Mike Cushing / Digital Strategy / September 30th, 2015

Taking Customer Loyalty Beyond the Punch Card

On paper, customer loyalty programs are simple – you reward customers and entice them to shop again. In reality, there are 10 half-punched discount cards doomed to the floor of my car, vainly awaiting their next punch, until I throw them out over the course of the next 6 months.

Like me, the average American household maintains membership in 29 loyalty programs, actively using 12 of them. Much like the punch cards in my car, only about a third of loyalty programs have any lasting impact – for customer and company, alike.

Traditional loyalty tactics, like the punch card, offer a passive, one-way system of loyalty. It puts the onus on the customer to return to the business, with little value for either side. There’s a better approach to loyalty.

92H

Build Incredible Customer Experiences

Let’s face it: brand loyalty has become far more important to the company than to the customer. Brands want to build relationships, while more than anything consumers want clear, honest communication about a business’ products and services. Modern consumers have more choice than ever, yet many brands still treat their customers as a commodity rather than an investment requiring attention and care.

Brands spend an enormous amount of time and money attracting new customers, then miss the mark when nurturing and providing value to their current customers. They’re stuck in the punch-card mindset: give the customer a token gesture of reward and hope they come back.

This won’t shock you, but customers don’t abandon a business because of a bad loyalty program: 68% of customers leave because they are unhappy with the service they receive.

Customers are loyal to businesses that return the favor and continually invest in their platforms and services. True customer loyalty is built upon a rewarding customer experience. Digital loyalty programs, combined with dedicated customer service, can help brands build the foundation of a loyalty company, filling the gap between customer acquisition and retention.

Refine Your Acquisition

Customer acquisition can cost 5-10 times more than retaining current customers, but it’s still the lifeblood of any growing business. Unfortunately, most brands focus heavily on growth to the detriment of customer retention efforts. Brands focus on acquisition because it’s easy to track, whereas quantifying retention revenue requires hard data like customer churn and lifetime value (only 23% of marketers track customer churn). An effective digital loyalty program can increase retention, while providing data to guide smarter acquisition efforts.

vintage-kitchen-design-interior

Strengthening customer retention and loyalty pipelines can deliver huge dividends in your acquisition efforts. With the right data, you can identify the types of clients most likely to purchase more, stay loyal and become brand advocates. That data is invaluable for UX design, onboarding new users and finding the customers that will drive revenue.

Your website and digital channels provide key data to help identify consumer trends. A digital loyalty program is a platform specifically geared to deliver insights that make customer retention tracking possible. We’ve talked before about the value of owned marketing channels, and a loyalty program is no exception – it’s a powerful platform that rests between your website, email marketing and social media efforts. In a crowded marketplace, a loyalty program can be the competitive advantage that drives a sale.

Though there are many examples of exemplary loyalty companies, Amazon stands out. It can, of course, afford to run for years without focusing on short-term profits, it puts customer satisfaction ahead of everything. Flagship products like the Kindle Fire (and even Amazon Prime) are loss-leaders for the company – sold below cost in order to garner more loyalty and drive sales.

photo-1434873740857-1bc5653afda8

Amazon is constantly guided by a single principle: create a positive experience that drives repeat business.

“…Our energy at Amazon comes from the desire to impress customers rather than the zeal to best competitors… Proactively delighting customers earns trust, which earns more business from those customers, even in new business arenas.”  – Jeff Bezos, Amazon letter to shareholders.

Build for Your Customers

Like Amazon, a loyalty strategy should be ingrained throughout your organization – everything you produce should track back to generating a happy customer. That means an off-the-shelf digital loyalty program is unlikely to resonate with your users. Too often, companies focus on the solution itself, rather than the process of building loyalty.

Loyalty programs are just like any other digital product; they’re built best with your whole digital ecosystem in mind, guided by your customers. Today’s consumers are spoiled for choice; your loyalty program needs to communicate brand values and deliver actual value to your customers. Brand advocacy and customer loyalty require emotional appeals more than logical ones. Deals and convenience can drive repeat business, but loyal customers require an emotional connection.

That emotional connection must be built upon a shift in your marketing mindset: stop thinking about customer loyalty and just focus on loyalty. In other words, be loyal to your customers.

We need to deliver value to them each and every day. Whether that’s a great user experience, informative and entertaining content marketing, an app designed for utility, or an actual rewards program, we need to deliver value if we expect value from our customers in return.

Brand and customer loyalty are the same thing. When we ask customers to spend money with us, we need to show an equal investment in the experience we provide.

Building a culture of loyalty requires a deep understanding of your customers, your competition and your place in the market. Once you know these factors, you can build a loyalty marketing strategy that puts the punch card to shame.