An end to the pandemic remains out of sight but financial support from the government’s small business rescue program stagnates. The future remains uncertain, and businesses aren’t immune.
The Payment Protection Program offered temporary relief to small businesses. A majority of businesses (56%), encouraged by the conditions of forgiveness, spent their loan. The remainder of businesses aren’t far behind according to a National Federation of Independent Business survey.
Beyond government programs, there remain opportunities for businesses to access greater financial security. A customer loyalty program may help businesses to navigate this precarious moment.
A customer loyalty program rewards customers who purchase or engage with a brand on a recurring basis. The goal is to transform a consumer into a regular consumer or brand promoter through the use of rewards, discounts, and freebies.
Businesses may be wary of offering freebies or discounts given the economic climate. However, members of customer loyalty programs tend to spend up to 18% more than other customers. It’s also six times more expensive for businesses to acquire a new customer than to maintain an existing one.
A customer loyalty program may result in a significant return on investment. To activate the program’s benefits, consider the following tips:
- Assess your options for loyalty programs
- Build engagement by offering a range of rewards
- Reward various customer actions
- Consider partnerships to encourage exposure
Businesses should build an effective customer loyalty program, which may help them to conquer this economic contraction.
Assess Your Options for Customer Loyalty Programs
Businesses should review their options for a customer loyalty program to implement a version that fits their customer base.
Prior to implementation, you should consider the various forms of customer loyalty programs. Certain programs may better serve different industries and types of organizations. These differences may impact the success of the program.
- Points-based programs
This is the most recognizable form of a customer loyalty program. Customers earn points from purchases to redeem for credit toward their next purchase. This encourages customers to keep making purchases.
- Tier-based programs
Points-based programs establish a foundation for tier programs. Once customers spend a certain amount, they reach a new loyalty level that offers greater benefits. Tiered programs encourage customers to increase their engagement to access the next tier. As you increase the exclusivity of benefits at each tier, you increase the customer appeal.
- Value-based programs
If your company has a notable social mission, you could implement a value-based program. Instead of spending tiers, you reward customer purchases through contributions to a nonprofit. For example, the purchase of a certain product is donated to a charitable organization related to your company’s mission.
- Spend-based programs
Spend-based programs reward customers who spend more in shorter periods of time. These programs reward your company’s highest paying customers. Customers who spend higher amounts access greater benefits to encourage their continued engagement.
- Gaming programs
Another option is to gamify your customer loyalty program, which makes spending fun. For example, Starbucks transitioned from a points program to a gamified loyalty program.
The coffee retailer offers a mobile app that customers access via their smartphones to access games that provide them with opportunities to earn bonus stars in addition to those earned through purchases.
Whereas their previous program rewarded customers one point for each purchase, customers now earn stars based on their purchases and engagement with the games. This added feature incites excitement with purchases.
Source: starbucks.co.uk
Build Engagement by Offering a Range of Benefits
Businesses should provide a variety of rewards to encourage customer engagement in their loyalty programs.
Discounts, free products, and store credit may help to build transactional loyalty. While these benefits encourage customers to enter into a loyalty program, monetary rewards may not sustain long-term loyalty engagement.
Once a customer enters into a loyalty program, leverage the opportunity to offer the following non-monetary benefits:
- Experiential rewards: These rewards may include free tickets to events such as concerts and access to limited edition products or services. This may delight customers, which builds emotional loyalty.
- Charity rewards: In addition to monetary rewards, you could offer customers opportunities to donate to a charity of their choice. For example, Lyft enables customers to round up the cost of their ride and donate the difference to the charitable organization of their choice through their Round Up & Donate Program.
- Contests and prizes: You could also provide customers who spend at a certain threshold or accumulate a certain amount of points with a chance to win an exclusive prize. A contest may motivate customers to spend their points. In return, you give away only a few high-value products.
An expansion of your rewards provides loyal customers with more value. By offering more than monetary benefits, you not only add value but also encourage emotional loyalty.
This form of customer loyalty promotes growth. A majority (70%) of emotionally engaged consumers spend twice or more on brands to which they feel loyal compared to consumers with low emotional engagement.
According to a study by Forrester, a majority of consumers (80%) with emotional loyalty also promote the brand. Word of mouth marketing is valuable. Over all other forms of advertising, a majority (92%) of consumers believe recommendations from friends and family.
To facilitate growth, you should offer a range of rewards to customers engaged in your loyalty program.
Reward Various Customer Actions
Businesses should also reward customer engagement beyond purchases to demonstrate your commitment to their loyalty.
More than a third (38%) of consumers state their greatest challenge with customer loyalty as an inability to earn points beyond making purchases. This limitation reinforces a transactional relationship with customers.
To better satisfy consumers and build their loyalty, you should reward more of their actions. Consider rewards for the following activities:
- Watching product videos
- Engaging an online platform
- Following social media accounts
- Sharing digital content
- Subscribing to a blog or newsletter
If using a point-based program, you could assign points to each activity. The higher the effort required, the greater the points a customer acquires. This encourages their continuous engagement.
The actions listed above demonstrate brand engagement. As a goal of a customer loyalty program, it’s sensible to reward them too.
By offering more ways to access rewards, you not only show an appreciation for but also build deeper loyalty with customers.
Consider Partnerships to Encourage Exposure
Businesses should also research partnerships with brands to augment rewards for customers engaged in loyalty programs.
For example, T-Mobile and Netflix partnered to provide added value to loyal customers. Customers with two or more lines receive a Netflix subscription on T-Mobile.
A co-branded partnership not only allows you to provide more value to customers. The partnership also increases your brand exposure through access to your partner’s audience.
If partnered with a company in a different market, co-branding presents an opportunity for you to extend your visibility and attract previously inaccessible consumers. As a result, the partnership may help to increase your revenue.
Another benefit of a co-branded program is the ability to split the cost.
Depending on the industry, businesses may spend between 4%–24% of their annual budgets on marketing. Co-branding enables you to split the cost of the campaign and double your marketing budget.
You should investigate opportunities for co-branding to expand your customer base to encourage greater sales.
Build an Effective Customer Loyalty Program
During this period of economic instability, a customer loyalty program may be a valuable investment.
You should review the different types of loyalty programs. By making an informed decision, you increase the likelihood of generating a return on your investment.
A variety of benefits attends to a broader range of customers and adds value to the program, which further encourages participation.
To better satisfy your loyal customers, reward them with perks that aren’t financial. This may help to build deeper loyalty to activate greater returns.
A partnership with a brand outside of your industry enables a customer loyalty program to capture a greater audience cost-effectively.
Kate Russell is an Editorial Associate for Clutch — an Inc. 1000 private company that helps decision-makers determine the best B2B service providers to solve business challenges. She leads accounting research and content initiatives.