18 Jun Loyalty Problems – Your customers don’t love you! (9min read)
The inconvenient truth
What is it that you do today, that makes your customer want to buy tomorrow? Is your loyalty program optimised for the digital times we live in?
Historical data shows it’s 5 times more expensive to convert a new customer than it is to convince an existing one to buy again, most marketers agree on that. Why are we then so obsessed with acquisition, rather than investing in customer loyalty? In this 5 min read I’ll share 4 key elements that make your loyalty program more effective.
1. BUILD RELATIONSHIPS
Since digital has gone mainstream we have all become drastically less loyal. We have evolved (since smartphone history) from a rational informed local loyal buyer to an emotionally distracted global switcher. We freakishly compare online, read reviews, see what others are buying, and get bombarded by similar offers across multiple channels over and over again…
In digital consumerism ‘customers are not loyal to companies, but they are loyal to the beliefs and values a particular brand stands for’. The main reason I am not buying your brand is not because of your product, I am buying because of what’s behind it. What the brand stands for, how it communicates to the world and what it believes in. This communication is becoming increasingly important today. For example, I am a great fan of Patagonia because the brand is marketed as sustainable and activist.
Ideally you want your customers to react like “Nice, this is way more than just saving money or buying a good product”. Sure, that discount code on the next purchase works great, but making that personal connection that makes you want to talk about it to your friends and family makes a far greater impact. If your loyalty program manages to inspire your customer it will automatically reach a broad audience. Look at what Starbucks is doing. Starbucks Rewards provides a lifestyle for its customers. It makes your life easier by solving problems (place an order online, stream music,…). That to me is a powerful key to ignite fun loyalty programs, solve problems. What can you do as a brand to make sure you’re talked about, or better yet, what makes your customers want to tell everyone they know about it?
Keep it fun and simple, but above all branded!
Don’t talk about product benefits but start building a personal relationship and talk about what you believe in as a brand. Remind your customers about your brand values and refresh the memory structures they have about your brand all the time. Make your loyalty program an extension of your brand.
2. FOCUS ON LIGHT BUYERS
It’s almost inevitable that your loyalty program will focus on the customers who buy your products the most: buy more, save more, logical right? The problem with this is that it undercuts your profit margins. These people buy your product anyway, regardless of the loyalty program or that crazy discount offer! All this is fine but your loyalty program will never achieve a real impact when it’s only focusing on heavy buyers.
It is much more effective to reach your light buyers with small but useful incentives and therefore increase their repurchase frequency. You agree there are a lot more light buyers than heavy buyers for just about any product, right?
The obvious solution is to have light buyers participate in you loyalty program.
Pepsico’s PepsiStuff.com is a great example on how a large FMCG player reaches many light buyers. Pepsi has stood for a youthful spirit and the choice of a new generation. By offering a wide range of benefits in their loyalty program and by printing “cool stuff codes”on their products during the entire year, they will inevitably reach all category buyers. Pepsico builds brand value by making people feel nostalgic with fun retro items.
That to me is a nice way to build brand equity!
3. VALUE YOUR CUSTOMERS
And I don’t mean, put a price tag on your customer… A loyalty program that shows the customer that he or she is valued and respected will survive tomorrow when the digital tsunami clears out all the BS loyalty programs. Make the customer proud that he bought your product or service but most of all make sure he doesn’t feel sold out!
I recently stumbled upon a large Telco’s loyalty program that asks it’s clients to sell out data from their friends. In return for loyalty points the telco company could then cold call their friends… Does that sounds like a good loyalty incentive? Let me think about this for a minute? Or maybe not! Maybe big corporates seem to forget that nobody likes being sold to. Loyalty gone in my opinion.
Emotional rewards are equally important as monetary ones.
In stark contrast, a few weeks ago I had a meeting with Spa about their Baby&Kids program. They offer nice gifts that are branded, beautiful ànd useful. Moreover, kids can follow the Spa mascot Arthur who takes them on an adventurous journey. The more you engage with Spa the more stories and adventures your kids will enjoy. I truly believe good loyalty programs contain an emotional layer, although I believe they could make things a bit more exciting with their photo challenge… 😉
4. MINE DATA OBSESSIVELY WITH RESPECT
CRM and loyalty programs (should) go hand in hand. The data collected through loyalty programs offers plenty of upside potential in the form of improved engagement and lifetime value. By mining data in savvy and sophisticated ways brands can build increasingly positive experiences.
While many brands can’t identify customers at the register, most can’t connect transactions to buyer profiles or preferences. Collecting data through loyalty programs is therefore increasingly important throughout the shopping journey of today. On the other hand brands need to protect customer data and provide transparency. Needless to say that data and privacy breaches can seriously damage consumer trust. Until a brand earns a customer’s trust, the concern over data security may be the greatest barrier for establishing loyalty.
Keep your CRM up-to-date by offering real benefits.
Belgian brands like Orange, Luminus and Kinepolis offer extra benefits on birthdays or when a customer completes his profile. These programs that ‘exchange data for a clear reward’ not only work well, but most importantly are executed with customer’s explicit consent, hence are GDPR-compliant.
Our research and experience with industry leaders shows that the best performing loyalty programs contain recurring benefits equipped with strong branding elements.