Customer loyalty. It’s marketing gold dust. So what is a loyalty incentive, exactly? And why is customer loyalty important? You might have become a loyal customer of a business yourself. Whenever you need the products or services they sell, you always go to them. Why do you do that?
There’ll be a collection of one or more reasons behind your loyalty to a specific brand, from practical to emotional. And that’s exactly what the experience and expertise of Ovation Incentives is based upon – we understand what makes humans feel loyal enough to buy from the same business again and again, which means we know how to reward customer loyalty in highly effective ways and keep the momentum going.
Once the customer loyalty meaning is crystal clear you’ll know what to aim for, why, and how to get where you want to be. This article reveals all.
What is Customer Loyalty?
What does customer loyalty mean? Customer loyalty measures a buyer’s likelihood of buying more from your business. It comes about thanks to a blend of customer satisfaction, positive experiences, and the value of the goods or services the person buys.
Once someone is loyal they’re not easily influenced by more choice or lower prices elsewhere. Once someone becomes loyal to your brand they’ll come back to you for repeat business. You’ll have to get things very wrong – and fail to put them right - to drive them away.
Here’s a real life example. A friend always buys her work diaries from a certain supplier. She likes them because she can pay by PayPal, the orders always arrive within two days, the service is friendly, and they have a huge choice. Covid and Brexit meant her favourite online shop’s diary stock ran very low last year, since a lot of it is imported from France. Despite the fact there were only a few left to choose from, but plenty available on Ebay, she sticks with her favourite supplier. So far she has bought all of her business diaries and notebooks from the same company for the last 13 years. And that’s what we call loyal. This is why customer loyalty is important. It can mean years or even decades of purchases.
There’s more. Loyal customers will validate their feelings and beliefs about your company by telling other people about you. And that’s the best type of customer loyalty of all, when it becomes advocacy. More about that later.
What Drives Customer Loyalty?
What drives customer loyalty? There are so many reasons why a person might become loyal to your brand or business. When your customer service is better than everyone else’s, you win people’s loyalty. When people feel they can trust your brand and company, it can result in loyalty.
When you provide people with goals or rewards to work towards, it can create loyalty. Customer incentive programs make people feel valued and appreciated, which means they feel more warm and friendly towards you. Financial incentives always have a big impact too, generating strong loyal feelings in customers.
Some people value experience-based rewards over any other kind. Others feel personalised recognition is a powerful incentive to stick with a company. Because being part of a community makes humans feel good, social drivers sit at the heart of community-based loyalty initiatives. When you clearly communicate the benefits of your products, services, support and more, people feel you care.
When you make a mistake with a customer but manage to resolve it well, the customer might end up becoming loyal to you. It’s fascinating to know that the simple act of solving someone’s issue can have a powerful effect, making them feel more loyal to you than they would have been if nothing went wrong.
A simple rewards sign-up process means people find it easier to apply for loyalty schemes – the easier, the better.
Most of this can be translated into potent customer loyalty initiatives designed to delight consumers, keep them coming back for more, and persuade them to buy more of the same or associated products.
Why Customer Loyalty Programs are Important
Why are customer loyalty programs important? There are several reasons. It tends to cost a lot more to recruit a new customer than it does to sell more to an existing customer, and this alone is a good enough reason to get busy with customer loyalty programmes. The high cost of new customer acquisition makes your current customer base an incredibly valuable resource.
We’ve briefly mentioned advocacy, where a customer becomes so embedded in your brand and trusts it so much they begin telling their friends, families and colleagues about it. This is effectively free marketing, and it’s worth a fortune to your company. Can you ease people along the funnel from buyer to loyal customer to advocate? If you manage it you should soon see improvements in your bottom line.
Customer loyalty programs can also provide valuable customer insight. Assuming your CMS is doing the right thing you should be able to use the data you’ve collected to figure out who to cross-sell to, who to up-sell to, and who to make special offers and discounts to.
Imagine someone buys a green widget from you. You provide such good service they come back the next time they need a green widget. Noticing you also sell orange widgets, they decide to try those too. A few days later you send them a special offer for golden widgets and they buy one. You say thank you and send them another customer loyalty discount. Their experience is so good they start telling their friends, who come to you to buy their widget supplies. You get the picture?
Next, how to get customer loyalty.
How to Build Customer Loyalty
Now you know what customer loyalty is, the key factors that can drive loyalty and why customer loyalty programmes are important, it’s time to explore how to build a customer loyalty scheme. Your first task is to give it a catchy name people can remember. Your second task is to make it as fast and easy to sign up as possible, since delays and complexities can easily put people off. Keep form filling to an absolute minimum and ask for as little data as possible, just the essentials.
Next, design and create the messaging and materials needed to communicate the benefits of the scheme to your customers, a blend of communications excellence and direct response marketing. Your materials need to inform, convince and inspire customers, and should use the same tone of voice you use in the rest of your communications to support the brand. Depending on your target audience it could involve everything from email marketing to pop-ups and special landing pages, and could veer offline into marketing classics like telesales, direct mail, TV or radio ads, and off-the-page ads in customer magazines.
All of this, of course, demands support from top class tactics and strategy. The following sections highlight various important directions you could consider when setting up a popular, hard-working customer loyalty programme.
Provide Exceptional Customer Service
We mentioned exceptional customer service earlier. It’s one of the biggest key drivers of customer loyalty. This means you need to work on every single touch-point where customers connect with you, every element of the customer journey, to make sure customer service excellence comes first every step of the way. If you discover any gaps, fill them. Once you’re sure you are taking the best care of people every step of the way, you’ve created a foundation on which customer loyalty can grow and thrive.
