The Comprehensive Guide to Customer Loyalty Strategy

We often see companies spending 80% of their marketing budget acquiring new customers and rarely applying the same level of attention or budget on retaining and growing existing customers. A customer loyalty strategy is a blueprint that directs companies towards fostering deeper, more lasting relationships with their customers. Not only does this ensure repeat business, but it also helps in converting customers into brand ambassadors. This guide aims to provide a brief exploration of the elements, execution, benefits, and challenges of a robust customer loyalty strategy. Read our blog for more in-depth articles on all of these points.

 The Underlying Philosophy of Customer Loyalty

Before delving into the strategy specifics, understanding the concept of loyalty is pivotal.

At its core, customer loyalty transcends mere repeated business transactions. It embodies a deeper emotional and psychological bond that a customer forms with a brand, stemming from trust, satisfaction, and aligned values. A loyalty strategy does not mean that your business needs a loyalty programme; your business needs a guide to fostering customer loyalty that every one of your staff embraces.

Why Prioritise Customer Loyalty?

1. Financial Efficiency: Retaining customers is less costly than acquiring new ones.
2. Increased Profitability: Loyal customers tend to spend more, and more often.
3. Brand Advocacy: Loyal customers champion the brand, driving referrals.

Crafting the Strategy: Key Components

There are 6 key elements to consider when crafting your loyalty strategy:

1. Identifying Target Customers

Firstly, you need to understand who you are going to target as part of your strategy. Is it your whole audience or only a selection (e.g. your key accounts, or customers who already shop online)?. There are numerous ways to segment your audience into manageable groups that you can target, but here are a few ways in which you could get started:

1. 1. 1. Demographic Analysis: Age, gender, location, and other demographic factors.
      2. Behavioural Insights: Purchase history, online behaviour, and feedback.

2. Setting Clear and Measurable Goals

Whether it's boosting customer lifetime value, reducing attrition rates, or enhancing the Net Promoter Score, having tangible goals facilitates performance tracking. Once you know what you are trying to achieve, you should be able to define the value to your business of the customer achieving those goals. This value is critical to defining how you are going to reward the customer for completing the actions or behaviours that you are expecting.

3. Designing the Loyalty Programme

Once you know the goals of the business and the value that achieving those should deliver, you can start to design a loyalty concept. A loyalty concept doesn’t have to mean an online programme with points and rewards; it could simply be a way of communicating with your customers or a way of offering them extra services once they have hit specific spend thresholds. The key to delivering a concept or programme that the customer will engage with is simplicity. The customer must be able to understand what the benefit is for them and how they can achieve it.

1. Structural Simplicity: Avoid convoluted point systems. Make it simple for customers to understand what they need to do.
2. Valuable Rewards: Offer rewards that resonate with your audience. They must value the rewards in order to engage with the business and change behaviours.
3. Regular Engagement: Remind customers of the benefits that are available to them, whether that be points, or enhanced services or physical rewards.

4. The Power of Personalisation

Personalisation is key to engaging your customers. They want to feel like you really know them, and that you understand their challenges and their needs. A well-structured loyalty programme will give you access to data that you can use to really personalise campaigns, promotions and communications. Before you start with loyalty however, you need to look at what data you already have, what the accuracy is of that data and how you are allowed to use it.  Here are some ideas for how you can use data to engage your customers:

1. Data-Driven Recommendations: Use analytics to suggest products.
2. Celebratory Offers: Recognise personal milestones like birthdays.
3. Segmented Marketing: Tailor communication based on customer segments.

5. Upholding Superior Customer Service

There is no point in even starting to think about designing a loyalty programme if you haven’t first got your product and service levels right. No amount of rewards or enhanced services is going to overcome a poor product offering or poor levels of customer service. Loyalty starts from within, so make sure that you are treating your own employees with respect and cultivating loyalty internally first.  Here are some ways in which you can make sure that your customer service is on point:

1. Swift Issue Resolution: Address concerns proactively.
2. Empathetic Communication: Train staff to show genuine concern and empathy.
3. Accessible Support Channels: Offer multiple ways to reach out, from chatbots to helplines.

6. Embracing Continuous Improvement

Any loyalty programme manager knows the value of keeping the programme fresh and engaging for the members. It’s important to research what is happening in your market, but don’t be tempted to just copy what others are doing. Think about the USP’s of your business and why your customers would stay with you, over a competitor. Tailor your programme to suit those customers’ needs. Make sure that you also have the channels available to listen to your customers and your customer-facing staff. They are at the forefront of your business and probably understand the customer better than anyone else. Her are our key points for continuous improvement:

1. Feedback Mechanisms: Establish channels for customers to offer feedback.
2. Iterative Refinement: Periodically overhaul the loyalty programme, based on insights.
3. Stay Updated: Keep abreast with loyalty trends in the market.

Beyond the Basics: Deepening Loyalty

Once you have designed your programme, you need to continue to manage the communication and engagement to build greater loyalty with your customers. There are two key things that are going to deepen your relationship with your customers:

1. Building Trust

Trust is important in any relationship, and your customers need to believe in your values, trust that you are going to deliver and want to be a part of your story. Our key tips for building trust are:

1. Transparency: Always be honest in communications. We have all seen a negative hotel review, yet it is often the manager's response, and how they handle it, that forms our final opinion of the business.
2. Consistency: Ensure consistent quality and service. Make sure that the customer receives the same service, information and experience wherever they do business with you.

2. Creating Emotional Connections

Creating an emotional connection with your customer allows you to really strengthen the bond and embed that connection into their daily routines. This can be difficult to achieve, particularly if you work in B2B as we often perceive those relationships to be more functional. Think about how you can align yourself better with what matters to the customer. Have someone in your business act as the Voice of the Customer in all your meetings and decision-making, so that you know they are always being considered. Understand what value you can bring to the relationship and weave that message through all of your communications. Here are a couple of ways that you can create an emotional connection:

1. Brand Storytelling: Tell your brand values and history through your marketing, your messaging and bring that journey to life. Let your customer really get to know the people and the journey behind the brand.
2. Community Engagement: Host events or online webinars for customers. Creating a platform that will allow customers to interact with each other and provide feedback that will be listened to will help create a deeper connection.

Potential Pitfalls and Challenges

1. Over-Promotion

Avoid diluting the brand by offering excessive discounts. Keep your message simple and always remember that you should be rewarding behaviour change, and not just rewarding the customer for doing what they were already doing. Create a 12-month calendar of promotions so that you can see the matrix of which customers will be able to take part in which promotions, and what their overall reward could look like.

2. Data Security Concerns

Customers are much more aware of their data rights and your responsibilities when handling their data. Make sure that everyone in the business understands how to handle customer data responsibly, ensuring that they comply with regulations. When thinking about data, consider its accuracy, how often it should be updated, its value to the customer or the business, and its security classification.

3. Programme Stagnation

Ensuring that you invest time into revitalising your loyalty programme to prevent it from becoming monotonous is critical to keeping your customers engaged. There are numerous ways in which you can keep a programme fresh, whether that is through imagery, content or campaign / promotion updates.

When there is so much choice available and brands are competing across multiple channels, cultivating loyalty is more of a necessity than a choice. A strategic, well-executed customer loyalty programme can be the defining factor that differentiates a brand from its competitors, ensuring not just survival, but thriving success in the market landscape.