Returning customers are the lifeblood of any business. After new clients are acquired, marketers want them to be loyal. But how? Luckily, there is a system to the madness of loyalty marketing. It doesn’t matter if you are in eCommerce, B2B, retail, or any other industry. The tried and tested actions are bundled under one name: Customer Loyalty Marketing. And the direct cousin: an amazing Customer loyalty program.
In this article:
Customer Loyalty is your new Battleground
6 Ways to build customer loyalty
The Impact of a Customer Loyalty program
How to create a successful customer loyalty Program:
1. Understand Loyalty Economics
2. Choose the Best Customer Loyalty Management System
3. Setting the right mix of rewards to excite and engage
4. Launch and Promote your Loyalty Program
6 Customer Loyalty Program examples for you to steal
So, how to create the best Customer Loyalty Marketing Program? A program that tickles all the drivers of Customer Loyalty for your brand? Let’s dive in.
Customer Loyalty is your new battleground
You might be thinking: “What is Customer Loyalty?”
There are multiple ways of explaining, but this is the definition that always works:
Customer loyalty is the likelihood that current customers will stay with a brand. A customer brings repeat business because of the total value they receive from a company and the positive association they have with the brand.
The loyalty loop model (above from McKinsey) defines the “4 battlegrounds of the customer decision journey”. Which puts repeat customers at the heart of the model. Know that 20% of your current customers can make up 80% of your company’s future revenue. (Zinrelo).
Over time, customer loyalty becomes a powerful competitive advantage as it prompts customers to choose your brand over your competitors.
Plus, loyal customers are super profitable. That is one of the reasons why Brands are smart to invest in customer retention and loyalty.
6 ways to build Customer Loyalty:
Next to having a dynamite product and great customer service, how do we improve Customer Loyalty?
- Reward returning customers through a loyalty program
- Give extra attention to top customers with VIP tiers
- Improve customer experience (CX) in all channels
- Personalize your messaging and use segmentation
- Send event-triggered emails.
- Stimulate purchases with (exclusive) offers
An example case comes from Remedy Drinks, their automation starts with what looks like a simple welcome email with an offer. But actually goes on to engage with their customers with editorial on-brand content, how to’s, and complete scala of lifecycle campaigns. Their emails now have seen an increase of 15% in revenue.
Customer loyalty doesn’t mean that the customer only and exclusively buys from you. People have a favorite store and from time to time visit others. Think about your own supermarket or fashion store for instance. A loyalty program can increase the likelihood that they will stay and shop more with you.
What makes a great Customer Loyalty Program then?
A customer loyalty program is a marketing program to stimulate loyalty and customer retention. It offers benefits and perks to frequent customers and regularly engages with them.
It is no surprise brands invest marketing resources in loyalty programs, as it allows the brand to build a deeper relationship with the customer, fueled by trust. To encourage long time repeat business, loyalty programs offer benefits. These can include discounts on merchandise, rewards, coupons, exclusive or early access to highly anticipated products, and more.
A customer is truly loyal if he acts and feels loyal. So a loyalty program can stimulate both short term business with promotions, but also the long term attitude and behavior.
Customer Lifetime Value and RFM
A small improvement in retention rate or brand preference makes a huge difference over time. According to Harvard Business School, a 5% increase in customer retention increases profits by 25% to 95%.
So we have to mention Customer Lifetime Value (CLV) and Recency, Frequency and Monetary value (RFM) analysis. An RFM analysis will allow you to pinpoint segments of your audience and launch triggered campaigns in their customer (loyalty) journey.
An example of RFM scoring customer segments. Then to develop specific actions based on the segments. It goes too far to spell out al the tactics here, we lifted the following tactics from the ebook “Mastering RFM; segmentation tactics for success”
But to get those segmentations and insights, they need to be made available.
Intelligent eCommerce and BI dashboards show you, for instance:
* Total Revenue,
* Average Order Value (AOV),
* Customer Lifetime Value (CLV),
* Number of one-off customers vs repeat buyers.
Here is an example of dashboarding that will allow you to develop specific client actions on customer RFM segments.
The impact of an excellent customer Loyalty Program
A customer loyalty program can have a huge impact on your brand and bottom line.
- Members of top-performing loyalty programs are 77% more likely to choose your brand over the competition (Bond).
- Research shows that Customers with an emotional brand connection have a 306% higher lifetime value.
