On average, customers are signed up for around 18 loyalty programmes. This includes brick-and-mortar and online stores. However, of those 18, customers only actively use nine of them.
The reasons for this lack of engagement vary. Sometimes customers sign up to loyalty programmes because they feel like they can’t say no. Or because there’s an aggressive introductory offer that’s too good to turn down.
Customers engage with the remaining nine because they see the value in doing so. That’s not to say all loyalty programmes are created equal.
The nature of the relationship the customer has with the business also plays a part.
One of the most common loyalty programmes is a points card. Customers accrue points for every euro, pound or dollar that is spent and 100 points equates to one euro etc back.
It offers little in the way of value beyond a cheaper purchase every few months. For shops like supermarkets, this is fine. Customers shop there because, for the most part, they have to.
Supermarket customers benefit from in store special offers including promotional offers, discounts, multibuys and club member discounts. So accruing points to get money off every quarter is a reasonable exchange. Both parties understand the relationship and both parties know that the customer is going to shop there largely out of convenience.
Unless they sell a niche product or customers have a vested interest in shopping there, for other businesses however, loyalty programmes have to work much harder.
There is no one size fits all approach to loyalty. What you sell can dictate how your customers interact with you as much as the service you offer.
For major domestic appliance retailers, for example, customers make one or two purchases every few years. Purchases are heavily influenced by both budget, size of the product and practical features.
In this instance customers are looking for the best product they can afford that meets their needs. As such, the best these retailers can offer in terms of growing loyalty is money off the next purchase.
They can add value by producing content that answers recurring questions about specific appliances. However, this information while building trust with customers, won’t necessarily result in loyalty.
This exception to the rule highlights the need to get any loyalty offering you’re going to provide right first time.
Customers have tremendous choice in terms of where they shop so a poorly conceived, badly managed or unfair loyalty programme will fall flat.
The more data you have on your customers the easier it will be to build a loyalty programme around them.
Regardless of your industry this insight is essential. Understanding how your customer interacts with your website, your products and your offers will help you to identify your loyal customers.
You should consider not only how frequently your customers shop with you or how much they spend, but how many items they buy at full price.
Customers who spend a lot when you have a sale running, isn’t a great customer. Customers who pay full price for products, is.
But this data will give you valuable insight into how price influences purchase decisions. This in turn will guide your decision making in terms of what you offer your customers.
To differentiate these customers you need to segment your database. Segmenting customers by demographical data is what most businesses do. It’s fine but it’s too top level to be of any long term value.
You don’t win points for sending an email with the customer’s first name, or knowing which personal pronouns they prefer.
Customers expect a lot more.
Product searches, product purchases, size and colour preferences, average order value and order frequency are all needed to understand your customers.
But to build a sustainable loyalty programme you need to identify which customers are not only purchasing often but who are paying full price for products. That isn’t to say you should exclude lower spending or lower margin customers, but these alpha customers should be your priority.
Data consolidation will make it much easier to identify your various customer types for segmentation.
Each bucket you create allows you to communicate with your customers in a different way. And ultimately tailor your loyalty offerings to those different customer types.
After all there’s no value in excluding customers from your loyalty programme, or nurturing their loyalty in general. But invest the majority of your efforts in retaining your high value customers.
This segmentation will enable you to personalise your communications and, providing you have a robust customer data platform, you can analyse and iterate your communications for better engagement.
The more engaged your customers are the more receptive they will be to any offer of a loyalty programme by you. This is important because, for the most part, customers don’t like it when businesses try to win their loyalty.
When setting up a loyalty programme it’s important to get it right. Customers aren’t going to bear with you while you iron out the kinks. They don’t need to. After all they were quite content without the loyalty programme so there won’t be any great driver for them to give you the benefit of the doubt.
And, again, in general customers really aren’t too bothered about making it easier for you to sell to them. Which brings us onto best practice number one…
All loyalty programmes, even the basic ones, start with data. Knowing which customers are coming back and which are spending the most. These basic data points are the foundation of any reward system and without them you’ll struggle.
Ensuring your business is equipped with a customer engagement platform with a built in customer data platform allows you to consolidate, analyse and segment your data into detailed Single Customer Views.
From there you can then build engagement campaigns, within the platform, to start building retention and gaining those valuable insights into what your customers like.
It’s at this point you can start to think about how to nurture loyalty.
To learn more about how a customer engagement platform with built-in CDP can help you engage with your customers, get in touch to request a demo.