How to keep your customers coming back…
Loyalty schemes – that’s how (and it’s cheaper than recruiting new ones)
Fast becoming a go to for lots of brands who may have never even thought about one before or even realised their value. But, with advertising costs having risen and driving new customers becoming a bit more difficult, lots of brands are now looking into implementing a loyalty scheme.
Customers now expect more from brands with lots preferring more than just a transactional exchange. They want to feel more important than that to a brand and they crave a more personalised experience.
So what is a loyalty scheme?
It’s simply rewarding your customers with something they see value in (such as store credit, money off, free product) in return for them shopping with you or taking an action such as incentivising new customers. Think Tesco or Boots - some of the biggest loyalty schemes out there.
Why are they so good?
They bring your customers back more than once, hopefully multiple times.
They increase lifetime customer value
They bring in new customers
They are ‘free’ advertising
They create loyal customers who then go on to talk positively about your brand
And I think this is one of the best reasons – they allow you to gain access to your most loyal customers and gain more insight about them. From this information you can then target your perfect customer more easily.
What can you reward loyalty for?
Sharing user generated content
Leaving a review
Sharing your social profile
Sending to a friend
Making a purchase
Here the stats…
83% of shoppers are willing to hand over their personal data in exchange for loyalty rewards or product recommendations.
82% of customer say loyalty rewards motivate them to buy from certain retailers or brands over others.
48% of shoppers would rather wait for their preferred brand to restock than purchase a similar product from another brand.
Let’s look at 2 examples of great loyalty schemes…
And yes ok you might not be as big as these guys but there’s plenty to learn from them.
Case Study 1 - Arena Flowers
I’ve purchased off these lots of times now and I don’t think I’ve ever paid full price. Let me tell you why this works…so obviously they’re selling flowers so it’s a product you can buy multiple times in a year anyway and gaining a customers loyalty is huge to them for this reason. I bought my first purchase full price and I think I found them through searching on Google and clicking on an ad, so they paid to acquire me. I then received loyalty points which gave me money off my next purchase based upon the amount I had spent. The next time I went to send a bunch of flowers to someone I instantly thought of them and knowing I had money off made me shop with them again (and again and again).
One thing to note here though, and it’s something to note throughout all of this. Customer service and Quality is up there with the best. Without these things I wouldn’t have gone back to them, regardless of how many points I have for my loyalty. If you can’t say the same about your brand then work on this first before you get any loyalty scheme in place. Because – let me tell you, any weaknesses in your business in these areas will only be highlighted by a loyalty scheme. And no one needs that!
Case Study 2 - Nike
Let’s look at Nike, one of the largest sports brands in the world.
It encourages you to download the app to get all the benefits. I’ve seen this become increasingly more prominent with lots of brands recently, the use of an app to direct traffic to who will get better offers, first views etc. Ok, so you probably don’t have an app, but…the method here is to create a community, the most loyal customers who love your brand the most. And how can you do the same? Well through email of course, and there’s also the option of a Facebook group too (more about these later, let’s get back to Nike).
As of 2021. Over 300 million people had signed up for NikePlus (their loyalty scheme). According to Nike, these people spend more than 3 times the amount then the ‘regular’ customer. All members receive:
Free shipping
First Access to exclusive products
Exclusive trainer customisations
Invites to experiences and events
Access to Nike experts for styling tips and products recommendations.
Special offers and benefits
What makes a loyalty program work?
1. Timing
Timing really matters. You don’t want to a loyalty scheme rammed down your throat before you’ve even considered buying do you? But…in some businesses this might help sweeten the deal with the first purchase. It’s all about knowing how your customer shops.
2. Business set up
If your business doesn’t have a repeat customer, if it’s a ‘one time purchase and never again’ then a loyalty scheme won’t work. Similarly, if it doesn’t have a high SKU count and not enough variety for your customers to come back time and time again then forget it.
It’s also got to work with your margins – you’re going to have to give some money or product away and if this doesn’t fit in with your numbers then it’ll give you a problem pretty fast.
3. What you offer
Again your numbers really matter here. What you offer can be a wide variety of things but it has to work for your business. The most common are:
Points that equate to money off
Points that equate a percentage off
Free gifts
Free product
Free shipping
Will it work for my business?
Before you install a loyalty scheme in your business you need to ask yourself some questions. Consider:
Your average order value (AOV) – is it high enough for you to offer discounts for loyal customers? This ties into the next point.
What’s the cost to acquire your customer? (CAC) – think about me with Arena flowers, my first purchase was made from an ad so they had paid to get me in the fold to start with. However, they must have known they had a high repeat customer rate which is the next point.
Lifetime customer value (CLV) – If you have a customer that purchases more than once within 12 months then whatever you have paid to acquire them must be ‘worth it’ (i.e. you can afford to acquire them at a break even, small loss or small profit). If you know you can get more profit from them in the 2nd or 3rd sale then go for it.
So to wrap it up, here’s the facts:
You need the right business set up (repeat customer etc)
You need to know your numbers
It needs executing well
It’ll increase your lifetime customer value
It could drive new customers for ‘free’
It could be a huge driver in increasing your revenue
The top and bottom of it is – once you get your customers coming back time and time again your business becomes well oiled and much easier to scale. Not only this, these loyal customers send new customers your way. And these new customers are often fired up and ready to buy. And why? Because they’ve been sent your way by someone they trust so they’re much more likely to convert. Points make prizes all round!