- Companies with strong loyalty marketing programs grow revenues 2.5 times faster than their competitors and generate 100-400% higher returns to shareholders (HBR).
One of the best examples of a successful customer loyalty program is the Sephora Beauty Insider rewards program. Sephora’s loyalty program is point-based. Customers swipe their loyalty card with every purchase at the beauty store retail chain. Every dollar they spend earns the member one Beauty Insider point.
The program has 17 million loyal members and drives up to 80% of Sephora’s annual sales. Yes, you read that right. Later we’ll show more examples of loyalty programs. But first, how do we create a successful loyalty program?
How to create a customer loyalty program?
Creating a loyalty program requires some planning. We start with the same framework for any loyalty program and then customize it based on your brand and audience. Here are the four steps to launch a solid small business loyalty program.
1. Understand your Loyalty Economics and set program goals
Starting a marketing program because ‘everybody else is doing it’ is never a good idea. You need to define the reason a loyalty program for your brand exists.
Loyalty economics will direct your “Why Loyalty”
The logic that connects customer loyalty to bottom-line results is simple. If customers love to shop with you, they buy more products and services and they’re less likely to defect.
The challenge is to dig in and find the loyalty drivers. What exactly makes them like to shop with you?
But a Loyalty Program often has additional goals that are not directly tied to customer loyalty. The loyalty program becomes a vehicle for other parts of your business model like enriching data and customer insights. So your program goals need to include those too. Then your ‘Why Loyalty Program’ is clear, a lot falls in place.
Here are 5 typical goals of Loyalty Programs:
* Gather opt-in, contact details, and data to support direct marketing.
* Improve repurchase rates and Customer Lifetime value
* Decrease service, communication, and acquisition costs
* Stimulate community and gather User Generated Content (like testimonials, reviews)
* Improve customer advocacy and increase the number of brand promoters
Ideally, the outcomes of your Loyalty Program directly support your business. It’s always better to have a number attached to it, making them measurable. This sometimes means working with surveys to catch changes in attitude.
If you find your Loyalty Program serves multiple goals, rank them based on importance and priority. Now you can clearly measure the success of your program with correct metrics and at defined milestones.
2. Choose the best Customer Loyalty Platform and Automation
A Customer Loyalty Platform is Saas software that bundles multiple loyalty marketing features. The platform is a key piece to realise your loyalty program. It has lots of impact on the day-to-day operation. So we need to understand the differences between the platforms.
A quick checklist to evaluate customer loyalty platform:
- Does the platform have all the loyalty features I want?
- How much does it cost and is this within our budget?
- Is it a one-size-fits-all or customizable solution?
- Does the platform play well with my existing tech stack?
- Have they served brands like ours / in our industry?
Loyalty Marketing software will typically handle specific parts of marketing functionality. For instance, a Customer Loyalty Management system could handle saving points, rewards, and subscriptions, but then integrate with other CRM, email marketing, and eCommerce systems.
The 3 best Customer Loyalty Platforms
When serious about launching your loyalty program, use a Customer Loyalty Platform that bundles features and adds to your current MarTech stack. Here are three of the best Customer Loyalty Platforms to consider
LoyaltyLion is a data-driven loyalty and engagement platform that powers eCommerce growth.
- Use loyalty points and rewards to encourage repeat purchase and enhance engagement across all platforms
- Trigger loyalty emails and points statements to deliver targeted communications
- Increase customer acquisition and boost advocacy more cost-effectively via referrals
You can integrate LoyaltyLion with your existing marketing tools such as ESPs, subscriptions, review platforms, and helpdesk softwares. It works with all major e-commerce platforms including Shopify, Shopify Plus, BigCommerce, and Magento. Pricing starts at $135 per month.
Antavo: Antavo is an enterprise-grade SaaS loyalty platform that builds comprehensive loyalty programs. With a scalable and holistic loyalty logic. Antavo helps foster brand love and change customer behavior for omnichannel and e-commerce companies. They deliver a great shopping experience with in-store capabilities like POS integration, mobile wallet solution, in-store gamification, and kiosks.
* Earn & burn, tiered, gamified, coalition, and many types of programs
* for eCommerce, omnichannel, brands, retailers, and shopping malls
* Coalition loyalty, mobile loyalty, and touchless in-store solutions
* Built-in gamification
They highlight the API-centric nature of their Loyalty Program software. Making it an intergratable piece to include your tech stack. Pricing available on request.
