Customer loyalty schemes are a powerful way to improve your customer-retention levels. There is no definitive number, but estimates are that it costs four to ten times more to acquire a customer(1) than to retain one so finding ways to increase your customer retention can significantly boost bottom-line profits. Are you currently using ways to build customer loyalty?
In the competitive marketplace where customers have an array of options to choose from, it’s easy for them to switch suppliers if they aren’t happy with the service or product you’re providing and there’s no incentive for them to stay. Just keeping your customers satisfied isn’t enough, you need to recognise and reward your best customers which in turn can do wonders for your profitability.
Devising the loyalty scheme
Have a clear aim as to why you’re starting a loyalty scheme in the first place, customers like to feel they’re getting rewarded for giving you their business – but what are your motives? You’ll be mistaken if you think of a loyalty scheme as a quick fix, loyalty schemes can be time and cost intensive and definitely aren’t a substitute for your product or service. Devise the scheme with profit in mind, but what other objectives are you looking to achieve? Do you want more repeat business, your customers to spend more or perhaps to capture data to understand your customers?
Make your offering right
A recent survey of UK consumers found that 54 per cent feel it takes too long to earn rewards in loyalty schemes, with 27 per cent having stopped using a loyalty programme as a result(2). Highly personalised content will help to add value to the customer experience, such as reviews and how-to guides; you need to create a customer experience that extends beyond the direct offering.
The rewards you offer can vary widely depending on your business. It can range from collecting points and stamps for every purchase, to offering discount and prizes, to days out for your most loyal customers. No matter how big or small your business is, there’s always an opportunity to offer your customers a loyalty scheme. The scheme needs to be simple to understand for you and your customers, and the rewards should be attractive and attainable but make sure you can recover the cost reasonably quickly.
Getting to know your customers
The data you generate and collect whilst running your loyalty scheme can be very valuable to help you understand your customer’s behaviour. They can show you your best customers and your worst as it can be more profitable to lose bad customers than to gain new ones. Your loyalty scheme can help you reward your most valued customers and promote similar products and services to the ones they use. Loyalty schemes can also help you to win back customers that may have moved on or gone to competitors, it’s much easier to win them over than cold prospects. You know them, their buying history, where and how to reach them.
The data generated can offer other valuable insights such as highlighting defection patterns and help you improve your product range and stock selection. Knowing what your best customers frequently buy helps you choose which lines to stock – and which lines to expand.