Thanks to the Internet, virtually anyone can start a business. Any entrepreneur with a few bucks and a laptop can easily launch a website, create marketing campaigns, and host virtual meetings out of their basement without an ounce of industry experience. Regardless of the fact that only about half of all new businesses make it through their first five years, their short existence will still affect your bottom line if you don’t have loyal customers. One of the best ways to ensure that loyalty is through a well thought out customer loyalty program.
This trendy tactic is now more popular than ever with loyalty memberships increasing annually. A recent study found that 82 percent of respondents were more likely to shop at stores that offered loyalty programs. That’s not surprising given that the average household today holds at least 23 memberships. The same study also looked at consumer interest in specific program features. Programs that offered a smartphone app, for example, were favored by 59 percent of customers, while almost 57 percent indicated they would prefer a program that offered perks based on VIP status.
Focus on the best of your existing customers
It’s a simple theory – loyal customers spend more money, more often, and more consistently. The cost of retaining a loyal customer is less than 10 percent of the cost of acquiring a new customer. Customer loyalty programs essentially operate on the basic principle that getting to know your customers, then rewarding them for behaving in the way that you want, will save you time and increase profits in the long run.
The threat of being perceived as a commodity is a challenge in any industry. The average customer base in today’s market is enormous. Even specialized markets are feeling the need to appeal to an audience that is growing at warp speed. The key to retaining your value in such a large market is creating a non-price differentiation. The qualities that you offer customers beyond the typical ‘Four Ps of Marketing’ (product, price, place, and promotion) are what make you stand out from the competition.
Compile measurable results
Data collected through customer loyalty programs provides ample opportunities to increase profits and run targeted campaigns. Customer and transactional data obtained can be analyzed in order to provide an in-depth look at your customer base and their habits. Knowing what your customers want today is smart, but being able to predict what your customers will want tomorrow is genius.
Identify customer preferences to increase profitability
Customer loyalty programs show that you care about customer relationships and the quality of service that you provide. Learning about your customers and forging meaningful relationships is the key to ensuring that your business can’t be easily replaced.
Loyalty programs allow businesses to link purchases to individual customers and then analyze that data in relation to numerous variables. For example, when a competitor opens nearby, the data collected will identify which customers were affected and how. Knowing this information allows you to target those specific events by incentivizing those customers to come back. It also helps identify how you can be more proactive in the future.
Knowing your customers’ preferences when it comes to what they buy is important. But loyalty programs can also help you track when and why they buy, so you can appeal to their specific needs.
Retain existing customers longer
In order to have truly loyal customers you have to manage those relationships continuously. It’s no easy task, but loyalty programs help make it a little less daunting. A good CRM that includes business intelligence features is essential, but committing to your customer relationships mostly requires patience and critical thinking.
Being an entrepreneur means coming up with creative ways to please your customers. Many businesses that started with traditional loyalty card programs, for instance, are switching to digital in an effort to increase retention. Customer preferences in every facet generally lean towards ease of use and availability of options, so trending towards digital programs is a logical progression.
But don’t ditch your existing customer loyalty program too soon. New data on the digital crossover actually shows that while customers are drawn to digital options, they want it in conjunction with the traditional programs. Implemented successfully, digital customer loyalty programs that support existing efforts help provide a well-rounded marketing approach. Creating a seamless user experience by integrating web, mobile and point of sale transactions give customers multiple entry points and use cases. This type of personalized service creates long-term value for customers and businesses alike.
Competitive advantages in this accelerated market are short lived. No matter how cutting edge you are today, there are likely a dozen startups on the horizon with the potential to squash your business. Implementing a customer loyalty program is like installing a safety net for your company to rely on when times get tough. Competition and unfavorable market fluctuations are largely unavoidable, but customer loyalty is one area that is always under your control.