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Developing a customer loyalty program that works  

Developing a customer loyalty program that works  

By James Ray, CEO, Armadillo 

Encouraging existing customers to be loyal to your brand is a no-brainer. In normal times, we know highly engaged customers buy more frequently and spend more (up to 90 percent 60 percent more per transaction, respectively, one piece of research suggests). And with the filter of the pandemic overlaid, brand preference has been severely tested, with only the strongest brands withstanding shifts away from them. Support from its most loyal customers will be key to any brand’s ability to recover quickly in the coming year.

So, how do you create a strategy and a proposition today that builds customer loyalty and collects profitable data?

Regardless of sector, implementing a successful loyalty strategy comes down to three core elements. These should be combined to deliver a value exchange for consumers that keeps them coming back, and useful data for the brand to enable them to keep strengthening that relationship:

  1. Utility  

Participation makes it easier, quicker or more convenient for consumers to interact with the brand. For digital brands, this is built in and is the very reason consumers use apps like Uber or Deliveroo.

For other brands it’s harder, but absolutely possible. In the food and drinks sector Starbucks, for example, is one of a number of brands which rewards known customers with a faster and enhanced service. In 2011, Starbucks launched its Starbucks Card mobile app, enabling mobile payment. By 2019, 71% of Starbucks app users were visiting a store at least once a week, according to Numerator, a consumer insights provider.

  1. Reward 

Give customers tangible incentives to encourage participation. The research mentioned above revealed that 97% of retention programmes are transactional. Think about which customers you’re attempting to reward. If it becomes apparent rewards are only available to those who regularly purchase products, consider if there’s a way to earn loyalty from new customers as well as retaining those who are already loyal?

There’s no one answer to this, but definitely avoid over-complication and over-generosity. For digital brands, where customer self-identification is inherently at 100%, the classic loyalty approach may be fitting. Take Hotels.com, for example, whose beautifully simple Rewards programme gives it a brand advantage in a super-commoditised and competitive sector.

  1. Experience

This is the hardest of the three to define and it’s very closely related to both reward and utility. Make the user experience as seamless and positive as possible. Make every part of the process straightforward and frictionless.

79% of retention programmes use mobile channels, yet just 24% allow mobile redemption.  Imagine how frustrating this can be for customers. The more friction you place between the customer and the reward, the less likely your customers are to engage with the scheme. Equally 49% of consumers wish more stores offered mobile apps that would enable them to collect and redeem loyalty points with ease [451 research].

Traditionally well-trodden by premium service sectors like airlines and hotels, this is the territory where mass-market and retail brands will need to be creative to find bite-sized equivalents such as service upgrades, entertaining content, altruistic pay-off by charity donation, and so on.

Virgin Money is a strong example of this. Choosing to invest in lounges which offered customers free newspapers, magazines, Wi-Fi and refreshments (not banking services but an improvement in the overall customer experience), resulted in a 200% increase in sales at lounges located near a store.

In order for your loyalty scheme to be effective, all three of these elements must be functioning. Underwhelm in any one area and the others suffer. This is why so many loyalty schemes fail in those vital first two years, according to Capgemini.

Loyalty can’t be bought, but it can be rewarded in an effective way. Rather than relying solely on discounts and freebies to keep customers coming back, it’s important to focus on the overall customer experience – letting the individual know that they’re not just another figure on a report with a card full of points.

Loyalty approaches work best when a business becomes a part of a consumer’s everyday life, as demonstrated by Starbucks. Find a way to bring value, ease and consistency to your customers and you will have laid a strong foundation on which to grow that relationship.

Finally, when you have all three elements polished and ready to go, make sure you tell people about it. It might sound obvious, but 49% of customers don’t even know whether or not there is an app associated with their loyalty programme. You’ve got everything right. Now it’s time to shout about it.

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