Yotpo: Yotpo is a feedback and reviews management system that has grown into a full loyalty eCommerce platform. Use incentives and coupons to get more reviews or other user-generated content. The loyalty module comes with custom design, multiple rewards structures, and customer management.
- Start getting more customer reviews, feedback, and referrals
- Get a free plan for Shopify merchants
- Tier-based loyalty rewards programs
Integrate Marketing Automation and plan Omnichannel messages
You can’t underestimate the importance of marketing automation in a digital loyalty program.
Every brand is active in multiple channels, where loyalty data and systems have to be integrated into your Marketing Tech stack. So we need to consider where to centralize or make available the data.
Using customer insight tools it is way easier to create loyalty segments as we mentioned earlier in the piece about RFM. Using these segments or tags, content can be sent to your most loyal customers. As well as those inactives, or at the risk of churning. Matching your customer’s phase in their journey. This can be in targeted emails, SMS, push messaging, remarketing, and web apps.
3. Set your Rewards Structure to be functional and exciting….
A loyalty program hinges on the structure of your loyalty rewards. Customers will only enroll if you give them a good reason. And need to experience the value of the benefits and rewards to stay enthusiastic. The first “Aha!”-moment’. So nailing the benefit structure is instrumental for the success of your program.
A mix of reward types will appeal to different types of customers as well as customers in different buying phases. Here are the 5 types of loyalty rewards.
I . Monetary Rewards and discounts: A monetary rewards structure is the most popular system for rewards. That doesn’t mean there is no variety and fine-tuning to do:
Customers can get Monetary rewards in the form of:
* Upfront or one-time discounts to join
* Ongoing discounts or services (think 5% off or free shipping)
* Members-only exclusive offers on products
* Reward points redeemable for Store credit or products
These rewards are popular because they directly stimulate repeat purchases and are relatively easy to set-up and maintain.
II. Sweepstakes, Contests, and Giveaways:
A contest brings a bit of excitement to the entire loyalty system. People look forward to the possibility and the rush of winning something makes the entire brand experience memorable. Variable rewards are known to tickle the brain keeping it away from being purely transactional.
III. Content and personalized touchpoints
Customers don’t value loyalty programs that fail to cater to their attitudes, behaviors, and expectations. Add touchpoints and personalized moments so the brand relationship deepens.
This is amplified if they can also enjoy benefits outside of their buying cycle – So they don’t have to purchase all the time, but member engagement is stimulated.
IV. Experiences Rewards: Experiences are something many customers value more than money. An experience reward can create real excitement and memorable brand interaction.
Organizing industry events (in B2B),
Discounting trips to theme parks, etc
Perks in the shopping experience
Meet and greets
Designing a loyalty program tailored to your audience is a way to please your customers. Especially if you consistently reinforce the brand and identify their preferences.
For example, The North Face gives rewards that fit perfectly with their brand and customers’ lifestyles. One part is the option to earn points by attending events, checking in at locations, etc. But redemption is where they shine. Customers can use points for unique adventures and travel destinations.
V. Exclusive access and VIP program
People in the highest tier of loyalists are the apostles and advocates of your brand. This goes very well with a tiered loyalty program. A result is that you can segment your customers better (top clients versus other tiers). Adding benefits and services like free delivery or extended returns shields the customers in the higher tiers from being snatched by the competition.
VIP programs, show how much you care about them through:
Exclusive customer-only VIP events,
Personal shoppers / shopping experience,
Branded and limited editions of products
Your own loyalty reward structure
Often a mix of different types of rewards is most effective and we’ll see that the reward structure is tailored to the brand type of loyalty that is to be expected and customer relationship in general. Nailing the reward structure to be both exciting and maintainable is key to the program’s success.
How to Launch and Promote your Loyalty Program
A successful launch makes sure your Loyalty Program can quickly get critical mass. But after that, we still need to promote your loyalty program. To keep the costs down, you need a smart launch and promotion plan. Here are the places and ideas to promote your loyalty program:
I. Store & Point of Sale Promotion: This is where you should definitely start. Make the loyalty program a part of the buying process.
If you have a Brick-and-Mortar physical location, it is perfect to promote the loyalty program. Not with a passive leaflet somewhere behind the counter, but especially the conversations your sales personnel have at the POS.
