Just like a fresh-faced teenager new to relationships and insecure about what you bring to the table while thinking your potential suitors have it all, many companies find themselves avoiding taking the leap of setting up a loyalty program. You may think your loyalty program will be a failure because you don’t have budget to offer rewards or bandwidth to set up a points program, but there are still many reasons you should do it, the least of which is that it would provide you with the information you need to personalize your customer’s experience.
A loyalty program is set up by a business to bring the customer back over and over again—to make them loyal to your brand and choose you over similar brands. It could be as simple as a Buy 10, Get 1 Free punch hole card or as complicated as credit card points and airline miles. The most successful loyalty programs strike a balance between benefits they provide and the amount of data they collect from their customers.
Here are the top 3 reasons (plus a bonus reason!) you should set up a loyalty program—and a few examples of the brands that are doing it right:
1. It drives a superior customer experience.
Every brand wants that coveted customer email address, but what are you doing to make your consumer feel like giving it to you was a wise decision? Think of all the times you’ve been asked for your email address the first time you visit a site, or at the store checkout counter — and how willing you were to give it up. As a brand, even if you do manage to earn an email address, your customers will likely begin to ignore your follow-up messages over time after taking that initial deal. Why? They’re faced with hundreds of similar emails everyday, and if you’re not driving continued relevance to them, it’s simply not worth their time or energy to open yours.
However, if you were able to convince a consumer to give you rich information about themselves in that crucial first trial period, you likely have everything you need to send them products and content they are uniquely interested in. Their continued use and interest will deepen your knowledge of them and what’s more, if they’ve already given you information, they’re likely to do it again if you ask in the right way. (See foot-in-the-door technique).
Take for example Landry’s restaurants (made up of Morton’s Steakhouse, McCormick & Schmick’s, Rainforest Cafe, plus many others). In their initial loyalty program questionnaire they ask if their customers have ever served in the military. Though some may not find this useful, Landry’s proves their appreciation for their loyal customers by offering those with Veteran status free meals in the week leading up to Veteran’s Day. Their messaging is timely, delightful, and relevant because they know who their customers are on a deeper level, and if I’m a veteran, I now know that Landry’s respects and appreciates me. The next time I’m in the mood for a steak, it’s more likely I’ll choose a Landry’s restaurant since it’s now top of mind.
2. It helps you identify your highest-value customers.
Many companies can run recency, frequency, and monetary analyses on which customers are the highest-value drivers. Are they the customers who bought a $2,000 couch in the last 6 months and your analysis says they’ll likely come back for a high-end coffee table? —Or are they customers who buy smaller-ticket items at a greater frequency? The Pareto Principle, otherwise known as the 80/20 Rule, reveals that 20% of your customers will drive 80% of your revenue. If you can identify who those high-value customers are from the start of their journey and deepen their loyalty by providing them a personalized experience, you stand to drive even more value from them.
On the flip side, if you can identify who your 80% are and focus on marketing to them in a personalized way, you’re in a much better position to propel them into the 20%.
3. It creates additional touchpoints throughout the customer journey and leads to top-of-mind brand awareness.
The fact that your consumer gave you their email, birthday, hometown, veteran status, coffee preference, or any other personal information you’re asking for establishes their interest in your brand, and it’s up to you to keep that interest alive.
A compelling message that’s sent at the right time, on the optimal channel, and with clear relevance will create a continued conversation between you and your customer. The combination of these factors is important. Imagine how jarring it would be if you followed a brand on FB and when you’re checking out at the mall the cashier compliments you on your birthday pics. That’s not the experience we’re going for.
However, keep in mind that you don’t always need to offer a reward to make your message special, as the Redbox example below shows. Redbox remembers the consumer’s birthday and sends them friendly birthday wishes— unexpected to the consumer and a welcomed celebration of their day. You can leverage birthdays or other occasions in your messages, like the anniversary of your customer joining your loyalty program, or the anniversary of them making a large purchase. The key will be to think through the information you’re asking of your customers and put yourself in their shoes to really deliver a memorable experience with your brand.
Bonus! It provides your customer with an incentive to stick with you.
The most successful loyalty programs include a point system where customers can earn, burn, and repeat the cycle. The best examples are airline miles and hotel points, but you can apply this model to just about any type of business. This strategy is successful because it creates a need for your customer to stick with you so they can hit their milestones and redeem points. It creates an opportunity cost for them if they don’t return—if they don’t get the points they need to redeem a reward, they’ll lose everything they’ve saved up. Timing and contextual relevance are key with this strategy as well. If points are about to expire and a customer only needs 10 more to reach a redemption milestone, they likely won’t know unless you tell them. And when they hit those milestones you better believe they want to know they have rewards to redeem.
Understandably, this strategy takes planning and is time-consuming to execute. However, if done correctly it can pay off immensely. Think of those known for their points programs and the emotions they elicit, like United Airlines, Starwood Hotels & Resorts, and Nordstrom. Below is an example from Ulta that certainly puts forth a convincing argument to shop, followed by an example from HotelTonight letting customers know they’ve reached their HT Perks Level 2 with better discounts.
A superior customer experience drives increased loyalty, which in turn drives word of mouth, and leads to sales, and so on. It’s a domino network effect you can’t afford to ignore simply due to the worry that you have nothing to offer. Your customers will give you what’s needed to drive value for them; it’s up to you to nurture and strengthen your relationship so that consumers stay loyal to you.
Now that you’re convinced setting up a loyalty program is the way to go, stay tuned for my follow-up post on what a best-in-class loyalty program looks like.