Building Customer Loyalty: Key Steps and Tips

June 5, 2024
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Nothing really compares to a well tailored suit. The feel, the inspired confidence, all of it just seems to make sense. While it may seem like a stretch comparing a suit to a loyalty program, finding the perfect loyalty program can be even more satisfying. Building customer loyalty can be compared to the dedicated service a tailor provides when preparing a suit, where the fit can make a world of a difference.

Unlike tailored suits however, loyalty programs are highly relevant in e-commerce which is why we’ve prepared this guide. Make no mistake, loyalty programs have been in the conversation long enough to become an important talking point for brands looking to leave a competitive mark. Although navigating the intricacies can prove to be challenging, there are a few frameworks that can simplify the setup process. 

Why are loyalty programs important for businesses?

Retention is widely considered one of the principal goals in e-commerce. The unique challenges faced when operating a business online emphasize the critical nature of fostering long-term intent. These loyalty programs make it possible to keep customers engaged with a brand while minimizing brand switching. As your brand matures and your understanding of customer demand evolves, your loyalty program becomes an immense source of insight and value. 

One of the most prominent comments business operating loyalty programs mention is the ability to extract value from loyalty members. This often manifests through increases in repeat purchases and customer lifetime value. While on the lead generation front, loyalty programs are known to mediate the rising costs of customer acquisition which effectively makes it less expensive to generate leads given you successfully retain these visitors.

Consider also how increasing the duration of customer loyalty may create opportunities to enrich relationships. It is during this time that customers interact with your core business operations like customer service making themselves available for interaction. User interaction is also known to help businesses scale core functions like reviews or social media through their engagement. It also just so happens that loyalty members represent your core demographic, which is your most direct and greatest source of value.

Key Benefits:

  • Reduce brand switching, making business more competitive
  • Diminish costs of customer acquisition
  • Increasing proceeds from loyalty members
  • Enriches the customers experience
  • Customer interactions scale your core features
  • Loyalty members produce the most critical insight
image representing the effect of effective customer retention

As your business conducts its standard marketing function its normal to lose chunk of the leads you generate which can be a major burden on your marketing business. However, by effectively inducting customers into your loyalty program and establishing active communication, your loyalty can become a significant source of value for your business. By successfully motivating customer engagement its possible to expand your member list, which can be transformative for your business.

Through the process of continuous improvement it's possible to maintain customer interest which can lead to longer and longer engagement. Successful loyalty programs are known to lessen the burden on marketing functions, making them more efficient and improving factors like cost of customer acquisition. If you're able to effectively sustain customer engagement for longer periods and maintain active communication, your loyalty program will continue to expand and the value you derive from loyalty programs will follow.

“A month to month retention rate of 20-30% can be transformative to a business.”

Stages of creating a loyalty program

Building customer loyalty programs often occurs in stages with each step having a potentially major impact on the outcome of a loyalty program. Following these stages is fundamental to building a loyalty program. This section is dedicated to explaining those stages so that you can make more informed decisions. 

Defining your goals

When building customer loyalty programs it's essential that we understand what we are trying to accomplish, as this can fundamentally alter everything. During the planning phase we will encounter critical choices from the audience we target, the type of program we use, and the rewards we offer. Once our program is operational a lot can change that can test our initial goals. Whatever our goals are we need to understand that being adaptable is just as important as the initial goals we set.

Establishing lasting goals requires an acute understanding of our industry in order to prove their viability. Arbitrary goals more often than not, produce no real gain and so you must have substantiated terms when building your customer loyalty program. Its common to see luxury brands use more experiential rewards while business with a smaller price point 

Example of goals:

