It happens to every business:
You’ve spent a ton of time, money, and energy nurturing a customer up to VIP status.
You’ve helped them grow, and they’ve grown to rely on you—so much so that they routinely spend money on your products and services.
Then, one day… crickets.
Your once-regular customer skips a promotion… then another… then another. Pretty soon, it becomes crystal clear that you’ve all but lost what was once one of your most valuable patrons.
The worst part?
Nothing really went wrong to make the customer churn. Up until they left, they had continually received the same value they’d come to expect from your brand every time they engaged.
Aha. There’s the problem:
They received the same value they’d come to expect from your company.
Unfortunately, the Law of Diminishing Marginal Utility explains that “the more you consume a good or use a service, the less satisfied you will be with each successive use or consumption.” Basically, if your customer receives the same thing from you every time you engage with them, they’re gonna get bored—and the regularity with which they’d been giving you their money will start to taper off.
All of this, of course, is a testament to the idea that you should continuously be working on improvements to your products or services. Still, depending on your development cycles, your regular customers may get bored or impatient as they wait for new and improved products to be released.
In the meantime, you can stave this off by sporadically rewarding your best customers for their ongoing patronage.
But, again:
Even the rewards you give out can decrease in value and become trite over time—if you always take the same approach to giving them out.
That said, let’s look at how you can change up your approach to rewarding your most loyal customers in order to keep them engaged and always coming back for more.
Go Beyond Transactional Rewards—Get Emotional
In bringing up the topic of customer rewards, the knee-jerk reaction is to think in monetary or commoditized terms:
- Percentage or dollar-off discounts
- Points earned toward free products
- Free products upfront
These types of rewards can help your engaged customers build their purchasing habits. But once this habit is established, the Law of Diminishing Marginal Utility kicks in. In time, these rewards will simply become par for the course—and won’t do much to “wow” your customers.
Fortunately, this phenomenon doesn’t apply to the same degree when rewarding your customers on an emotional level. Emotional rewards tend to retain value in the eyes of the receiver, even as they receive the reward repeatedly over time.
In turn, your customers are more likely to continue doing business with your brand. As a 2017 report from CapGemini shows, 82% of emotionally invested consumers always buy from their favorite brand.
The key to emotional rewards? Personalization.
For example, as part of Sephora’s customer loyalty initiative, the company regularly gives freebies to VIP customers specifically based on their purchase history and customer profile.
It’s the difference between “Here are some points for some free stuff,” and “You’ve earned enough points to receive a free product. Here are some recommendations for you based on your preferences and the amount of points you’ve earned.”
If you focus solely on rewarding your best customers monetarily, you’ll have to up the ante pretty much every time you reward them. Eventually, this will cut too heavily into your profit margin to be worthwhile.
But by providing emotional rewards (in addition to monetary), your regular customers will continue to get more and more value out of every reward you give them.
Let Your Customers Pay It Forward
You can also reward your customers on an emotional level by providing opportunities for them to give back in some way.
In fact, CapGemini found that 70% of emotionally engaged customers say social responsibility is a major contributing factor to their level of brand loyalty. Providing intrinsically rewarding opportunities, then, can be an effective way to keep your best customers on board well into the future.
You can approach this from both high level and ground level perspectives.
In terms of big picture emotional rewards, take a cue from TOMS Shoes—famous for its various initiatives in giving back to the world at large.
For TOMS’ customers, knowing part of their purchase is going directly to those in need is itself the reward for their loyalty. In making social responsibility and charity part of its unique selling proposition, TOMS all but eliminates the Law of Diminishing Marginal Utility.
On a smaller scale, you might allow your individual customers to give back in the way they choose to do so. For example, last year, MOD Pizza updated its loyalty program, giving devoted customers the option of converting their points into a monetary donation to be made by the company.
There are a number of ways to get creative here. You might allow your customers to:
- Share their rewards or points with a friend
- Redeem points to pay for the next customer
- Choose from a list of charities to donate to
It’s all about determining what drives your audience on an emotional level. When engaging with your brand is emotionally rewarding to the point of being empowering, your customers will have every reason to stick with your brand.