Also, think about in-store (self or assisted service) kiosks to sign up and bring the loyalty program to life. And a reminder for participants to swipe their card / register the purchase.
II. Your newsletter and triggered emails
Email is a great channel for loyalty program communication. It starts with your personalized newsletter, periodic promotions, and triggered emails. The triggered loyalty emails are sent exactly at the right time based on the customer’s actions in and outside the loyalty program.
By connecting a loyalty platform with marketing automation software you can send personalized emails based on their loyalty status.
By pulling data such as most recent purchases and loyalty points in your marketing automation software in real-time, you can make the most customized email campaigns. Here is a welcome automation in the dotdigital platform where customers are added to a ‘loyal customer’ segment based on their actions.
So in this case, data is coming directly from Magento and we start with a welcome + coupon. If the subscriber uses the coupon AND clicks on the recommended items in the next mail, they are deemed loyal customers, they are super enthusiastic – so definitely that is a great engaging segment.
There is an SMS part running as a fall back in our example, but those go into a different bucket. Just to show that this is 100% customizable as you’d like it and in the backend, customers can move in and out of groups as you see fit / it makes sense.
Five loyalty program emails to certainly send:
* Welcome to the program, let’s get started
* Post-purchase emails
* Emails promoting new perks and benefits
* Campaigns to receive extra points
* Reactivation emails
Consider using the newsletter subscription as an entry for your loyalty program. In other words – everyone that gets the newsletter also has a (tier zero) subscription to the loyalty program, even if they aren’t active customers yet.
Matches Fashion, winner of the 2020 the Hitting the Mark benchmark report by dotdigital, introduces their loyalty program “The Curator” as part of their welcome series.
III. Website visibility and pop-ups
Your website audience is already interested in your products / services. So adding more visibility to the program on your site is a no-brainer.
* Create a dedicated landing page for new registrations
* Add more visibility and strategically place the calls to action on the site.
* Run (exit-intent) pop-ups leading them to the loyalty section of your website
* Add a sticky bar to the top of your site with the promo information.
IV. Current customer products and touchpoints
Promote the program in or on your product, making it a part of the customer experience (CEX). At the same time promoting your Loyalty program. With eCommerce platforms like Magento, Shopify, or others this can be inside the “My Account” login.
Some industries like travel or credit cards will have an automatic loyalty program opt-in. The moment you create a log-in, you are enrolled in the program. Monthly overviews of gathered points make sense there.
V. Remarketing, Social media, and word of mouth
Your website visitors are already part of the conversation. Promoting the loyalty program through remarketing ads incentivizes them to engage with you more. This is not just Google Adwords, Facebook audiences might be a good option, Linkedin, etc.
Break them into segments on loyalty and customer value from high to low. Start to promote your loyalty program to the most interesting customers and work towards less interesting. An additional thought is to target Look-a-Like audiences that share characteristics with your advocates and Loyalists.
An additional “social” way to promote is to use the power of Word-of-Mouth and include tell-a-friend functionality in your program. Incentivize customers that are already in the loyalty program with additional points/benefits for sharing on social and get their friends to sign up.
6 Customer Loyalty Program Examples for you to Steal
By now you know what a loyalty program is, how to choose a loyalty platform, the different ways to structure your rewards. Let’s look at loyalty program examples and all the different types you can implement and learn from today.
1. Beer Hawk (Earn and Burn loyalty program)
An earn & burn loyalty program is based on the principle that the more you spend, the more points you earn. Every time a customer makes a purchase (or other engagement actions), they get points. This can be based on how much they spent. For instance, earn 5 points for each €5 spent. For every 100 (100 euro or more) points receive a €10 discount to use on your next purchase.
Alternative points loyalty programs focus on frequency and give delayed rewards. Like a stamps system. For instance, every 10th visit, get a coffee free. One of the most common examples of a points system is how the credit card rewards system works.
BeerHawk Beer Tokens
What is better than free beer? Two free beers :D. BeerHawk is the UK premier online retailer of specialty beers and ales. They wanted to connect mobile, online, and bars, and drive personalization with loyalty enhanced emails. The Beer Tokens loyalty program does all three.
- Earn loyalty tokens for purchases, friend referrals, reviews, and returning kegs.
- Every Beer Token is converted into a £0.05 off on the next order, in bar and online.
