Why Every Business Can Profit From Loyalty

Post by 
Mitchell Formica
Published 
September 21, 2020
I

’ve worked as a CRM Specialist, Digital Marketer and Marketing Consultant throughout my career and in that time I’ve come to understand how undervalued loyalty/CRM can be when stacked up against a Marketing or Merchandise or even Multichannel budget. When it comes to budget spending I believe that more resources should be placed in Loyalty as there is real value to be obtained from this area.


Just in case you’re not familiar with Loyalty here’s a definition: “The goal of establishing customer loyalty is to transform a company's one-time customers into regular customers. Customers should always return to their preferred company and a strong sense of company loyalty prevents them from changing to another brand or supplier”. Loyalty programs do this by offering incentives to customers like a $30 off voucher after purchase to entice the customer to purchase again. The customer has two options here, ignore, or spend. The thought of losing $30 pulls the customer toward spending even though they might spend double or triple that amount within a single purchase. 


So how do we tailor the loyalty program to your particular company? Testing your price elasticity is important to understand exactly how high you can charge a customer for an item without deterring them. Loyalty programs are built with the opposite mentality in mind. How much can we offer a particular customer to get them to spend more? Offering a customer $5 off may not entice them when a single product can cost anywhere from $50 - $100. The same goes for giving too much away, as customers may choose to spend that incentive on an item that costs less, therefore, making you a loss. 


It is very important when using a loyalty program to follow these guidelines. Keep your customers happy, up to date with their data, and most importantly loyal to your brand. All business is data-driven so the cleaner the data the more structured the communication and the more targeted the approach. It’s nice to receive an incentive like $30 off, however, it’s even nicer to receive a $30 birthday voucher from a company that addresses you with your name. Personalisation of messages is a key part of the puzzle when thinking about using a loyalty program as it can really grab your customer’s attention. Whilst some loyalty programs support the build of email communications some don’t and rely on digital marketing software like Mailchimp, DotDigital or Salesforce Marketing Cloud to name a few to ultimately deliver the loyalty messaging to the consumer


Loyalty programs like Epsilon, Cheetah Digital and Omneo provide a loyalty solution that may or may not fit your business needs depending on what they are. I’ve previously worked within the Cheetah Digital loyalty platform and spent time understanding its capabilities and processes. Cheetah Digital makes loyalty easy, by creating a new instance on their software for each new client to log in and use. Once logged in you’ll quickly grasp the easy to use interface from which you can navigate to certain parts of the program. For example, if you’d like to set up a points balance system where-by customer earn points through interacting with your brand or spending, to rise through the ranks of a multi-tiered loyalty program you can do this in the rules section of the platform. But why is it important to do all these things and how can it provide a profit to your business?


To understand why loyalty is important we must first understand our customers. Customers are the most important part of your business because, without them, we have no one to sell too. Loyal customers are hard to attain but once attained they cost less to serve, they are willing to spend more than other customers and act as word-of-mouth promoters for the company. There are two key factors at play here, purchase behaviour and word of mouth. Both are important and both should be measured to understand what type of incentive should be sent and how much of an incentive is given to each consumer. Non-purchase behaviour like websites, emails and social media are also important and should come into consideration at an early stage to convert new customers. 


Whilst some customers will continue to buy from your company they may not advocate for it. This is an important distinction when serving up loyalty incentives to your customers as you might think you’ve won a customer over but really they are just using your business out of convenience. Whilst convenience can sometimes be why a company operates for its customers we must still measure our customers to identify those who are truly loyal to our brand. 


To overcome this dilemma marketers use scoring attributes like responsiveness, surveys and engagement scoring within their data to depict their likeness to spend and how often. Surveys will tell you lots about your customers however, it is hard to get customers to complete them in the first place, so an enticement is usually offered. 


It is argued that lower spending customers should receive less of an incentive than those who aren’t loyal but are spending lots. This because customers who aren’t loyal could move on very quickly and it is important to try and entice them to stay with the brand. On the other hand, customers who are highly loyal but not profitable should have more touchpoints like email, SMS, push notifications and social targeted towards them, this is to keep them spending more often. Loyalty incentives whilst are a minimum will provide customers with a means to spend, the type of communication and the incentive of choice is really important when thinking about your customers. 


Customer data like in-store POS purchasing, website tracking like the abandoned cart and email statistics together with previously mentioned survey tracking data is key and should be highly scrutinised before categorising customers and sending out communications.

It is our job as marketers today to understand customers needs and to make sure that the tools we are using are designed for all types of customers whether loyal or not. Communications need to be tailored to the customer’s predisposition to spending and loyalty programs are the best way to manage and track this continually moving cycle of customer behaviour. 


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