enroll customers in the retention/rewards program and increase program stickiness. Rewards programs increase revenue when there is increased transaction frequency and recency on behalf of consumers.
Utilize data collected from P-O-S exchanges:
Analyze customer data to create specific offers targeted to newly acquired customers. Additional offers may increase product attachment or cross-category realization to drive brand awareness and more importantly, brand loyalty.
Create predictive models to identify customers that would tend to accept “limited-time-only” promotions. These models also increase one-to-one marketing efforts to other targeted customers that fit the model profile, and indicate customers that may shop with a competitor.
- Analyze customer data to create specific offers targeted to newly acquired customers. Additional offers may increase product attachment or cross-category realization to drive brand awareness and more importantly, brand loyalty.
- Create predictive models to identify customers that would tend to accept “limited-time-only” promotions. These models also increase one-to-one marketing efforts to other targeted customers that fit the model profile, and indicate customers that may shop with a competitor.
4 essential components of loyalty program satisfaction (Scott Robinson and Bob MacDonald with Martz Loyalty Marketing)
Robinson and McDonald surveyed more than 6000 people in 30 national loyalty programs across six industry sectors.
Vital and Appropriate Communication – A little more than 90% of members want contact from loyalty programs, 53% perceive communication from loyalty programs as relevant. 57% of members read everything they get from rewards programs for which they have enrolled while 12% of respondents report that the amount of communication is too much. Research displays clearly that members require to be informed of the program rules, updates, and what they as a member are able to glean from the program.
Utilize Multiple Channels – 96% of participants in the survey report wanting communication and 46% want communication in at least three channels. 73% want mobile devices to interact with loyalty programs. However, only 37% see mobile devices as the primary loyalty channel. People using mobile devices are most likely to download loyalty apps. Members dedicated to loyalty programs want communication on member terms and require a various access points that members direct.
Show Awareness of Customer Preferences – 69% of respondents find personalized offers based on purchasing habits desirable. 62% prefer to drive themselves. These participants want offers based on preferences that are managed by the participant. Both of these groups want rewards earned and applied to items and services that are highly regarded.
The interesting aspect here is that consumers are in two categories. Consumers in one category feel understood and appreciated when offers are based on personal attitudes or behaviors. In the opposite category consumers feel violated by the experience. Therefore, loyalty program marketers must segment participants to identify the proper balance and test the information-for-value exchange to determine consumers’ tolerances.
In the opinion of over 25% of participants loyalty programs require or acquire too much information, prompting privacy concerns from respondents. Loyalty programs have a built-in paradox. If program satisfaction is a function of relevance; and data collection drives relevance, then without data, programs are destined to whither on the vine. Don’t collect data and turnaround and not use the data. If the data is not acted upon then you risk developing programs and content that’s not pertinent to members.
Demonstrate Congruency in Values – Brand loyalty is an offshoot of brand preference and leads to brand advocacy. There is a strong relationship between a customers’ personal and brand values. 40% of survey participants see their favorite company’s brand values to be one in the same with their own values. Therefore, consumers who perceive their values in alignment with a company’s brand values are much more satisfied with that particular company’s loyalty programs.
Undoubtedly you recognize this traditional branding strategy. Successful brands reflect and emulate the personality, values, voice, and beliefs of the company’s best customers. Focusing on content and messaging that resonates with program participants is essential for a loyalty marketing program to be successful.
Possibly the trend will move more toward consumers being active in helping to co-create content and devise tactics that mirror who customers are and what they as consumers believe in deeply.
Considering the on-the-go pace in which we live, loyalty is a constantly shifting target. however new data offers fresh insights, approaches, and tactics that may help create, capture, and apply the desire for connection, recognition, reward, and passion in each person.
Earning a customer’s loyalty is more difficult now than ever because attention spans are shorter, patience is decreasing, consumers are inundated with thousands of messages a day, and the competition is more visible and accessible than ever before.
Therefore, building a loyal customer base starts with acquiring the right customers. A firm’s chances of building a good relationship with customers are greater from the outset when loyalty programs are utilized because there are common interests between the company and the customer. The key to long-term success lies in demonstrating value to the customer and building on the foundation established with a properly integrated customer loyalty strategy.