- POS integration that updates a customer’s point balance in real-time.
What we like about this program
What we like is the omnichannel data integration and feel of the loyalty program. All customer loyalty data – such as loyalty status, purchases, available Beer Tokens – are pushed to Beer Hawk’s marketing system account (like Dotdigital) in real-time. This way the company’s email campaigns have all the loyalty information up-to-date and personalized.
2. FNV Member benefits – (Partner and Membership program)
Memberships are the ultimate form of loyalty. Organizations & special interest groups always attract new members because of the main service but these can go intangible (until there is a pressing topic or need). A loyalty program with substantial benefits can be the added value and validation of the membership.
In a partner model, the organization uses co-promotion and discounts of other companies (the partners) to offer exclusive benefits to their members or clients. The partners in return can offer their products and lift on the communication to the loyalty members.
FNV Member benefits
The FNV is the dutch workers union that works for multiple industries in representation, lobby, and individual help around work and income. Their program has been running for over 10 years and offers member discounts in several ways:
- Yearlong discounts, Quarterly, and Monthly promotions keep the program fresh
- Specific segments like Starters or Seniors have discounts and communication tailored to them.
- Omnichannel program communication including website, email newsletters, and a print membership magazine.
What we specifically like is the enormous engagement and use of the program. More than half of all members have made use of the benefits. 71% sees added Brand value based on the “extra cherry on the cake” membership program.
Important for the organization as well, the program can run centralized. Coordinated by external Loyalty Marketing Agency Dunck it is ever so close to budget neutral.
3. The Chivery (Gamified Loyalty program)
Gamification is the application of game-design elements and game principles in non-game contexts. As such, Gamification can offer an extra engagement layer to your loyalty program. Game mechanics commonly found in loyalty programs include tiers/levels, challenges/ missions, badges, progress bars, surprise-and-delight, auctions, and virtual rewards.
The Chivery sells pop culture merchandise, related to the super popular blog TheCHIVE. The Chivery has a very active customer base on social media. They have over 1,000 products and 1.2M customers.
To increase customer loyalty and engagement they reward purchases, but more than that. Reward actions and gamify the whole experience. They used the LoyaltyLion Shopify app to speed up integration and then customized every element of the loyalty program through editable CSS.
- Earn points for account creation, visits, and purchases.
- Rank on the ‘Chivers’ point Leaderboard for a bit of healthy competition.
- Get even more points for referrals, and activities like photo uploads, scoring, and social sharing.
What we like about this program:
theCHIVE uses the loyalty program to gamify their entire blog. Fans can go from theCHIVE to the Shopify shop via the loyalty program and redeem the points there alongside purchases, thereby turning fans into paying customers. This makes it such an interesting case study. The program works across multiple sites and domains making use of the LoyaltyLion Platform and Shopify Multipass.
4. Amazon Prime (Perks – Join and Enjoy)
Customer loyalty programs don’t always have to be completely free. Taking a walled garden approach you can ask for a monthly or an annual membership fee. Customers can opt for the paid program and become ‘premium’ or ‘plus’ members of the brand.
The Amazon Prime program is an excellent example of a paid perks program. The challenge with the approach is two-pronged: you have to make the offer irresistible and you need to sell it like a product.
5. Toms (Charity and Purpose)
You can communicate with your clients that a certain part of the revenue is donated to charities or good causes, and it gives people joy.
However, something like this needs to be closely related to your brand. Brands like Toms or Patagonia doing it makes sense, as the brand resonates with it. Although it is not always the most direct customer loyalty stimulant.
6. Lego Ideas (Community and Membership program)
Humans are social animals and we yearn for the feeling of belonging. Make the access exclusive and your community becomes even higher rated.
Lego Ideas is also a program you can take inspiration from.
Start building Customer Loyalty!
Customer loyalty is directly tied to your business’s bottom line, retention, and ability to grow. So, get started today by determining which customer loyalty tactics you’re going to tap into and use the examples we reviewed above for inspiration.
There’s isn’t a better way to grow than retaining your best customers. Customer loyalty programs are the most structured and effective way to start and scale it. Start with a strategic and business-oriented goal, choose the right platform, create a reward structure that suits your brand, steal what the successful brands are doing already, and get the ball rolling.
“Satisfaction is a rating. Loyalty is a brand.” – Shep Hyken.