One of the key things for a business to consider is how to retain its customer base. In an increasingly competitive and crowded product marketplace it’s important to ensure that people are buying, recommending, and returning to your products over your competitors.
One way to promote your business and the reason why consumers should pick you is to highlight your unique strengths and selling points. There is another option however and one your business would do well to consider. Loyalty cards or a loyalty initiative can have marked benefits in terms of customer satisfaction and retention.
There is an important distinction to make before we explore this business option any further. Loyalty is not the same as frequency. Customer frequency has much to do with external factors and is less specific to your brand. Loyalty means that customers will come to you over competitors regardless of pricing and product perks.
This is a concern that businesses need to address. A frequent customer could very easily go to another business over yours if a better choice becomes available. A forward thinking business must consider the future and the most prudent approach is to target loyal customers over frequent ones.
Developing a loyalty program
Not all customers are going to be loyal and there are plenty of reasons for this. This means that the ideal loyalty program is one that identifies and targets those already loyal to your brand. A good loyalty program will be one that is designed to appeal to loyal customers and has marked benefits for them to remain loyal to your brand and products.
To begin with then it’s important to segment your audience into desired categories. Each category will have a specific and different approach so ensure that whatever program you offer is designed to appeal to your target category over the others.
This is a good place to start – right at the beginning. When a business acquires new customers it needs to turn those one off purchases into retention and the sale of new products. Unfortunately nearly half of one-time purchasers never go on to purchase a second time. In order to retain those customers and promote your business as a place to revisit and be loyal to there are some considerations to make:
- Target customers that will like your product and are likely to buy again
- Identify the customers that are unlikely to use your services again – tweak your marketing budget for this category accordingly
- Consider your existing loyal customers and try and target like minded people
Understanding your audience is key here and figuring out what makes your business unique and promotes customer retention is equally important.
Retention of existing customers
The importance of retaining existing customers can’t be understated. It provides a business with a form of validation and it ensures that there is continual custom for that brand and its services.
A loyalty program can provide a practical and hard reason for customers to remain and continue to buy from your business. A business can utilise something like the accumulation of points towards a reward or even higher levels of service ensuring that loyal customers feel valued. It also provides information about the customer that allows your business to target them (and their wants and needs) much more efficiently and effectively.
A loyalty program can create a scenario where once a customer starts redeeming rewards their enthusiasm and commitment to a brand increases. The data from a loyalty program is also very useful to a business and its understanding of the customer. This type of data can be used for the purposes of sales, marketing efforts, and customer services.
However it’s worth noting that customers are complex and their needs and wants can differ from time to time. Often this is down to external factors so a business also needs to understand the influences on a customer and the reason behind why they buy a given product at a specific point in time.
Loyalty Program and New Customers
If a loyalty program is run and marketed correctly it should provide a reason for new customers to join your brand by buying its products. This does depend however on how exciting and valuable the rewards seem in relation to the product or service being purchased.
Remember that acquiring new customers (whilst important) is much more costly than maintaining existing ones. A loyalty program should never focus on new customers (instead they can be a by product) but it should deliver a better service, with marked benefits to its already loyal customers.
There are other things that a loyalty program can do. It can create brand advocates in your customers ensuring better word of mouth advertisement, online mentions and reviews. It can also foster a better relationship with your customers and increase the back and forth conversation between a business and its loyal customer base.
By Richard O’Flynn for Hitchhiker’s Guide to Digital Business