Steps You Must Follow To Build The Right Customer Loyalty Program Strategy
As we witness the growing demand for digitization, every organization is focusing to optimize business processes for better productivity & enhanced customer experiences. Successful businesses know that customers are always their top priority and no business can fully grow without loyal customers no matter how great their offerings are. That is where having a good customer loyalty program is essential for your business to win your customers’ hearts & retain them for a longer time. However, creating customer loyalty software is not an easy task and it takes effort and time. In this blog, we will help you with the best Guide to Customer Loyalty and find out the most important steps to follow while building the loyalty program for your specific business needs.
Reasons Why Customer Loyalty is Essential
Building customer loyalty helps in growing revenue, which is why acquiring & retaining customers should be the long-term priority. The study says increasing customer retention rates by only 5% could increase profits by 25% to 95%. Every customer’s needs may be different and they have their reasons why they prefer one business over the other. Your business should be capable of convincing them that you are providing the best of everything- price, quality, service, and value.
Customer loyalty focuses on building trust between a brand and a customer ensuring that the customer chooses you & your services over competitor brands. Here are some of the top reasons that show how important customer loyalty is-
– One of the top benefits of using customer loyalty programs is that it helps in the retention of existing customers, which is more beneficial than acquiring new ones & much cheaper. Acquiring a new customer can be 5 o 25 times more expensive than retaining a new one.
– Loyal customers help in bringing more revenue, as the repeat buying patterns help businesses to boost sales without investing extra resources.
– Your loyal customers are more likely to refer your products to friends & families, which people trust as it comes in the form of word-of-mouth marketing rather than sponsored advertisements.
Step-To-Step Guide To Create/Update Your Loyalty Program Strategy
After understanding the importance of customer loyalty for a business, we will know to figure out how developing a strong customer loyalty program helps in building a good customer loyalty program.
Listed below are the steps to help your business build or update your loyalty program strategy-
1. Customer Segmentation
The first step is to build and review the current segmentation of customers whether you are planning for a new customer loyalty strategy or updating an old one. Some of the common models for segmentation include demographic, geographic, behavioral, value-based, etc. Segmentation helps in understanding the target audience, which is essential to personalize the program as per the customers’ requirements.
2. Know What Customers Want
Customer satisfaction is important for the success of any business, which is why knowing your customers in-depth is needed to create better loyalty program strategies. Understanding your customer needs can help you with the campaigns & concepts that they are expecting from your brand. This not only connects your customers emotionally but also helps them become repeat customers & brand advocates.
3. Review Available Data of loyalty & Retention
After understanding your customers and segmentation, take time to review all the available loyalty & customer retention data. Even if you have built your customer loyalty program, start analyzing the data you have. The data gives your business valuable insights to know your customer behavior, which in turn will drive loyalty. Extracting information from data will help you design your own personalized customer engagement strategy.
4. Define Customer Unit Economics
Unit Economics helps to define how much value each unit/customer generates for a business to access the current financial performance. Some of the common metrics are
- Customer Acquisition Cost (CAC), the cost of convincing customers to pay for your products
- Customer Lifetime Value (CLV), the total revenue a customer brings to a business minus the cost of acquiring & serving him/her
- Cost Per Acquisition (CPA), the cost to acquire a non-paying user
- Churn Rate measures the percentage of customers who end their relationship with the brand during a given period
5. Understand Your Loyalty Investment
After getting an idea on how to calculate and understand how much it costs to acquire/lose a customer, the next step is to define and set the loyalty investment per customer segment. Take time to analyze all the customer segments before you start investing in them and keep a special focus on high-value customers as they are the ones helping you generate more sales.
6. Define Loyalty Program Strategy
Depending on the different customer segments, you need a strategy to figure out how your business can engage and retain them. Think of the several ways about how to make your customers feel special and valued, how they can earn or redeem reward points, etc. Add monetary features in your loyalty programs such as cashback, promotion, discount, and others that focus on personalization recommendations & customer satisfaction.
7. Plan an Anti churn Strategy
Your business must focus on reducing the churn rate, which eventually helps in increasing the customer lifetime value and make customers feel more valued. Analyze and set strategies to check out how you can fight churn. Focus on improving customer journey to identify when a customer is about to churn with the help of effective anti-churn solutions.
8. Special Focus on Super Loyal Customers
There are few customers in your brand that are emotionally connected to your brand, who spend more, and are likely to recommend your brand to others, they are known as super loyal customers. Set a robust strategy to find out this segment and how you can retain them with your brand for a longer time. This will not only help in boosting sales but also help in turning normal customers into super-loyal customers.
9. Engage Customers with Campaigns
Once the customer loyalty program is set, try to engage customers with new and interesting campaigns based on their preferences. Use segmentation and strategies that can help your brand delight customers and attract them to register/ use your loyalty program.
10. Monitor, Analyze & Improve
If you want your loyalty program to be a success for a long time, monitor the program performance regularly, measure all the campaigns, and others to find out how you can improve the program & the metrics of customer unit economics. Continuous monitoring and update are essential as customers’ needs may change with time and focus to enhance customer journeys with personalized customer experience for every customer’s specific needs.
We know that understanding your customer in-depth is the key to achieve success in your customer loyalty program, where data plays the main role in this understanding. Ensure that you follow the above steps before defining your loyalty program investment per segment to make your customers feel valued. Once the customer loyalty program strategy is in place, it is crucial to measure and monitor the performance of the program from time to time, which will help you refine it in a better way. Don’t forget to consider the insights from your data while building a personalized customer loyalty program that engages and attracts your customers perfectly.