Why loyalty programs should be a part of your marketing strategy
By Lydia Nicoll
Professionals in sales, advertising and marketing often talk about the sales funnel.
We are constantly creating marketing collateral that tries to reach potential customers at each stage of their path to purchase as they travel down the funnel. We talk about brand awareness at the top of the funnel, providing value and information at the middle of the funnel, and closing the sale at the bottom. But once a sale is made, and a customer has traveled through the funnel, a marketer’s job really isn’t done. Holding onto customers should be just as important as gaining new ones. Loyalty programs do that.
Types of loyalty programs
Many types of loyalty programs exist, but they pretty much all have the same goal – to keep customers happy and create incentives that make them return for future purchases. These are some of the potential loyalty programs available that you could incorporate into your business:
The points program
Some loyalty programs come in the form of point accumulation. This could be a one-to-one type points program, as in every dollar spent earns one point, or some other ratio of goods or dollar amounts to points. when enough points are accumulated, customers may redeem them for free items or discounts on purchases.
Our advice is to keep the formulation as basic and easy to follow as possible. A points system that makes customers confused about how to earn points won’t do you any good.
We talked about Sephora’s unique approach to marketing to customers in store and online, and their points based loyalty program is a big part of that.
The discount program
Some retailers may offer a loyalty program in which there is special pricing for those who frequent storefronts or online outlets. These often come in the form of displaying a discount for those enrolled in the loyalty program, next to the price that non-loyalty shoppers must pay.
Some pharmacies like CVS, Walgreens, and Rite Aid offer special pricing for their card holding members, as do some specialty foods and grocery stores as well.
The pay-up-front program
Another route some retailers take is the pay-up-front loyalty program. This is often in the form of customers paying an annual fee, then receive benefits all year long.
Amazon Prime offers free shipping and other special discounts for its reward members, and charges a once a year fee. Barnes and Noble does the same, with their loyalty program offering discounts on every purchase made after making the annual up front payment.
The increasing tiers program
This type of program is especially great if you want to reward your customers based on just how loyal they are to you. With each purchase, customers can work their way up to your differing levels of loyalty rewards with increasing benefits, or they can pay to be of a higher status with greater rewards, depending on their wants and needs.
Many airlines and hotels use tier-based loyalty programs, such as Marriott, who offers levels such as Silver, Gold Elite, and Platinum to their customers based on use and amenities. Frequent flyer programs have long been a way for airlines to create loyalty in their customer base and ensure repeat business from certain companies or individuals, whether traveling for business or pleasure.
How does a loyalty program fit into your marketing?
The lines are being blurred between sales, marketing, and customer service, as we all see the need to put the customer first to make an initial or returning sale.
A loyalty program creates automatic fodder for marketing materials. Loyalty programs not only make your current customers happy, but they can draw in new customers who want to shop with a company who shows appreciation for their customers. Learning about incentives and rewards can help the decision making of unsure shoppers when they are in the comparison stage of their buyer’s journey.
One obvious way to include a loyalty program in your marketing efforts is by creating campaigns based around the new program. Whether you are creating advertisements, remarketing campaigns, social media activations, or content, you can focus on your loyalty program, alone, or in combination with other promotions or features.
If you have an e-commerce website, use e-mail campaigns to alert customers of the loyalty program, and especially target those who have made a purchase in the past, but have yet to return to you. New awareness of a loyalty program may draw them back in, and show them that you are focused on improving, and making their shopping experience with you, superior to other brands.
Why loyalty programs are a good marketing strategy
This CRMTrends article discusses the main benefits of a loyalty program as marketing strategy: “Shift – Acquire new customers, Lift – Increase the spending of existing customers, Retention – Improve the natural churn rate of customers, Profit mix – Shift spending to higher margin products.”
Marketing in general aims to do at least some of these things, and a loyalty program helps by turning new customers into repeat customers, and then keeping those repeat customers close.
A loyalty program is a good marketing strategy because of the data it provides. Data is becoming a strong asset for marketers, as we are able to better understand our customers, potential customers, and purchasing trends, and use those insights for better marketing. Loyalty programs help to acquire more data on the purchases certain individuals are making, while helping us to compare to overall spend and the inventory of goods and services provided by a company.
The more individual information we can gather about purchases and purchasing habits, the better we can also improve our direct tailored marketing efforts. Instead of creating just one message that we hope resonates with most of our customer base, we can now create multiple messages that target more specific groups of shoppers.
Loyalty programs also create data for us to use in our general marketing campaigns. Even when not discussing the program, we can add factual information that we’ve gathered from our loyalty rewards customer access, or utilize the information to create timely sales or other promotional activities.
Data we can utilize from loyalty programs include percentage of returning customers, or average customer spend. You may find patterns in when customers are shopping, which days and times, weekly, monthly, or annually. Which locations have the most loyal customers, and are more customers likely to redeem rewards or incentives online or in-store. What types of incentives are drawing in customers and which rewards are being most redeemed. All of this information helps us to improve our marketing campaigns.
Loyalty programs help to improve overall business practices as well. Through loyalty programs you can ask customers about their experiences and fill out surveys regarding anything from product satisfaction to customer service experience, to opinions on store layouts. When you utilize the impressions and opinions of your most valued customers, not only does it strengthen their feeling of importance to you, but it helps you to gain more valuable understanding of your customers and their needs.
It is said that customer advocacy is the strongest marketing currency and we tend to agree. Loyalty programs not only create loyal customers, but those customers may be more likely to share their experiences with friends and family, creating a new generation of customers. Word of mouth is a great side effect of loyalty programs, and is a type of marketing that oftentimes money can’t buy.
Have you created a loyalty program yet?
There are countless reasons why a loyalty program makes good business sense. From a marketing standpoint, current customers can be our strongest allies. When we draw in new customers, and not only provide them with a great product or service, but also make them feel appreciated, we create a whole new aspect of relationship marketing.
Loyalty programs should be a part of your marketing strategy because of the innate level of customer service they provide, and the insight into customer purchasing patterns. When done correctly, these aspects of business make for powerful marketing tools.