  • Product Turnover: Is there a product that you want customers to try? Or perhaps a product that demonstrates low turnover? Perhaps product bundles will work well with your loyalty rewards.
  • Lead Conversion: Especially during early stages it may be important for a business to focus on incentivizing first time purchases, capturing credentials, or perhaps ensuring that second purchase.
  • Average Order Value: It’s common to see businesses attempting to raise their average order value by a target rate by balancing reward values, flash sales, and special offers. All of which are a staple loyalty function.
  • Repeat Purchases: It's possible to structure rewards so that they are focused on subsequent purchases, tiers also assist in motivating customers, and having a great outreach program can re-engage customers.
  • Retention Duration: Retention duration is primarily influenced by the types of rewards you offer, how well trained your program is to your customer needs, and once more the value of your tiers.
  • Social Proof: A very important goal for business worldwide is demonstrating authenticity, it's possible through a variety of approaches to accelerate UGC in order to create customer trust.
  • Customer Experience: Depending on your market position, enhancing the customer experience may be your greatest differentiating factor. It’s possible to award your most prized customers with substantial rewards.

Just these few examples represent the sort of versatility you can employ when building your customer loyalty program. Consider how else you can use clever thinking to influence customers to behave according to your design.

Selecting the target audience

A loyalty program often depends on your ability to attract not just any customer but your most relevant customer. This is why your target audience is always part of the optimization process and where we find the most value. Besides being the most informative demographic these customers also demonstrate the highest activity rates and longest duration of engagement. Furthermore, the right audience also demonstrates the most predictable behavior which enables you to make more informed decisions when managing your loyalty program.

Yes, successfully targeting your direct audience is important in building customer loyalty, but it's also a critical part of scaling your program. Real value comes from your ability to capture and retain customers which manifests as a scaler effect. By managing churn rates and continuously acquiring new loyalty members, you can expand your loyalty program. This can be achieved if your brand, loyalty program, and product all align with customer expectations.

Choosing the type of program

Choosing the right program type is a balancing act between your desired versatility and market viability. An example, experiential rewards are the most desired types of rewards and are perfect for luxury brands but ultimately struggle to create value for ice cream parlors. While there are many types of loyalty programs not all of them are applicable for your particular segment. The first step is narrowing down your options and figuring out which one has the best long-term perspective. We’ll attach an article suggestion that covers the many types of loyalty programs.

The industry norm nowadays is to use apps or integrations to streamline the implementation process. They allow e-commerce businesses to build customer loyalty programs of many different types without the technical complications and capital requirements. They come equipped with all the tools necessary to construct a loyalty program to fit your specific needs. However the biggest differentiating factor is the ability to integrate these programs with other marketing mechanisms in a dynamic fashion. This often results in a richer customer experience with greater functionality.

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Determining the program structure

Your program structure is where you have the most control and where you can balance your reward values and reward types. Structuring your loyalty program is a balancing act between the value of your rewards and your bottom line. We want to make our rewards attractive enough to capture customers while ensuring our profitability, afterall each reward has a financial value. Here it’s important to understand what type of rewards attract customers or alleviate their pain points. Alignment between previous steps are realized through your program structure and where execution is best manifested.

Execution is critical, think beyond the reward types and values, consider also user interaction and user experience. How will customers see and use your loyalty program? The general guidelines suggest dynamic features with modern design. We want to make the experience enjoyable, and ensure that we are in a position where customers will have the greatest chance of interacting with our program. We’ll discover at some point that strategic implementation will determine how engaged customers are with your loyalty program.

Promoting your loyalty program

The next stage in the process of building customer loyalty is the promotion of your program and its merits. This will help your business generate some much needed exposure, and highlight the benefits of joining your loyalty program. Our first step will be choosing the right marketing channels and effectively communicating our core message. A well executed campaign can enhance the perception of your loyalty program and allow its merits to shine through. Consider also how you’ll be branding your loyalty program, and how that can reflect positively on your businesses.

While we do want to use our marketing channels to communicate the features of our loyalty program, we can also benefit from loyalty program members and their advocacy. User generated content such as photos, videos, and reviews are known to be high quality endorsements for our loyalty program and overall brand. Loyalty members are also more likely to praise your brand than first timer buyers, which makes them especially valuable when forming a reputation.

