5 Best Practices For Customer Loyalty Marketing Programs

ITA Group
ITA Group

loyal customer rating business on website

According to Marketing Metrics, the success rate of selling to an existing customer is 60–70%, while the success rate of selling to a new customer is only 5–20%!

Not only that, according to Criteo, 52% of customers say loyalty programs are one key reason they choose specific retailers or brands.

A loyal customer will buy from you again and again while encouraging others to do the same. This often results in quality referrals and positive word-of-mouth reviews. Loyalty goes beyond spending money. Loyal customers will vouch for you and serve as advocates for your business.

One study showed extremely happy customers are more than five times as likely to repurchase. In addition to a high return purchase rate, they are also almost seven times as likely to forgive a business. And who couldn't use that kind of grace in today's world of uncertainty?

Keep reading to find out why customer loyalty marketing is so important and how to make it work.

The Importance of a Customer Loyalty Program

Upkeep and fine-tuning of the relationship between you and your customers is imperative. After all, according to the Harvard Business Review, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one and increasing customer retention rates by 5% increases profits by 25% to 95%.

Here are five loyalty marketing tactics to include with your customer strategy.

1. The Best Customer Loyalty Marketing Is Based on Research

Customer loyalty marketing can be a fickle business. One where you get pulled into the weeds of promotions, offers and point calculations. The best thing you can do is invest in research for your loyalty program—even if it’s been running for years. (Especially if it’s been running for years.) Times have changed, buying behaviors have shifted and priorities should evolve because of it.

Customer loyalty research can help you know which behaviors to continue, who your most loyal customers are and what the right mix of rewards are to retain loyalty program members.

This type of research will also help you evaluate what should be offered at the beginning of a customer’s relationship with your brand and how that evolves over time. Offering the same thing to new-comers and long-time purchasers can be the sign of an out-of-date loyalty program.

The next step is to know what motivates ongoing loyalty. Think of this as your extended customer journey—what happens after they decide to purchase something from your brand?

CMB, a wholly owned subsidiary of ITA Group, Inc., performed analysis on research around the psychology behind consumer decision-making. After looking at tens of thousands of consumer responses, it revealed four core motivations that drive engagement. The study goes on to show that fulfilling these motivations boosts consideration, trial, loyalty and advocacy for brands across industries.

To drive customer loyalty, provide experiences, offers and communication that tie to a person’s emotional and identity benefits.

Related: CMB’s VP of Consumer Psychology Dr. Erica Carranza draws on recent research with tens of thousands of consumers to reveal the four core motivations that drive engagement. This webinar will provide insight and help to inform strategies anchored in what truly inspires consumers. Watch now.

2. Balance Investments Against Customer Lifetime Value (CLV)

Customer lifetime value goes hand in hand with customer retention, satisfaction and brand loyalty.

It’s the financial benefit of having repeat customers. Businesses with high CLV are able to grow more independently of ad costs and enjoy a stable cash flow. Having a clear grasp on current CLV and knowing where you want to take it opens countless doors to creative promotions and unique experiences that will not only grow your bottom line, but also help drive home the psychological benefits of the relationship between your brand and your customers.

Investing in the right loyalty strategies can extend your CLV and increase your bottom line. This is done by identifying the areas between purchases that can keep your brand top of mind. Explore elements like:

Major life events

  • Growing family
  • New job
  • New house
  • New pet
  • Loss (if done correctly)

Non-purchase ways to interact

  • Referrals
  • Games
  • Quizzes
  • Testimonials
  • Complimentary products/services
  • Aftermarket and annual inspections/check-ups
  • Social media shout outs
  • Short-form video thank yous
  • Handwritten birthday cards

Each of these outside-the-purchase-phase interactions can be strung together to create a unique and satisfying loyalty program that your customers don’t even know they are a part of because it’s presented as a value add.

It can also help your company limit exposure on a purchase-only program, which, in a long sales cycle, simply doesn’t make sense.

3. Elevate Event Offerings

While free tickets to a box seat at a baseball game or concert are a tried-and-true method of loyalty marketing to high-value customers, they're not even the tip of the iceberg when it comes to the variety of events available. With virtual events, customers can access event content like keynote speeches and presentations. Even better, customers can choose to access virtual event content live or on-demand, whenever they want after the event. FOMO is quickly becoming a thing of the past, because of the wildly improved digital experiences.

Here are just a handful of event ideas to build customer loyalty:

  • Give loyal customers VIP access to a user event
  • Offer them hands-on access to your latest product at an immersive product launch
  • Provide valuable networking opportunities at an expo that brings your customers together
  • Embrace virtual events and experiences

Regardless of type, events are most successful and build the most loyalty when they align with and reinforce your company’s brand while tapping into the emotional elements that drive loyalty.

With the right content and eye-catching appeal, your event provides just the thing your company needs to keep customers loyal.

4. Master the Art of Resuscitation: The Win-Back & Fall-Off Efforts

By looking at your data, you can identify areas of common fall-off. These are the points in time where people cancel or don’t come back, or a common trigger for diminishing spend (think poor experiences). Preceding the fall-off trigger, put fall-off activations on high gear. Offer larger awards tied to contract length or re-purchase, or a general touchpoint to stay in contact.

When you do something nice for a customer out of the blue, later on ask them how it’s working or if they are enjoying it with no other call to action. It looks like you're just following up, but you can get some valuable feedback about the touchpoint while subtly reminding the customer that you care.

Win-back efforts are about reactivation and transparency. Often customers just want you to fix a problem or acknowledge an issue. Simply put, a customer complaint can become very profitable when you can resolve their problem quickly.

A study by Harvard Business Review found that customers who have a complaint handled in less than 5 minutes go on to spend more on future purchases.

If you want to reinvigorate dormant customers, you have an opportunity for some fun. Where mistakes need to be dealt with directly, reactivating dormant customers can be silly, compelling and off-the-wall. The key is to provide high perceived value. If that value lives in your service or product, fantastic. If it’s passively consumed, what value can you give the customer in the form of rewards or experiences?

5. Measure Emotional & Behavioral Metrics

One of the best tips for designing a customer loyalty marketing program is knowing what loyalty means for your business. It’s often defined as many different things, including retention, increased lifetime value, purchase behavior, incremental sales, size of purchases and a whole lot more.

Often forgotten is the sentiment behind these actions. A best practice can be to find the people who act like loyalty customers and then understand why some of them feel loyal to your brand. That’s the true identification and measurement of loyalty.

You can pair behavioral elements like those sales and value measures with emotional measures like customer satisfaction, net promoter scores and sentiment analysis.

Feedback loops are key. Measure the things you can address and change through a behavior or action. Data improves awareness, and awareness is the first step to behavior change. Otherwise, your measurement just shows the outcomes.

Get a Head Start on Improving CLV

Customer loyalty marketing changes drastically with industry, buying cycle, customer types—even the market demand. Follow these steps and ideas to get a head start on your new (or revamped) customer loyalty program.

If you’re focused on CX (no matter your title), check out this white paper featuring proven strategies to improve CLV. Read more.