Customer retention is one of the most important factors that drive growth. While acquisition would seem to be the focus of industries like service providers, seven out of ten service providing companies cited customer retention and loyalty as more important to create reliable growth. For one thing, new customers cannot grow your company if the old ones are leaving. For another, acquiring a new customer is typically six to seven times more expensive than keeping an old one.
Despite customer retention being so obviously vital, many brands fall short. The average company will lose between 10 and 30% of its customers every year, according to the Direct Marketing Association.
Customer loss does not have to be an inevitability, though. With a successful loyalty program, you can keep new customers longer and find new ways to engage and reward older customers. In the end, more people stay on board, more people recommend your brand to others and more customers see value in your brand to the point where they get excited about the idea of a new purchase or reward.
Customers Consider Loyalty-Backed Purchases Money Well Spent
One of the biggest motivating factors of loyalty programs is their ability to make customers feel appreciated. 75% of consumers stated that they approve of businesses who give preferential treatment to customers who have spent more money with them.
Many customers feel the idea of developing a relationship with a brand is harder in these days of big-box retail and eCommerce transactions. Loyalty programs are an opportunity to single out those individuals who matter to a brand and give them a reason to feel loved. Since 20% of customers tend to drive 80% of revenue, sending a little love to the right frequent buyers makes sense for the bottom line.
Customers Like Rewards Worth Dreaming About
Loyalty programs must clearly demonstrate value to customers to see any measure of success. Having arbitrary titles like “VIP” or “Gold Member” can mean little unless the advantages to them are obvious.
The type of reward or benefits matters a lot, too. When surveyed about what they like to see in a loyalty program before joining, 93% of consumers rated that the types of reward offered was either “very important” or “somewhat important.”
Brands that can explicitly list the benefits of a loyalty program are able to get customers more engaged and see more consistent participation. American Eagle Outfitters, for instance, has a well-worded sign up process that lets potential adopters know just what they are getting by participating. They also send a follow-up email restating the rewards along with a temporary member card to print out. Touches like these keep new participants on board rather than losing their attention.
Keep It Simple and Seamless
Another important element to a loyalty program is that it should be a seamless, frictionless experience. Signing up should be a breeze, as should redeeming awards or checking points status. Loyalty rules should be pared down to a few simple-to-remember concepts with the fine print available elsewhere. Keep surprises to a minimum, but do not trouble participants with inconsequential details.
Similarly, let customers use the tools they already utilize to participate. Elements like punch cards are inconvenient and often frustrating to those who forget where they left theirs. Instead, allowing them to use their mobile device to receive updates, track progress and engage through other channels will see more enthusiastic engagement.
For example, loyalty programs that reward social media actions have been increasingly popular with customers. Starbucks Tweet-a-Coffee program allowed Starbucks Rewards members to send a $5 gift code to a Twitter follower of their choice. Within a few weeks of launch, over 27,000 customers had participated.
The trick is to find a loyalty program management platform that can link seamlessly with social media and one-to-one communication. Digital Social Retail provides such a product. Our revolutionary customer engagement platform can manage loyalty program activities along with social media, SMS, e-mail marketing and other tools all at the same time. Find out how simple it can be to harness the power of social media through your rewards program by visiting our product page.