Monitor, collect data, and upgrade our program

Modern loyalty programs enable businesses to collect data on customer behavior and visualize that data for analysis. The primary reasons why this is so critical to a business can be broken down into two key components. The first is the concentrated nature of loyal customers that represents your “core”, and results in the highest quality information. The second is simply information, whereas businesses stand to benefit from as much insight as they can gather.

This information can then be clustered, segmented, and dissected for some very interesting findings that can help you better understand what customers desire. This information can impact not only your loyalty program but other key functions such as customer service, sales strategy, and inventory management. We have seen brands utilize personalized strategies to create highly effective promotional campaigns and integrate this information into things like product recommendations or email marketing.

Tips for creating a successful loyalty program

The main goal of loyalty programs is enhancing the customer’s experience through benefits and services. These two elements when successfully implemented can make a business standout in comparison to similar brands. These tips are intended to give you the proper orientation to craft an influential loyalty program and effectively draw value from your loyal customers.

Make it simple to understand

Your biggest hurdle when building a loyalty program is its UX and UI, which can oftentimes be complicated and as a result create problems down the road. Optimizing the customer experience here means removing potential pain points and making sure that your loyalty program is coherent. Modern loyalty programs utilize dedicated pages for benefits, timely placed loyalty features, and dynamic pop-ups. Take a look at the reward meter below and the accompanying list of ways to earn points. This is an example of how you can simplify the process and drive customer engagement.

Example of a simple to understand loyalty program

Offer Valuable Benefits

Loyalty programs greatly depend on the value of your benefits to motivate customer engagement and retainment. As such there is value in understanding what customers are attracted most towards and how to balance reward values without straining your pocket. This balancing act is a major part of building a loyalty program as each point carries financial consequence. Check out the example below of four unique loyalty tiers that grow in value the longer customers are loyal to their brand.

Example of highly engaging rewards for loyalty members

Useful Tip: Another element we want you to remember when building a loyalty program is how you can use the many types of rewards to your advantage. Loyalty rewards can be programmed to nudge customers towards targeted actions. This can help your e-commerce store generate crucial interactions that can help scale your store. This can include things like user-generated content, social media interactions, or referrals.

Provide easy access to information

Loyalty programs when observed in detail will have many small differences, something like “fine print”. These critical features need to be explained to customers. At a most basic level, we need to enable customer access to all relevant information and ensure that it is comprehensive in nature. This will not only pave a path towards your success, but also serve as a reference for information about your loyalty program. Below is a FAQ page that explores the many commonly asked questions posed by customers. 

FAQ section for loyalty program, easy access information

Provide excellent service

Customer service is a standard function that actively sustains customers along their shopping journey. Effective customer service not only improves a businesses performance but also enables the potential for customer loyalty. Customer satisfaction is a precursor to loyalty, and a major requirement for the optimal implementation of a customer loyalty program. Ensuring that your customer services team is aware of common complications with your loyalty program and are quick to resolve those issues is critical.

Analyze results regularly

One of the most definitive advantages of e-commerce loyalty programs is the data they are able to generate. This data enables you to distinctly analyze customer behavior and optimize processes along the way. Making analysis a regular task is a great way to stay on top of shifting customer demands. Loyalty programs deliver some of the most precise findings because they originate from customer interactions with your store. Regular checks are a standard practice and can also improve your customers' experience through their implementation.

Conclusion

Building customer loyalty can be challenging, there is no sugar coating this fact. However with determination and a strong framework they can eventually prove their immense value. It is amongst competitors that we notice the most significant impact and where they have their greatest utility. In e-commerce, competition is omnipresent which sort of work to justify their application. Hopefully this article has given you enough information to craft your own loyalty program, but more importantly to differentiate your loyalty program from the norm.

Join 14,000+ brands already on Growave
Curious how Growave can help increase AOV and customer retention? Let’s talk.
Book a call >
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Join 14,000+ brands already on Growave
Curious how Growave can help increase AOV and customer retention? Let’s talk.
Book a call >
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Aika Growave Sales
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