Using Loyalty Marketing to Improve Customer Experience

Customer loyalty initiatives aren’t anything new; in fact, loyalty programs have been in existence since the 18th century. It all started with American retailers giving a customer a copper coin when they made a purchase. This copper coin could then be redeemed by the customer on their next purchase from that retailer.

Tokens and stamps were later introduced as loyalty program ‘cards’. By the 20th century, the familiar coupon was first used by Betty Crocker – these are still popular today – and American Airlines launched their Frequent Flier customer loyalty program by the early 1980s. By the 21st century, technological innovation had taken over and businesses started to adopt more user-friendly, eco-friendly ways to reward their customers.

In recent years, customer growth and retention have become the primary focus of many marketers. This has been driven by the rise of eCommerce and the advancement in technology, such as AI and mobile.

For marketers, incorporating loyalty marketing into a company marketing strategy is a given. Over the past few years, there has been more focus – and more budget – targeted towards the customer; but the acquisition thereof, rather than retention. A savvy business will realize that retention should be prioritized over acquisition within any strategy.

What is loyalty marketing?

Loyalty marketing is a type of marketing that focuses on fostering loyalty among existing customers. Successful loyalty marketing should increase customer lifetime value through either increase purchase frequency, increased average order value, or both.

It’s a well-known fact that 80% of your revenue will be generated by 20% of your existing customers. This principle is known as the 80/20 Rule, or Pareto principle, and can be applied to a number of different business aspects. But, in this case, we’re applying it to marketing.

So, on that understanding, we can apply the 80/20 rule to loyalty marketing. Therefore, it makes sense to focus on retaining those customers and encouraging them to spend more with you. There is also a benefit in rewarding those customers; they are your brand ambassadors and are likely to recommend your company to other people, which is where many of your new customers come from.

As well as the power of word of mouth, a customer that has already bought your products or services know their value. Rewarding loyal customers through marketing a loyalty program is more likely to take less ‘marketing’ effort and generate repeat business.

Why is customer loyalty important?

There are a number of very good reasons why customer loyalty is important; and why marketers should be spending more of their budget on retaining existing customers than targeting new ones. If we go by customer loyalty statistics:

• 89% of customers are likely to remain loyal to a brand if they share the same values.

• 43% of customers will spend more with a brand they are loyal to than brands they are not.

• 75% of consumers will choose a brand that offers a loyalty program to reward members.

• 93% of your customers are likely to return and buy again from you if they had a good experience previously.

• A business can benefit from an increase in profitability of 25-125% if they reduce its churn rate by just 5% (the churn rate is the number of customers that leave, and the revenue lost as a result, in a given period).

Just these figures alone are enough of a reason why customer loyalty is important. Whilst most marketers are aware of customer loyalty, many don’t allocate enough of their budget to establishing loyalty programs to retain existing customers.

However, just having a loyalty program is not enough. A key aspect of a successful customer loyalty program is delivering excellent customer service to enhance the customer experience. If the business doesn’t deliver a good experience for the customer and build trust in the brand, no matter how attractive their loyalty program is, they will go elsewhere.

A study by Rare Consulting showed that 83% of customers will sign up for a loyalty rewards program if they trust the brand. Customers don’t just want a good experience, they also want to feel valued, to feel they are making a difference.

Defining a loyalty marketing strategy

Before you can start building a loyalty marketing strategy, it’s important to define your customers, your goals, and your method. Defining a customer loyalty strategy follows the same principles. But it must be remembered that it’s a changing environment; what was a successful reward scheme a few years ago may not be the same now. This is because a customer's values change, and what they’re looking for is different. Then there are the financial and technological aspects to consider, not to mention the social influence.

However, whilst defining a loyalty marketing strategy has its challenges, there are three main elements to consider when you build customer loyalty with marketing that should always be incorporated. Known by some marketers as the three R’s are Reward, Recognition, and Relevance.

• Reward – it’s’ tangible, it’s real; you are giving something back to your customer as a thank you for their custom. You are rewarding them for their loyalty. But you are also gaining valuable insights into your customer’s behavior.

• Recognition – recognize your customers' contributions to your business; value them as a customer and give them something back, such as first access to special offers or events, or complimentary upgrades to membership.

• Relevance – if you want longevity, it’s important to connect and engage with your customers in a way that shows them you understand what matters to them. Tailoring your loyalty program to what is relevant to your customer is a way to cut through the masses of competing messages they receive on a daily basis.
  

Your customer’s journey with your business provides multiple opportunities to develop a highly personalized, engaged relationship with them. Gathering valuable insights into their wants and needs through customer feedback about their buying behavior adds a lifetime of brand value and customer satisfaction.

How to build customer loyalty with marketing

Knowing the value of implementing a customer loyalty program will add to your business is one thing; marketing customer loyalty is the challenge. If you don’t promote your customer loyalty program and encourage customers to join, it’s not going to be the success you want it to be. So, how do you market customer loyalty and generate repeat customers?

• Promote your loyalty program – there’s no point in having a loyalty program if you don’t shout about it. Promote it; but make sure it is marketed to the channels your customers use. If your business is predominantly online, that’s where most of your marketing needs to be. So, it’s your social channels, website, and email marketing to reach firstly, your existing customer base and secondly, to entice new customers.

• Offer a sign-up incentive – most existing customers will sign up for a loyalty program, particularly if they’ve already had a great customer experience. However, some might be a little cautious. New customers, however, might be more reluctant until they’ve built trust in your brand. So, offer them an incentive to sign up for your customer loyalty program, such as an instant discount on their first purchase.

• Go beyond that standard incentive with experiential rewards – differentiate yourself from your competitors and encourage customer loyalty longevity with experiential rewards. Give your customers a good reason to keep coming back time and again, such as collecting points towards an even greater, better reward. The best bit is that your customers will share their experiences on social media and encourage their friends to sign up, too.

• Incentivise customer content and reward them – there’s no better promotion of your products or services than customer recommendations. But rather than just relying on testimonials, go one step further and encourage your customers to create their own content and increase brand engagement.

• Time your targeted messages – use your data to discover the most active ‘buying’ time, and location, of your customers. Then you can tailor your messages to coincide with this buying window to generate the maximum impact, and ROI.

No single customer loyalty marketing program works for every business. Being creative in your approach to promoting your customer loyalty program is key to targeting the right customers, at the right time. Adjusting your marketing programs to focus on existing customers, whether they are lapsed, infrequent, or regular buyers, will generate better customer relationships and a more successful loyalty program.

Why Piggy?

Piggy’s all-in-one, cloud-based customer loyalty software enables businesses to tailor their loyalty program to their, and their customers, exact requirements. Our system gives you the opportunity to create any loyalty program that will ensure repeat purchases and increased customer retention.

Adapting your program with easy-to-use integrations, tools, and customizable rules, means you can build and launch your program within days. Set your type of rewards, sell gift cards, establish a rewards points system and send targeted messages all from the Piggy dashboard. In addition, Piggy’s customer loyalty program software will integrate directly with your existing stacks, such as Shopify, WooCommerce, Zapier, Planday, and Caspeco. This allows you to automate workflows; from POS and HR systems through to eCommerce set-ups. Try Piggy for free or get your demo today and discover what Piggy can do for your business.