Customer loyalty marketing helps organizations of all sizes build brand supporters. Wonder how loyalty marketing can transform your customer retention efforts? Your answer is here!
This guide reveals what loyalty marketing is, its benefits, and more.
Let’s learn more about loyalty marketing and how it can change the way you interact with your customers.
Loyalty marketing is a marketing approach that meant to keep and increase revenue from current consumers.
Imagine you have a lemonade stand. You want kids to keep coming back to buy your yummy lemonade, right? Loyalty marketing is like giving those kids a special card. Each time they buy a lemonade, they get a stamp on their card. Once they collect enough stamps, they get a free lemonade. That way, they’re more likely to return to your stand instead of going to someone else’s.
Loyalty marketing in stores works the same way. Stores give you points or rewards for buying things. The more you buy, the more rewards you get You want to keep shopping at that store to earn more.
Loyalty marketing is like having a special club for your best customers. Here are some important things about this club:
This includes everything a customer does with your brand, from when they find you to when they leave a review and maybe even after that. Loyalty marketing aims to make the whole experience enjoyable and worthwhile.
Giving deals isn’t the only way to use loyalty marketing. It’s about making your people feel good and special in your relationship with them. Some ways to do this are to provide great customer service, personalize deals, and create a sense of community.
This means keeping people you already have and getting them to come back for more. Customers are less likely to switch to a competitor if rewarded for buying from you again.
This is the overall profit you expect from customers during their association with your business. Loyalty programs can help boost CLTV by keeping customers interested and making them spend more over time.
The main goal of loyalty marketing is to get people to pick your brand over others. By giving customers trust and good experiences, you can turn them into loyal customers who always choose your products or services.
This fosters trust and strengthens their preference for your brand over competitors.
We’ve shown loyalty marketing builds long-term consumer connections. But the real question is: what’s in it for business owners? Here are the answers for you.
One of the best things about loyalty marketing is that it can help keep customers longer. Dollar Shave Club’s loyalty program best shows this strength. According to a Narvar survey, 83% of Dollar Shave Club U.S. customers expect frequent buy contact, up from 75% last year.
In just five years, they have attracted three million return buyers by building a community where everyone feels they belong.
This shows how powerful customer loyalty marketing can be. People are more likely to buy from you again, and you can also cross-sell and up-sell.
Loyalty programs are a secret weapon for keeping customers deeply engaged with your brand. Statistics show that 48% of US survey participants joined a brand loyalty program to express their devotion to the brand. That’s a strong feeling of community, and connection comes from loyalty programs that go beyond just purchases.
Let’s say you run an online shoe shop with a program that gives points for every buy. Customers can use these points to get deals, special goods, or early access to new versions.
But why stop there? You may include aspects of gamification in your program. It includes reward badges for accomplishing tasks like posting about purchases on social media or leaving reviews for products. These playful elements add a layer of fun and incentivize further engagement, propelling your customers from passive participants to active brand champions.
Federated Reichheld’s research shows a strong link: keeping customers for an extra 5% of the time can lead to a huge 25% increase in sales.
Let’s look at the Sephora case study as a real-world example. There are an amazing 17 million users of Sephora’s Beauty Insider program in North America. These loyal customers make up 80% of Sephora’s sales. Their loyalty program encourages interaction, so customers stay in touch even when not shopping.
This boosts Sephora’s revenue by 22% in cross-selling and 13-51% in upselling due to its engaged devoted consumer base.
After learning about customer loyalty program’s benefit, it’s time to design a successful program. Don’t worry, this part will show you a few fundamentals and customizing them to your brand and audience. You can design a loyalty program that consumers love and gets results.
Epsilon’s study shows that 80% of customers are more likely to buy from a company that provides a personalized experience. It all makes sense now. Customers are more likely to connect with a program that understands their needs and interests.
Personalization is a lot more than naming someone in an email. Here are some useful ways to make your reward program more personal:
Dynamic Content: Use information about your customers to suggest products on your website so that each customer sees the best deals.
Using these tips, you can create a reward program that makes each customer feel special and important. This encourages greater involvement, which leads to more trust, and a successful business.
Here’s a breakdown of some rewards structure (points, tiers, etc.), along with inspiring success stories:
Point-Based Programs:
This is a traditional and often-used strategy. Customers may redeem buy points for gifts, reductions, or unique experiences.
One point-based method is Starbucks Rewards. You may get a “Star” with every purchase.
2. Tiered Programs:
It’s possible for members to get more points or better rewards as they move up the ranks. This makes them spend more and feel that they’re the only ones who can have what they want.
For example, Sephora’s Beauty Insider is a tiered program that offers first-class access to its products.
3. Paid Customer Loyalty Programs:
This type gives you access to extra perks for a monthly fee. It’s perfect for companies with loyal customers willing to spend money on a better experience.
