When the customers start pouring in, you know your advertising is effective. When you start seeing return customers, you know you’ve created something special: Your brand is offering products, services, and a story worth coming back for.
This type of recognition doesn’t happen overnight. But it can happen a lot faster if you engage in loyalty marketing.
Loyalty marketing helps you build a network of devoted customers. As a strategy, it has countless benefits. And best of all, it’s relatively easy to implement.
In this guide, we’ll explore it all—the what, why and how of customer loyalty marketing.
Table of Contents
- What is loyalty marketing?
- Loyalty vs retention
- How customer loyalty marketing is tied to business success
- How to design your customer loyalty program
What Is Loyalty Marketing?
Like all marketing strategies, loyalty marketing aims to spread the word about your company’s value, thereby boosting sales. However, the overall focus is on turning one-time shoppers into avid supporters.
Loyalty marketing often uses incentives—like reward programs and exclusive member discounts—to attract and keep customers.
The ultimate goal? To build a loyal fanbase that buys regularly and advocates for your brand.
Loyalty vs Retention
Sounds a lot like customer retention, doesn’t it? Indeed, the terms “loyalty” and “retention” are sometimes used interchangeably, even by marketing professionals.
While they might be two sides of the same coin, there are some differences.
Retention Marketing
With retention marketing, the goal is to reduce customer churn. With that in mind, retention marketing isn’t concerned with attracting customers—only with keeping them on board.
Retention strategies are usually two-fold. Brands can leverage communications like email newsletters and feedback surveys to build strong connections. They can also improve the consumer experience; think personalized offers or frictionless customer support interactions.
Metrics that track the success of your retention marketing efforts include:
- Retention rate
- Churn rate
- Repeat purchase rate
Loyalty Marketing
Loyalty marketing goes a step further than retention marketing. Instead of simply persuading customers not to leave for another brand, loyalty marketing actively encourages them to stay and support your business.
Along with using the reward systems mentioned earlier, loyalty marketing also creates a sense of belonging for returning customers, building community through referral schemes and members-only spaces.
As a result, loyalty metrics focus more on indicators of customer sentiment, such as:
- Customer lifetime value (CLV)
- Net Promoter Score (NPS)
- Referral numbers
How Customer Loyalty Marketing is Tied to Business Success
Loyalty marketing is so appealing because it’s a rarity in business: It’s a win-win for brands and their customers. Consumers enjoy the two-way relationship, discounts, exclusive content and other perks they want from a company they like.
Meanwhile, brands see all sorts of benefits. Loyal customers are infinitely valuable because:
- They cost less – Acquiring new customers is an expensive endeavor. In some industries, capturing a new customer can cost four to five times more than satisfying an existing one.
- They spend more – Building a loyal following can boost your bottom line. On average, loyal customers spend 31% more than new ones. They’re also 50% more likely to try out your new offerings.
- They tell their friends – Your loyal supporters further reduce your customer acquisition costs (CACs) by marketing on your behalf. Consumers share their positive experiences with those around them, and 88% of people trust personal recommendations more than any other advertising.
- They help you improve – Loyal customers are like family—they can be brutally honest. And critique from your biggest supporters is invaluable. By soliciting feedback from your fans, you can improve your offerings, further pleasing your existing customers while also attracting new ones.
Ultimately, nurturing customer loyalty positively impacts business metrics and brand advocacy.
Designing Your Customer Loyalty Program
So, how can you assemble a legion of loyal customers who will support you through thick and thin? Here’s a quick step-by-step guide on setting up and marketing your loyalty program.
Step 1: Identify Target Audience Motivations
To start, you’ll want to answer a simple question: What motivates your ideal customer?
You may already have the answer if you’ve been in business for a while. When in doubt, check your data for clues. Maybe a free shipping promo made your sales skyrocket. Or maybe a limited-edition product prompted a record-setting number of mailing list sign-ups.
Luckily, even if you don’t know what excites your target audience, you can soon find out. Consider learning about customer motivations through:
- Market research
- Surveys
- Social media conversations
Step 2: Select Impactful Rewards and Incentives
When you understand what makes your ideal customer tick, you’ll know which rewards to provide.
It doesn’t matter if your loyalty program is tier-based, points-based or a paid subscription. The key to success is offering perks that your audience will want. After all, what is loyalty marketing if not a way to thank customers for their continued support?
Offer something of actual value, and your customers will thank you in return—by shopping.
Here are some loyalty ideas to inspire you:
- Discounts – Customers could receive a 15% rebate on every third order.
- Exclusive products – Shoppers who reach a particular tier (by spending more or completing other desirable actions) could unlock a special gift.
- Sweepstakes – Every $10 spent could be an entry into a prize drawing.
Step 3: Choose the Appropriate Platform
Next, you’ll need to decide how you want to share your loyalty program. Depending on your target demographic, you’ll likely want to use some combination of the following:
- Email – Email is the closest thing to one-on-one communication. Building loyalty with email lets you personalize your messaging and connect with your customers directly.
- Social media – As public forums, social platforms are the perfect place to assemble a community of brand supporters.
- Proprietary apps — For total control, you can take a page from Starbucks or McDonald’s and build a mobile loyalty app. These cost more upfront, but given that 76% of people shop on their smartphones, the investment can pay off.
Step 4: Market Your Loyalty Program
From here, it’s time to tackle the “marketing” portion of loyalty marketing.
Loyalty marketing differs from conventional marketing in a few ways, so you can’t use any old strategy to reach the masses. Some of the best ways to market your loyalty program include:
- Pay-per-click (PPC) advertising – PPC is especially powerful when you harness retargeting—a tool that lets you advertise to previous shoppers or users who have shown interest.
- Influencer marketing – Loyalty marketing is about building a rapport with your customers. So why not take advantage of an existing relationship? Shoppers trust their favorite influencers, and if you partner with them, you’ll have a direct connection to your customers.
- In-store strategies – If you have brick-and-mortar locations, you can spread the word in other ways. Have your employees encourage loyalty sign-ups at checkout and include loyalty information on signage, packaging and receipts.
No matter how and where you spread your loyalty messaging, ensure it reflects your brand’s voice and style.
Step 5: Measure and Iterate
As always, the work doesn’t end when your loyalty program goes live. Successful loyalty marketing hinges on your ability to adapt.
Data is your best friend here. You can modify your loyalty program and marketing strategies by measuring performance through your ecommerce platform and marketing dashboards to extract the best results.
Aside from the loyalty metrics listed above (CLV, NPS and referrals), you may also find it worthwhile to track:
- Member acquisition
- Purchase frequency
- Average order value (AOV)
- Redemption rates
If your performance in any area isn’t up to snuff, switch up your strategy. You may need to modify your ad campaign’s visuals, reward tiers, or discount amounts. The numbers—and your customer surveys—will tell you exactly what needs to change. The important thing is that you listen to them and make the necessary changes.
That’s how you turn first-timers into forever customers.
Find Your Forever Customers with Human
Those loyal forever customers are out there. All you have to do is connect with them.
At Human, we offer ecommerce marketing services that can help you find your brand fans and build relationships with them.
To find out more, contact us today.