Create Reward-Focused Partnerships with Other Brands
Another effective way to retain your customers with rewards is to partner with other brands to develop co-sponsored rewards campaigns.
Here, you’ll want to partner with brands that:
- Share an overlap in target audience
- Offer products or services complementary to your own
- Share a common mission or vision
In some industries, such partnerships are fairly common. For example, many hotels work with local restaurants and businesses to offer discounts to frequent or VIP guests. Many credit card and airline companies offer similar rewards:
Investing app Acorns puts a twist on this approach: When a user makes a purchase from one of Acorns’ partner brands, a specified dollar amount will be deposited into their investment account.
Ironically, in this example the customer isn’t directly doing more business with Acorns. Still, the incentive did get them to engage with the app once more. And, with the recent investment made to their account free of charge, they’ll be even more likely to check back in the near future.
(As a quick side note, it’s worth mentioning that co-branded rewards campaigns can be a great way to generate new customers as well. In the above example, Acorns users are exposed to the different brands listed—and these brands will expose their audiences to Acorns in turn.)
In partnering with different brands, it’s vital to ensure members of your audience have a need for their products or services. In creating this perfect alignment between brands, you can develop rewards that are irresistible to your loyal customers.
On your end, this means two things: more retention, and less churn.
Mix It Up: Randomize Your Rewards
The idea behind rewarding your loyal customers, plain and simple, is that they deserve it.
Sure, they can continue to earn more rewards over time through your various loyalty campaigns.
But:
The truth is, your best customers have already earned much more than you may be giving them credit for. As reported by Adobe, the top 10% of your customer base spends up to three times as much as your average customer.
So, in addition to providing more structured reward systems for your loyal customers, be sure to reward them sporadically without their having explicitly earned it.
Now, while a reward such as the above may seem random to the customer, you’ll have control over which customers get what reward—allowing you to target high-value offers to your highest-value customers. Moreover, you can identify optimal moments to provide these rewards in order to maximize engagement and potential for conversion.
Here’s why this works so well:
According to the operant conditioning , providing rewards at random (or random in the recipient’s perception) can actually be more effective at reinforcing behavior than offering earned rewards. The idea is that since every purchase or engagement can potentially earn the customer a reward, the possibility of winning on the next purchase is incentive enough to get them to convert.
(Note: Even if your approach to doling out rewards is hidden and rather complex, it is possible that your customers will figure it out—and exploit it. While this is a different discussion altogether, we’d just advise you to not make your “random” reward triggers too obvious.)
Interestingly enough, this incentive is only increased by what’s referred to as the Lucky Loyalty Effect.
The theory—which has been proven accurate—says that consumers that spend more with a given brand subconsciously believe they have a better chance of earning random rewards than the average customer does. In turn, this makes them even more likely to make future purchases, since (from their perspective) every additional purchase increases their chances of winning a free prize.
That said, if you haven’t specifically promoted your giveaways as being “random,” they don’t have to be. Again, here’s where you can target individual customers behind the scenes, then deliver a seemingly random reward that will incentivize them to engage with your brand sooner rather than later.
Your most valuable customers don’t have to do anything more for you to reward them. So, in the interest of showing them just how much they’re worth to your business (and, of course, to keep them engaged), a random, just-because, out-of-the-goodness-of-our-hearts reward is the best approach to take.
Wrap Up
No matter what business you’re in, you’ll eventually see some of your best customers slowly slip from your grasp—possibly never to return.
Sometimes, it’s not a matter of their no longer needing your services. Often, it’s simply because they’ve gotten so used to receiving value from you that they’ve forgotten just how valuable your brand is to their lives.
And it’s your job to remind them.
As long as you continually remind your customers of the value you bring them—and of how much they mean to your business—you should be able to keep them onboard for a long time to come.
Potential future topic: How to reward your customers without getting taken advantage of (or something along those lines)