Perhaps the most valued customer is the loyal one. In sales, loyalty means buying almost exclusively from one brand or sales agent. The goal is to ensure that customers do not only make one purchase, but repeat their purchase throughout the years.
Different companies and industries approach customer loyalty differently, but there are a few aspects that remain universal. Read on to learn how to increase customer lifetime value by creating your own customer loyalty program.
What Is a Customer Loyalty Program?
A customer loyalty program is a business strategy in which you provide customers with incentives based on previous engagement with your brand. Traditionally, loyalty programs were limited to when customers made purchases or signed up for branded credit cards.
Now, however, many customer interactions occur digitally and may deliver value unrelated to purchases. For example, referrals from social media interactions, site visits, or signing up for newsletters. Modern loyalty programs acknowledge the value of these interactions and reward these behaviors accordingly.
Benefits of a Customer Loyalty Program
Organizations can derive a variety of benefits from customer loyalty programs beyond simply helping you increase customer loyalty. Some of the most significant benefits are covered below.
Increase customer lifetime values
Customer lifetime value (CLV or CLTV) is a measure of the net profit generated by your relationship with a customer over its lifetime. This measure enables you to predict the future value of customers based on their current value. Loyalty programs can help you better calculate this value as well as help you increase this value.
Programs accomplish this increase through the collection of customer data which you can use to refine predictions. For example, loyalty programs can help you better track customer buying habits and behaviors which can then be used to improve customer profiles.
Targeted marketing and personalization
Many modern consumers prefer personalized services and are more likely to engage with brands that customize interactions. Loyalty programs enable you to collect the information needed to achieve this personalization. This data can be collected through profiles and quizzes that a customer fills out or by tracking their behavior on your sites.
For example, if you see that a customer has viewed an item multiple times you can assume that they are interested in purchasing. If you then recommend similar items, you can show that you understand your customer and increase their loyalty.
You can also extend this data to use in targeted marketing campaigns. By using data from past interactions you can predict what platforms a customer prefers to be reached on and when. This information can then be applied to delivering content and recommendations at the most appropriate time and in the most effective manner.
Better communication
Loyalty programs inherently collect customers that are interested in engaging with your brand. Programs can provide you a direct line to these customers, improving communication and ensuring that your efforts aren’t wasted.
You can use this enhanced communication ability to promote special offers, provide insider information, or even reach customers for product recalls. Additionally, frequent (but not too frequent) communication helps ensure that your customers remain engaged and increase the likelihood that they’ll make future purchases.
Types of Customer Loyalty Programs
There are several different types of loyalty programs that organizations can implement. Below are the most common types.
Points programs
These programs give award points based on customer interactions that can be redeemed later for rewards. Interactions (News - Alert) can include purchases, referrals, social media posts, writing reviews, or other activities. These programs are typically free to join. You can get inspired by some of these real-life examples.
Tiered loyalty programs
Tiered programs provide rewards as customers pass milestones. Milestones are typically tied to dollars spent but may also be related to time as a customer or number of purchases. These programs provide a greater incentive for customers to increase engagement and purchases. Tiered programs also add an element of gamification, making achieving the next status more than a monetary reward.
Premium loyalty programs
In this case, you charge a fee for immediate access to benefits. These programs provide instant gratification to customers along with a feeling of exclusivity. Additionally, because customers have paid for access to programs, they are more likely to use the benefits, resulting in more purchases and interactions.
Tips to Create a Winning Customer Loyalty Program
When working to create a customer loyalty program, consider the following tips.
Reward a variety of customer actions
Rewarding a variety of customer interactions outside of just purchases shows customers that they are more than just transactions to your organization. When customers download apps, watch product videos, or share social media posts they are boosting your brand ranking on providing free marketing. This is a sign of loyalty and engagement and deserves to be rewarded.
One example of this type of diversification is HubSpot’s (News - Alert) HubStars program. This program rewards customers with points for completing an action of the week. Actions may be something as simple as reading a blog post or as complex as creating a fan video. In response, HubStars awards points based on the complexity of the task.
Match benefits to customer values
In general, customers are more willing to spend money on brands that match their personal values. For example, when brands display dedication to political or social issues that a customer cares about. Integrating these values into your rewards program can strengthen your status in the eyes of your customers and enable you to offer non-monetary rewards.
One well-known example of this is TOMS Shoes. TOMS rewards community-minded customers by donating shoes to needy individuals with each purchase. The brand also offers a range of products that support other causes, such as clean water access, animal welfare, or maternal health. By dedicating goods in the name of its customers, TOMS enables customers to justify making purchases and rewards their goodwill.
Make enrollment easy
After you’ve created a loyalty program, you want to make it as easy as possible to join. Customers shouldn’t have to go to great effort to sign-up, unless that’s an exclusivity angle you’re promoting. Instead, provide lots of opportunities to join and make the benefits of membership clear.
A method commonly used by eCommerce sites is to display the rewards that customers can earn next to the purchase price. For example, listing how many points purchasing each item will earn or what discounted price a customer can get as a member. Frequently, sites will also embed a link to sign up in these displays, enticing customers to join as they shop or check out.
Conclusion
Whether you’re selling digitally or physically, a customer loyalty program can help you increase customer lifetime value, provide targeted marketing and personalized services, and promote better communication between customers and your brand representatives.
There are many types of customer loyalty programs, but the main three focus on creating three types of reward experiences. Points programs reward purchases with points, tiered programs lead customers through milestones-based award journeys, and premium programs welcome customers into a club full of discounts and benefits.
You can choose any of these program types to inspire loyalty in your customers, and even mix and personalize the program to the unique needs of your brand and your customers. Whatever course you choose, be sure to reward a variety of customer actions rather than just one, match benefits to customer needs, and make enrollment easy.
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Author Bio
I'm a technology writer with 30 years experience, covering areas ranging from fintech and digital marketing to cybersecurity and coding practices.
LinkedIn (News - Alert): https://www.linkedin.com/in/leahfainchteinbuenavida/
