How to generate the Holy Grail of loyal, high spending customers.
Article by Catherine Forrest business incentives manager, House of Fraser.
Good customer relationships that generate revenue and loyalty are crucial to any company’s performance. Loyalty and rewards programmes offer businesses the opportunity to consolidate existing relationships, seek out new ones and also to move occasional or one-time customers into repeat business and loyalty to that company.
Most businesses spend more time and energy trying to find new customers instead of retaining those they already have. Research in the area of customer loyalty has indicated that a 5% retention in loyal customers can create anything from 25% to 100% increase. On average, businesses lose 15 – 20% of their customers each year to their competition. And we all know the high cost of acquiring new customers – that’s reasoned to be at least 5 times higher than keeping an existing customer. So it’s easy to see that improving customer loyalty has a huge number of benefits.
Whilst it’s true that loyalty can impact positively on a company’s performance, there are a number of important considerations and chain of events that need to be implemented in order to generate the Holy Grail of loyal, high-spending customers, all of which are critical to the success of a customer loyalty programme.
We would recommend the following ‘8 Steps to Loyalty’ be considered as part of any loyalty and rewards programme:
Profile your Target Audience
Many loyalty schemes fail to target and segment their customers. It’s vital to do this in the first instance to ensure that you provide a reward that will interest and excite them. Age range, gender, hobbies, and salary bands are integral elements when deciding which reward to offer. Knowing little or nothing about their customers means that many companies end up offering discounts which only serve to erode margin and do nothing to build loyalty.
As you may well not know all this information, looking at your customers’ buying patterns will help you profile them. In addition, companies can use survey questions to ask their customers what really matters to them, which incentives appeal to them most, and which rewards are the most valuable. The loyalty reward needs to be something that is a best fit for them at that particular time.
It’s also important to reward loyalty with something flexible that will suit different ages and tastes, as there may otherwise be pitfalls. Offering a weekend break, for instance, can be attractive, but not everyone likes to travel. By the same token, offering ‘family’ days out to people without children will not be hugely popular – one size does not necessarily fit all!
In addition, the rewards of any customer loyalty scheme must not only be attractive, but should also be attainable. Striving for something you want that is and always will be out of reach will be a major turn-off.
An effective solution to any loyalty programme will offer detailed segmentation of customers, so that offers, communications and rewards can be precisely targeted at customer interests.
Do get the Scheme right
The goal of any loyalty programme should be clear. Profiling the target audience will help ensure that the scheme is run properly in the first place, but loyalty programmes must be in tune with customers’ changing needs.
Offering the most attractive rewards that will suit everyone is virtually impossible, but evidence exists to indicate that non-monetary rewards are more desirable than a cash equivalent.
But customers will need to understand what’s expected of them, and how they can benefit. No one likes or understands “smoke and mirrors” – just be upfront and ensure that the scheme is simple and easily understood. The loyalty programme must be able to be communicated to customers, and employees dealing with these customers, in a way that can be comprehended by everyone.
Loyalty from your customers is linked with how well you know them, and how well you treat them. Rewards should be pitched at the right level – most customers can spot a ‘quick fix’ or a gimmick a mile off! Loyal customers are of paramount importance to all companies, and it’s therefore vital to get it right first time.
Promote the Scheme
Communicating the loyalty programme, and its benefits, is a must. Establishing such a programme enables you to communicate proactively with your existing customers or prospects instead of passively waiting for them to return to your company to purchase your products.
Talk to your customers frequently with information and special offers that are relevant and which might tempt them.
When the scheme is launched, be loud and proud about it – after all, a great deal of time and effort has gone into planning it and into getting it right, and you need to communicate this to your customers in order to ensure a good initial take-up.
Make sure your personnel have been properly briefed about the scheme and that they’re also aware of the do’s and don’ts. There is a fine line here – make sure your staff don’t oversell the idea to the detriment of other sales attributes such as good overall customer service, but do recognise their achievement when they have successfully opened a new account.
A loyalty programme enables you to easily create communications that are valued by your customers, and care should be taken to ensure that those communications support and enhance your brand in a way that makes your business stand out from the competition.
Use loyalty schemes to maintain good relationships
Loyalty has never gone out of fashion and, used properly, loyalty schemes can help maintain good relationships with customers. Such schemes are also an extremely effective way of increasing sales by building mutually rewarding relationships.
But it’s not just about meeting customers’ expectations – by striving to consistently exceed their expectations, you will build and maintain customer loyalty.
Make certain that loyalty is long-term
Long-term loyalty can and does work if a company knows its customers, if the rewards are correctly targeted, and if loyalty is a long-term goal. Loyalty will be shortlived if customers’ long-term needs, aspirations and socio-economic groupings are not known, or have not been taken into account. It also takes a long time to build up correct customer profiles, as people’s buying patterns may well be seasonally dictated – necessitating at least a full years worth of data before you can gain an insight into that customer’s buying habits.
Long-term loyalty can also be aided by ensuring an excellent experience for your customers. Good service may not be enough – businesses should work to achieve an emotional connection with their customers, and provide world-class customer service and an outstanding experience for the customer.
This strategy is all part of building ongoing customer relationships – making them feel needed and appreciated.
Employ the right people to work with your loyalty scheme
Hiring the right people – those with vivacity and customer service skills – is a key element within a loyalty scheme. Focus on friendly people who show real enthusiasm for the job.
Training will help reinforce the aims and objectives of the loyalty scheme, and will also teach effective customer service training which should be part of an ongoing training programme.
And set performance standards for your customer-facing personnel. Tell them what you expect of them, how they should act and how they should respond to customers’ needs and requests.
And don’t forget to incentivise your staff for good behaviour and customer service. As well as being paid, they’ll also be glad of respect and appreciation shown to them – but they’ll need to know what you require of them. Reward those who exceed any standards set, and provide training and development for those who do not.
Ensure that your long-term aims are in line with your business
Any loyalty programme aimed at customers must be run in line with a company’s business objectives. These objectives may include increasing sales, retention of existing customers, or incentivising new customers to try your product or service.
The reward needs to reflect a company’s values and complement its image, which will aid in reinforcing any brand strategy. It should also not be anything “run of the mill” and needs to be a reward with universal appeal.
Finally – get feedback from your customers
Ensure that you seek and file feedback on the scheme from your customers. Ask how they felt about the reward, listen to their views on redemption opportunities if you’re using vouchers as a reward, and don’t be afraid to change the next scheme to reflect your customers’ views.
More info: www.houseoffraser.co.uk