Create a Points Programme
Loyalty can be driven by customer incentive rewards programs with targets that customers work towards. This type of programme is powerful because it constantly engages the customer, keeping them coming back for more. Your brand is in their mind’s eye on a regular basis and that in itself helps grow more loyalty.
Customers can track their points using a loyalty card, via a simple online account, or on a mobile app. This is one of the best-known ways to drum up loyalty, used by supermarkets and big chains – think the Nectar card, which has been on the go successfully incentivising consumers since 2002.
Point-based loyalty programmes are the most common type of rewards programme. They let customers accumulate points to exchange for freebies, cash, perks, price drops and more. People can often earn points by sharing content on social networks, providing reviews, and through gamification. You can build a loyalty programme for members who have never redeemed their points, only done it once, or have collected an impressive number of points.
Reward High Spending Customers
Your high value customers are worth a fortune to your bottom line. They deserve looking after really well. The more money they spend, the more they’re worth to you and the more their loyalty matters. You might have a suite of ten big buyers who always buy from you in bulk, or an individual who has made the same order with you month after month for years. Either way it’s good to be able to say ‘thank you’ in a way they appreciate, understand, and value. Think of generous special offers, gifts, prizes, and discounts for your big spenders. Also, they might ‘recommend a friend’ if you ask in the right way.
Offer Free Items with Multiple Purchases
Everyone loves a freebie, especially when it’s useful and valuable because the person giving it has bothered to find out what we like best. Give something cool away and your customers might talk about it with their friends, family and colleagues, potentially sending new customers your way at no marketing cost.
Free products offered for multiple purchases drive loyalty. You could offer a complimentary item that adds value to the product or service they’ve already bought, for example a bookcase for someone who has bought 1000 books from you. You might offer them more of the things they’ve already bought, or make a buy one get one free offer when someone buys more than a certain amount.
Create a Loyalty Card Scheme
Loyalty cards work well for low-value and frequent purchase, for example the loyalty card scheme run by a collaboration of local independent UK hardware stores. Whenever you buy more than £10 worth of goods they stamp your card, and when the card is full you get a free £10 to spend in the shop. Customers keep the card in their wallet or purse so it’s natural to take it out whenever they’re at the shop or outlet. It’s exciting seeing the points stack up. It’s just as exciting planning what to buy with the free money you get, a popular customer loyalty solution. Coffee shops also offer similar schemes.
Allow Customers to Choose Their Own Rewards
Personalising rewards are very effective in driving customer loyalty. You can understand why, when everyone is different. However accurate or ‘big’ the data you collect from customers is, you can’t make assumptions about what they’d like best as a reward. It’s easy to see why personalised reward schemes go down so well, with choices of rewards including experiences, events, products, services, and more. It’s the kind of scheme that keeps your best customers fully engaged with your brand.
Ask Customers What They Want
Similar to the point above, asking people what they want is a powerful way to get them on board. It signals clearly that you see them as an individual, someone you respect and understand. As consumers it feels good when a brand we like gets things right, appears to ‘get’ us. One of the most reliable ways to do it is actually ask people what they want rather than assuming. You could contact your customers by email to ask what they’d value most from a loyalty rewards program. The simple act of asking them brings you closer to your loyalty goal, helping people feel they’re engaged with like-minded humans, part of a warm community.
Implement a Tiered Loyalty Scheme
How about a tiered loyalty scheme? They provide customers with goals that keep them coming back. A tiered loyalty program is a membership programme where people are offered different benefits depending on the type of customer they are. The programme ranks members into groups based on metrics like amount bought or frequency of buying, each tier is given a set choice of rewards, services or benefits, and these get more desirable as the customer spends more with you. Tiered loyalty programmes work hard by giving people a structure to engage with in the long term. Both you and the customer can potentially benefit from the relationship for years.
Introduce a Referrals Program
Recommend a friend, refer a friend, they both mean rewarding customers for recommending their friends. Banks and utilities companies sometimes do it to attract new customers, and it taps into all-important trust. If your customer trusts you, they’ll feel good recommending your business to their friends and family. Their friends will appreciate the gesture, too. Sometimes the rewards can be significant, especially with companies selling high value goods or services or, like banks, expect to keep customers for years.
Interestingly this method is sometimes used by businesses themselves for recruitment. The business offers a generous reward if an employee recommends a friend or family member, they’re offered a job, and they stay with the company for a certain amount of time. The business benefits from a new employee who they don’t need to vet, the original employee feels good, the new employee is delighted. A win-win-win.
Value Loyalty programmes
The value loyalty programme model goes deeper into the customer psyche. The business connects with customers on a fundamental level by donating a percentage of the value of their purchases to charity. When you give them a variety of charities to choose from – say an animal charity, children’s charity, environmental charity and healthcare charity, you appeal to more people. On the other hand, if just one charity dovetails perfectly with all your customers’ values, choose that one.
While these programmes don’t reward customers they benefit society as a whole, and that’s the most important thing for some people. You could create a highly influential half-and-half hybrid programme with rewards for some customers and charity donations for others.
First time buyer discounts
To help you get new people on board in the first place, so you can begin turning them into loyal customers, you could try giving first-time buyers a discount. As well as getting a good deal they’ll enjoy a taste of things to come from a business prepared to reward them for their buying choices.
Keep your customers happy, feel the love!
You can see how big an impact a customer loyalty programme can have on a business’ bottom line, and on their ongoing success. Just in case you’re thinking it’s a complex process that’ll take you forever to research, set up, manage and improve into the future, it isn’t. Our brilliant system does it for you, making it easy to create a loyalty scheme tailored directly to your customers, one that suits them perfectly and drives them towards becoming advocates in an enjoyable way.
If that sounds good and you’d like to give it a go, you can test-drive the Ovation Incentives Demo here, or get in touch with your requirements.