The traditional model of loyalty programs is broken. Business owners are finding that programs cost more and more while gains are receding. This calls into question, “What does loyalty look like to customers?” and what does this mean for entrepreneurs. If business loyalty landscapes is changing, then why do 90 percent of businesses have them? Between 2012 and 2014, US loyalty membership grew by 26.7 percent, so customers are interested in loyalty programs. What’s the big deal?
Here’s the deal: Companies have kept investing money into loyalty programs without understanding how customers behave nor have kept pace with how customers think about loyalty. Small to medium-sized business owners must be thinking about this sooner, as loyalty program demands significant resources with diminishing returns. If entrepreneurs don’t find a solution to this societal attitude, decreasing profitability, lower margins, and slower growth is to be expected.
What are some of the new attitudes towards loyalty?
According to an Accenture study, 71 percent claim loyalty programs do not inspire loyalty; 77 percent said they retract loyalty much more quickly than they did 3 years ago. “But I have loyalty customers who spend quite a bit of money with me—they’re not going anywhere. They like what I’m doing”. Not so fast.
The study also found that the biggest consumers to brands they’re loyal to are 17 percent more likely to switch brands. If they spend loads of money at your salon, shop, or gym, they’re 9 percent more likely to end their loyalty. Time to rethink how you maximize value to loyal customers and where you invest to foster loyalty.
What’s the ultimate amongst customer retention techniques? Pay attention to detail and customers will be saying, “Stick with me”.
Take account of all loyalty investment
Sit down, go through your books, and follow the money. Where are you putting your money for loyalty programs? If you have one program, what kinds of aspects do you invest in? Identify which things retain or please customers more. Eliminate the program elements that are not putting your capital to good use. For example, a free coffee for the 10th haircut (that’s 50 percent off) wouldn’t be necessary. A loyal customer wants to come to you for a discounted haircut.
Millennials make up a $10 trillion market. If you don’t learn to sell and engage with Millennials, get ready to shutter your doors. It’s not clear to marketers what Millennials want when it comes to loyalty programs, but’s it’s evident what they don’t want: they don’t like brands that try to earn their loyalty. They tend to connect with brands that possess the same values as them, brands that personalize, and create exclusivity around a product and/or service. Sephora, the mega beauty brand, creates a personalized service and an exclusive club for the biggest beauty junkies. Customers aren’t a simple CRM number in the system; they feel paid attention to for their loyalty. As for exclusivity, Sephora’s VIB Rouge has been transformed as a status symbol within the beauty community. This tier of their loyalty program is only available to those who spend $1000 or more within a year. It does more than just simply reward customers, it becomes a marketing wheel. VIB Rouge members upload videos of unboxing freebies they receive, post on Instagram, and share their opinions. Think of ways that you can get Millennials talking about your product or service.
Focus on retaining existing customers
When deciding whether to put more capital into finding new customers or making programs for existing ones, put your money into the ones you know. Why? Engaged customers means they’ll be wanting to spread the word. Work on providing experiences that will retain customers. Thereafter, these customers will be your marketing channels as they share about their excellent experience.
Make it mobile-friendly
If you have an app, think of ways that you can incorporate aspects of loyalty program onto the app. Give notifications or flash sales for those who download your app. Even if you don’t have an app, be sure to make sure your program is mobile-friendly. Make your website easy to navigate with mobile Over 57 percent of members would like to engage with loyalty programs via mobile. Make it accessible via email or social media—-any place that customer could click on using their smartphone.
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