Effective customer loyalty programmes

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You know it costs far more time and money to acquire a new customer than to retain an existing customer. You also know that a customer loyalty programme could enhance the customer experience, company brand and drive repeat transactions. But as a marketeer, how do you get your CEO and Board, to think about customer loyalty and a formalised programme? To start with, it’s worth recognising that CEOs will inevitably have different priorities and preoccupations and you need to couch the key facts so that they address the preoccupations of CEOs, Financial Directors … and other colleagues.

Here are some things you may find useful to keep in  mind;

1. Assemble a due diligence pack of useful information. Include widely recognised data about the cost comparison of keeping customers loyal verses new customer acquisition. Include a list of companies with loyalty programmes and those in similar sectors / industries. If possible, talk to counterparts in some of these companies. As a starting point; 

Loyal customers

  • Tend to keep coming back
  • Tend to spend more with you / trusted companies / brands over time
  • Are likely to purchase more expensive items
  • Shop more frequently
  • Are more likely to embrace new initiatives
  • Are generally good advocates or ambassadors for your brand
Loyalty programmes

  • Can be segmented to groups of customers (eg lapsed, occasional, low spenders, high spenders and those in between)
  • Encourage customers to purchase
  • Provide invaluable data about habits, preferences which can be used to make better inventory and other decisions
  • Can enhance financial results significantly

2. Don’t confuse customer loyalty with sales promotion / retention. Customer loyalty programmes are about planning and securing growth – changing and positively influencing the propensity and value of purchase from a customer or a basket of like-minded customers. Retention programmes are about preserving the customer and often involve discounts or rebates.

3. Try seeing things from alternative perspectives common among colleagues

CEO perspective

  • Is our firm beating average benchmark industry growth? How can we get ahead?
  • How do we more successfully defend geographical sales?
  • Do customers understand and recognise perceived value beyond quality?
  • How do we more predictably lock-in recurring revenue?
  • What could add £ms to sales and boost profitability?

 

Financial Director perspective

  • How do we secure top-line sales growth predictably?
  • How do we enhance EBIT and reduce pressure on margin?
  • What is the ROI from our marketing and business development budget and what supplements can be made to drive superior results?
  • How do we help branches with below average sales performance?

 

Marketing Manager perspective

  • Beyond company name, quality of products and customer service, what’s our difference?
  • How do we enhance the customer experience?
  • Can we get customers we know about to spend more and spend more frequently?
  • What do we know about our customers which will help us make better sales, product, offer decisions?
  • How can we support business development and take marketing to the next level?

 

Colleagues will view sales performance, financial results, marketing and business development support differently – and by recognising their priorities, you can more effectively build a case that addresses their concerns / interests first time.

4. Plan meticulously

A good plan will include the following basics;

  • What are the company level objectives (starting point, intended impact, KPIs to indicate if you are hitting the desired objectives)
  • Desired impact on number of active customers, overall sales and profit
  • Segment your data by customer type (lapsed, occasional, low spender vs average, high spender…) and calculate what would happen if just 10% of groups at the bottom hit target
  • Demonstrate that you have carefully researched loyalty programme strategy and potential ROI
  • Incorporate case studies and relevant benchmarks
  • Work with colleagues from different departments (Operations, Stock Control, Sales, Finance etc) to ensure that key areas of business are considered
  • Be clear about whether you have one (Open) programme or a tiered (Closed) programme segmented by type / interest of customer and how it will work and how ROI will be judged
  • Be upfront about how reporting will look, what it will cover and how financial risk (programme expenditure) can be managed and capped
  • Be prepared to be flexible to meet different stakeholder needs
  • Keep it simple (you can always add layers after initial ROI is recognised)

Useful links:

www.first4loyalty.co.uk

www.bain.com

About the author

Sharon is Head of First4Loyalty – a customer loyalty and retention specialist who collaborate, design, manage and report on customer loyalty programmes for B2B and B2C companies. Companies have been known to achieve up to 200% sales growth on previous segmented customer spend. For a copy of 2016 white paper “How to plan and what to look for from an intelligent, effective customer loyalty programme”, email sharon@first4loyalty.co.uk.

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