Customer loyalty programs: Building valuable relationships through rewards
Creating a sense of loyalty in your customers is important to keep them coming back for more. Finding new customers is great but retaining existing customers is even better. So, give them a reason to stick around.
Customer loyalty programs have been around for longer than you might think.
Did you know that Betty Crocker introduced a rewards program to customers way back in 1929? In 1981 American Airlines rolled out the very first frequent flyer program, which took off faster than a Boeing 747.
These days almost every business seems to have hopped aboard the rewards bandwagon—from local cafés to Amazon Prime.
Photo source: American Airlines
OK, so what is a customer loyalty program?
A customer loyalty program is a customer retention strategy that aims to encourage consumers to buy again (and again) from your business. Creating loyal customers is a strategy that will pay dividends.
Ever get a new puppy? Notice how it didn’t come running back to you when you yelled its name?
That’s because you hadn’t given it a reason to come running back yet. Where’s the stick? Where are the treats? Your relationship is built from material kindnesses.
Sure, you can forget the rewards and just be nice to your new pet, but if someone else is throwing your dog a bone, they’re the ones who’ll build the trust.
Loyalty programs vary. They can give customers points, benefits, status, or rewards when they sign up. They come in all flavors. But the benefits aren’t just for customers.
The only reason companies employ these programs is because they work.
Why should you start a customer loyalty program?
More than 90% of companies now have a customer loyalty program as part of their eCommerce strategy—particularly because obtaining new customers is viewed as less cost-efficient than attracting new ones.
Successful customer retention should inspire repeat sales and maximize the lifetime profitability of each buyer—strengthening customer-business relationships along the way.
Together with incredible customer service, personalized shopping experiences, and providing valuable content, customer loyalty tools can give shoppers yet another compelling reason to purchase from you rather than a competitor.
According to a 2018 report by Bond, which surveyed over 50,000 consumers, 71% said that loyalty programs are a meaningful part of their brand relationship. Their brand loyalty means they are less likely to shop around for your competitors.
So which brands are leading the way in customer loyalty?
Environmentally conscious non-alcoholic drinks brand Sans Drinks serves up points when customers complete certain activities.
Shoppers get 50 points for creating an account, bonus points for reviewing their favorite drinks, 50 points for a social media follow, and 3 points for every $1 spent.
Using the points and rewards model, Sans Drinks has created easy and varied ways of earning that benefits both rewards members and their business.
Reviews and social media shares are particularly beneficial to recently founded companies that often rely on the leverage of social proof to grow their customer base.
Photo source: Sans Drinks
Starbucks Rewards is one of the most well-known global customer loyalty programs.
Introduced in 2009, it has grown in popularity year-on-year, with over 16 million active members worldwide.
Starbucks customers earn ‘stars’ that rack up to redeemable rewards like brewed hot coffee, sandwiches, merchandise, and even birthday treats each year.
Rewards like this boost loyalty because they show that your brand values customers enough to say thank you (or happy birthday) with tangible gifts.
Photo source: Starbucks
Swedish design and stationery business kikki.K has a benefits program that offers members first access to sales, birthday gifts, and a welcome voucher.
Sure, you could shop somewhere else for your new journal, but does the other store offer you the chance to be a VIP at special event nights?
Through this membership, kikki.K can keep hold of the customers who are more likely to buy from them again.
It’s one way of proving to buyers that you truly value their loyalty, and this proof can go a long way in creating relationships that last.
Photo source: kikki.K
Ethical eCommerce store FourState goes a different direction with its mission-based loyalty program.
Customers don’t just buy from an eCommerce store because it has the most competitive price—decisions are led by emotional connection, shared values, and social proof.
For this reason, mission-driven programs that have a social and political stance are growing in popularity.
A 2017 study reported that 87% of buyers would buy a product or service solely based on a store’s advocacy on social issues.
When customers gain points shopping at FourState, they can donate those points towards charitable actions like planting trees and donating meals.
By sharing their brand values in this way, FourState shows that they’re ‘on the same page’ as the customer and care about more than just sales and profits.
Photo source: FourState
Which customer loyalty models work best for small businesses?
As with most small business marketing strategies, it pays to experiment.
If your eCommerce business is new and has a small customer base, offering rewards in return for social media shares, Google My Business reviews, or user-generated content (UGC) can be a really effective way of increasing your online presence.
There are so many types of customer loyalty campaigns out there and you don’t have to stick with one.
You don’t have to look at your competitors to see what they’re offering and do the same.
In fact, it’s great to think about how you can differentiate from the businesses in your niche and attract buyers by offering something that really stands out.
The rewards programs that work best are those that are buyer-centric and improve the overall shopping experience.
That means proving that you value customer loyalty by listening to what your audience wants and acting accordingly.