Baked to Perfection: The Secret Recipe for a Successful Customer Loyalty Programs

Business.com / Sales / Last Modified: February 22, 2017

Research shows it costs businesses an average of five times more to acquire a new customer than to market to an existing one.

Customer loyalty is a valuable part of any business, regardless of industry. Research shows it costs businesses an average of five times more to acquire a new customer than to market to an existing one. And when you consider that 40 percent of e-commerce revenue comes from 8 percent of your customer base, the value of customer loyalty increases yet again.

Luckily for you, there is a simple recipe for developing a successful customer loyalty program that will help foster relationships with your current customer base, entice new customers to participate and increase profits.

Related Article: Under Promise, Over Deliver: The Must-Do's of Customer Retention

Ingredients:

  • Customer data
  • Easy ways to sign up and participate
  • Attractive rewards
  • Feedback and follow through 

Mix Data Carefully: What Do Your Customers Want from a Loyalty Program?

As tempting as it may be to jump right in and create the program would most like to participate in, it’s critical to use all customer data at hand to find the right mix for your target audience. Seventy-seven percent of transaction-based programs fail within the first two years. Since 97 percent of loyalty programs are transaction based, getting it right matters.

Use customer data from your customer relationship management (CRM) software, your website analytics, transaction records, marketing and campaign results. See what your customers respond to, and work those elements into your program.

If you need additional data, ask. Sixty-six percent of American adults are willing to provide basic personal information to your business to get better products and services. Try conducting a survey to learn more about what your customers would most appreciate.

Sweeten the Pot: Make Them Want to Earn

If your loyalty program has rewards that no one is interested in, what motivates people to participate? At the same time, if you offer rewards you can’t afford to sustain, the loyalty program defeats the purpose.

What rewards align best with your business? What are your competitors doing? Choose perks you know will motivate your customers, such as free products/services, discounts or cash back rewards.

Bake With Care: Make it Easy to Participate

Simplicity matters. If participation is too complex, your business will have a harder time with program management and your customers will be less likely to participate.

Amazon Prime is a great example of a loyalty program that works. Members pay $99/year to participate, and membership includes a wide variety of benefits, including, free two-day shipping on a vast inventory of items, free music and video streaming, free cloud storage and more. The program is so successful that Prime members spend an average of $1,500 a year with the site, compared to $625 per year from non-member customers.

Whatever the mechanics and rewards of the program, make sure they’re clearly outlined for the customer during the signup process. To make signup easy, give customers their choice of phone, the web, or in-person sign up for brick-and-mortar stores with an E-commerce counterpart.

Keep Your Dish Warm: Stay in Touch

After a customer signs up for your loyalty program, it’s important to keep in touch. Research shows the frequency of interaction builds loyalty and advocacy. Daily communication increases loyalty by 87 percent; weekly interaction increases loyalty by 64 percent and monthly and a few times a year increases loyalty and advocacy by 49 percent and 33 percent respectively. 

Keeping in touch ensures customers are reminded of your business and increases chances of participation in your program. Research shows email marketing targeted at your loyalty program participants has 40 percent higher open rates, 22 percent higher click-through rates, 29 percent higher transaction rates, and those emails generate 11 percent more revenue.

While you won’t be able to keep all of them happy all the time, treat customers with respect, even if they're not always right. If you encounter a dissatisfied customer, take the necessary actions to validate their feelings and rectify the situation.

Related Article: How Do You Sustain and Grow Your Customer Relationships?

Share the Goodness: Spread the Word

What’s the point of a customer loyalty program if your customers don’t know it exists? Promote your loyalty program with a combination of online ads, social media coverage, press releases, and any other methods available.

If your E-commerce store has brick-and-mortar locations, advertise in-store with signage and encourage staff to pitch the program to shoppers. After the program is launched and participation begins to increase, members will happily share it with friends and family, but you’ll still want to include it in marketing materials as a way to entice new customers to sign up.

Taste-Test: Adjust Your Recipe Using Feedback

About one-third of customers say they wouldn’t be loyal to a brand if it weren’t for their loyalty program, so if the program doesn’t go over well at first, listen to the feedback and adjust according to what your customers tell you.

A perfect example of feedback-based adaptation is how mass-retailer Kohl’s added a loyalty program for their customers, Yes2You Rewards. Initially, their customer loyalty focused on offering special deals and discounts to Kohl’s Charge cardholders. Based on feedback, loyal shoppers now can earn discounts from the retailer even if they don’t have a credit account with the store. The new program adds an extra layer of benefits to cardholders. 

By adjusting their loyalty recipe, Kohl’s was able to find the right mix of benefits to woo new shoppers, reward loyal shoppers and offer a little extra sugar on top to cardholders.

Loyalty perks that address only new customers or only members can miss the mark by alienating potential shoppers who may not wish to open an account, or by making offers not available to your loyal base. A truly successful recipe for loyalty offers everyone in the sales pipeline a tempting treat.

Creating your customer loyalty program will take time, and participation rates may be low in the beginning, but carefully crafting this recipe is a major step toward success. If you need some inspiration, take a look at some customer loyalty programs that deliver real value. And remember, developing a customer loyalty program isn’t the only way to boost customer loyalty. To truly be successful, you must use the program as one part of a multifaceted marketing strategy.

 

 

 

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