Effective customer loyalty programmes

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Most business executives realise that looking after existing customers is a priority. CRM, customer training and marketing communications all represent expenditure designed to focus on customers – however is it enough and could you do more?

Some initial facts

60-80% of defecting customers describe themselves as “satisfied” or “very satisfied” just before they leave. (Business Week)

It costs between 5x and 10x more to attract a new customer than to keep an existing one. (Bain & Company)

70% of the reason customers leave a company has nothing to do with the product (Forum Corporation)

By understanding basic concepts, technologies and business outcomes and putting them in to practice, you can quickly foster a culture of greater loyalty and engagement that will reward you with happier customers and healthier profits.

BASIC CONCEPTS

  1. Satisfy your customers with product quality

Satisfaction is the difference between your customers expectations and your service delivery. Expectations about product quality will depend on previous experience, price, value propositions of the company and impressions over time. However, no customer loyalty programme can overcome basic expectations related to product quality and service (availability, information, fulfilment).

  1. Build loyalty by exceeding expectations and building opportunities for repeat business

Today’s generation and millennials view purchasing differently. They are quality and image conscious, they are time-poor and they know that alternatives may just be a click away. To cater for customers, you can be;

  • Acutely responsive to customer questions, comments, complaints (loyal customers tend to complain more loudly)
  • Drive product and service development to offer more perceived value for less cost
  • Give your customers a chance to be loyal by offering rewards for repeat and / or incremental business which you communicate is valuable to you
  1. Engage your customers by reaching out to create a dialogue

Engagement strengthens your company’s relationship with your customer by providing an open channel for communication and feedback. An engaged customer is (a) more satisfied and (b) more likely to return. Engaged customers are more likely to spend more frequently, pay more and continue supporting you in good and bad times because they positively discriminate in your favour.

Engagement can take a customer beyond passive loyalty to active participation. Engaged customers are more likely to give you feedback from which the senior management team can make better informed decisions related to stock inventory, pricing, the timing of offers etc.

Customer loyalty programmes provide a channel to engage, data to analyse, numerous ‘touch’ points and a chance for customers to ‘opt-in’ creating a relationship dialogue (log on, browse, shop, state preference….). All of this can be used to positively influence business outcomes.

UTILISE TECHNOLOGY

  1. Dedicated (smart) customer portals are easily justified to interact, engage, administer rewards linked to loyalty and can be outsourced seamlessly
  1. Integrating emails, SMS and telephone calls for opted-in customers enables you to open a dialogue and create layered ‘touch points’ and intelligently reach out to baskets of customers with similar prefenaces, spend habits and likes – with a view to being relevant and positively driving outcomes
  1. Apps and trackable technology now enable you to trigger prompts, rewards and messages by SMS or email with a customer over the internet or in-store 

BUSINESS OUTCOMES

Measurements such as customer loyalty and engagement can be tied to hard reporting lines (total sales, EBIT, revenue / employee, branch performance) …. and actual business outcomes.

  1. Descriptive outcomes

Loyalty programme design is always governed around business KPIs, current and desired CRM and ‘keep in touch’ marketing principles. It ordinarily includes;

Top-line sales and EBIT contribution

  • Participation analysis (lapsed and occasional customer uplift etc)
  • Change in value (propensity to purchase and value of purchase)
  • Company / brand / product recall
  • Value of segmented baskets of customers
  • Branch sales analysis
  • Sale per employee analysis
  • Customer engagement analysis
  • Key analysis for Marketing teams
  • Key analysis for Financial teams
  • Condensed analysis and intelligence for the Board
  • Custom reporting
  1. Predictive analysis

Loyalty programmes involving segmented rewards to baskets of like-minded customers, are highly predictable. Participation and propensity to repeat purchase can be fairly accurately predicted and this, together with Know Your Customer research and surveys, can be used to help the senior management team make better informed decisions;

  • What to promote
  • What to omit from reward programmes because returning customers will purchase anyway
  • Stock inventory utilisation which can influence your future buying and cash flow
  • Customer psychology and how trends can be factored to create modelled behaviour from other types of customers (“Gold” vs “Platinum” etc). More here.
  1. Alignment with business outcomes

What is important to you? Being able to report average industry growth is 6% but you are growing three or more times faster? Or that your active customer base is growing by 20% year on year? Or that average sales are up or that overall profitability is up?

Once you have determined what business outcomes are most important, intelligent customer loyalty programmes, focused on growth, can be planned and tailored to KPIs that are most relevant to you.

Be aware that changes in customer loyalty and engagement generally precede changes in business outcome by 45-60 days but that across a full 12-month financial year, tangible KPIs related to sales, EBIT, revenue by branch etc are discernible and can be significant.

Further reading

Aligning the board, Financial Directors and Marketing … More here.

White Paper … Download

Get a consultation and model potential ROI for your business … More here.

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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