Take inspiration from the well-known US bookshop Barnes & Noble. There are two levels: B&N Rewards (free to join) and Premium Membership (paid).
4. Gamification:
Points, badges, and leaderboards—game elements—draw players in on this tactic. One well-known online retailer for chic ladies in sizes 12 to 32 is Simply Be. They give out member-only prizes every month.
Knowing these possibilities and looking at successful ones will help you choose the ideal loyalty program for your target market and company objectives. Make sure your program stresses exclusivity and value to boost consumer loyalty.
>>> Read more in this blog, “How to Set Up the Best Loyalty Program for Your Ecommerce Store“.
Step 1: Collecting and analyzing customer feedback.
Continuous growth is based on actively getting feedback from customers and analyzing it. Customer loyalty programs are a great way to get useful information. A lot of information about how customers feel can be gathered from:
The Ritz-Carlton Hotels exemplifies this approach. They strategically place polls in guest rooms and send follow-up emails, actively seeking guest feedback on their stay.
Step 2: Using feedback to improve products and services.
Once you have useful feedback, it is important to turn it into changes you can make. Look at the comments to find themes that are areas for improvement.
Ritz-Carlton Hotels, for example, are known for having great customer service. To show their appreciation, they give their workers up to $2,000 in buying power to solve guest problems on the spot. This lets problems be fixed right away and encourages a mindset of happy guests.
Ready to see loyalty marketing in action? Let’s take a global tour and examine some actual instances of companies that have perfected the art of winning over devoted customers.
The famous coffee shop chain Starbucks has a Starbucks Rewards program that lets customers earn “stars” for every buy. You can exchange these stars for free drinks, food, or special things. The program’s popularity comes from its ease of use and the chance to win rewards every time you visit.
According to Starbucks’ Q2 Fiscal 2024 Results, there are now 32.8 million regular members in the U.S., up 6% from last year. This shows that customers are interested and that the program could lead to more sales in the future.
>>> Read more:
Lessons from Starbucks loyalty program for Shopify store 2024.
Big brands like Starbucks have the edge of being well-known, but small businesses can still do great things with rewards programs. Here are some examples that will inspire you:
Case Study 1: Özel Beslenme using BON Loyalty to create its loyalty program.
Even though Özel Beslenme had a huge selection of health and fitness products, it had difficulty keeping customers. Their first rewards program didn’t get people involved. And their stock was so fragile that it made return purchases a worry.
Solution: Özel Beslenme put BON Loyalty’s app into action, which provides an easy-to-use interface with digital discounts and other features. This made it easier to redeem rewards and got customers more involved.
Results: In one quarter, more than 500 rewards were redeemed, which brought in about $13,000 in sales, a big 6% increase in sales.
The story of Özel Beslenme shows that choosing the right reward program partner can have a big effect on sales and customer involvement. Even for businesses that face unique problems.
Case Study 2: The Coffee Bean Rewards uses punch card 2.0:
A coffee shop called The Coffee Bean uses a reward app. Customers no longer use heavy paper cards to keep track of their progress toward free drinks and sweets. Instead, they use their phones.
The main point? For small businesses to have successful loyalty programs, they need to know their customers well and make the programs feel special and satisfying. These new ideas will help you connect with your customers better, increase sales, and do all this without spending much money.
The way members use rewards programs will be affected by many important trends. It is important to understand these trends to make a program that works in today’s world.
In this section, we’ll discuss the factors that influence the implementation of loyalty programs.
Data may help you understand your customer’s purchasing behavior and preferences. Key indicators to keep track of include:
>>> Explore more: Top 10 Customer Loyalty KPIs Businesses Should Track.
These metrics allow leveraging customer data and analytics to optimize your loyalty program.
Loyalty program management platforms (LMPs) control key functions such as member administration, point tracking, award redemption, and campaign design. Popular choices include:
Choosing the right loyalty program software for your business needs. Choose with your industry, customers, and desired software features in mind. Investigate free trials and demonstrations without delay to locate the ideal match.
>>> Read more: 13+ Loyalty Management Software.
According to Invesp research, businesses that excel in omnichannel strategy keep 89% of their clients, compared to only 33% of those who struggle.
Why the big difference? Today’s customers expect a smooth experience across online and offline channels. Whether browsing your website, visiting your store, or following you on social media. A loyalty program that feels disconnected is a missed opportunity.
Here’s how to create a seamless omnichannel loyalty program experience:
Using these tips, you can create a loyalty program that makes your customers feel useful no matter how they connect with your brand.
Harvard Business Review research shows that feelings have a big effect on customers’ actions. Customers are more likely to be loyal to a brand if they have a strong personal connection to it.
So, how do you tap into this emotional connection superpower? Here are some ideas:
Inform your clients about your brand’s meaning and the reason behind what you do. People are more likely to be loyal if they believe in your goal.
For instance, Patagonia’s fight for environmental causes resonates deeply with its customers.
Do more than just sell something. Give your people fun and lasting encounters. Olive Garden is a great example of this. Members of their eClub get free birthday food or cake. It adds a nice touch to their dinners for fans.
Thank yous are quite basic and may go a long way. Offer your loyal customers a little present as a thank you for picking you. Just thank them for their business or provide exclusive offers and benefits just to members.
Airlines like Southwest Airlines often do things to thank customers who fly with them often.
Loyalty marketing involves emotional connection and incentives and perks to encourage repeat purchases. The objective is for satisfied consumers to grow into ardent brand advocates.
Customer Retention tries to prevent customers from switching to competitors by keeping the ones they already have. Plans are in place to keep customers happy and address any problems that could cause them to leave.
Both methods are important for businesses. A strong customer retention program lays the foundation. A well-designed loyalty program can take customer relationships to the next level.
Here are two cost-effective ideas to get your small business loyalty program up and running:
Leverage Third-Party Loyalty Platforms:
Consider using existing loyalty program apps (like BON Loyalty for Shopify stores). This can help you get your program up and running quickly while saving you money and time on development.
Read more: 5 best digital loyalty programs for small businesses.
Start Simple:
Begin with a basic program that’s easy to manage and understand for you and your customers. Here are a couple of simple ideas:
Focusing on involvement and giving rewards, even small, can help you build a loyal customer base that keeps returning for more.
Tracking enrollment rate, activity rate, frequency of interaction, customer lifetime value, and repeat purchase rate may help you assess your loyalty program’s performance and influence on your company goals:
These important data and consumer feedback may provide you with a complete picture of your loyalty program’s performance.
Gamification is the newest way to get people really interested in your business. Gallup studies show that it can actually make people 60% more interested and 63% less likely to leave your business. Why? The drive to fight, succeed, and be noticed is deep inside all us, and gaming plays on that.
So, how does it work? Imagine your loyalty program with features like:
Get inspired by Sephora’s Beauty Insider. They made a community where people are given badges and are ranked every month based on how much they contribute.
There can be problems with even the best-planned reward program. The following are some usual problems you should be aware of:
A survey by Collinson Latitude found that 85% of people would rather connect with their favorite reward brands than in person. But the joy that comes with a new rewards program can wear off over time.
This could be avoided by providing your customers with exciting rewards and regular updates to keep them engaged in your program.
To get and keep people, it’s important to offer good rewards, but there’s a fine line to walk. Giving out too many awards can cut into your profits.
The important thing is to find a middle ground between giving your customers benefits they’ll value and making sure your program can keep going. Think about a tiered system where customers get better rewards as they interact with your business more.
Building trust and rewarding involvement are two things that will never change, even while how we do them changes. So, what does the future hold for loyalty marketing? This section covers AI-powered customization and value-driven incentives.
According to Catalyst research, the proportion of consumers who hold businesses responsible for price hikes has risen by 8%. This suggests that value is receiving greater attention. These days, people seek more than just bargains.
Here are some techniques to develop trust amid a tough economy with suspicious consumers:
People are more likely to trust brands that are honest about prices and show how hard it is for them to make ends meet. Loyalty programs can offer adjustable reward systems, focused sales on necessary items, and clear information about the program’s benefits.
We no longer have reward systems that work for everyone. Customers expect an experience that is tailored to their specific wants and needs. Customer loyalty marketing needs to use data to send each customer messages, rewards, and discounts that are more relevant to them.
Adapting to these evolving expectations is crucial for the future of loyalty marketing.
Grocery Doppio did a study and found that a big 76% of shoppers are ready to give their information to have a better event.
Lots of data is available, but artificial intelligence (AI) is great at finding hidden patterns. As a result, reward systems can make sure that every customer has a memorable experience.
According to the 2024 Digital IT Outlook, food stores will spend 7.3% of their IT budget on digital deals, awards, and services. All these things are done to bring in new customers, keep old ones, keep them interested, and give them real value.
Finally, customer loyalty marketing is more than just giving people points and deals. It’s about building brand loyalty and customer advocacy with loyalty programs. Use these strategies to create a reward program that develops trust, engages consumers, and secures long-term economic success.
Want to find the Shopify store loyalty awards app? We have what you need at BON Loyalty!
This Shopify loyalty app lets you construct a program with over 18 methods to earn points, total brand customization, VIP levels, and a strong referral program.
If you want to learn more about customer retention strategies, check out our blog.
Lindsey Nguyen is a Content Marketing Specialist at BON Loyalty, specializing in digital marketing and eCommerce. At BON Loyalty, she crafts content that empowers Shopify store owners to build and sustain thriving customer relationships through innovative loyalty programs. Her articles, often featured on the BON Loyalty blog, provide valuable strategies and insights that help businesses enhance customer loyalty and increase customer lifetime value.
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