The matter of rewarding loyalty is something that really challenges marketing teams. The default is usually to rely on discounts and promotions in pursuit of a repeat order. The curiosity of this approach is that we then devalue what we want customers to value the most.
In some ways, rewarding loyalty is limited to technical capability and tracking. Most businesses can run a discount in an automated way, so that’s what they do. Other types of reward are more complex to execute and so teams shy away from these. Retention can, to some extent, be bought with these discounts and incentives, but loyalty less so.
More from PostFunnel’s Loyalty Series:
Chapter 1: What Is Loyalty and How Do You Recognize It?
Chapter 2: What You Need and What You Don’t to Build Loyalty
Chapter 3: Measuring Loyalty – What Are the Important Metrics and How Do We Find Them?
Chapter 4: Is Personalization Relevant in Loyalty Marketing?
Discounts as an incentive
How often is there complaint that incentives for new customers are prioritized over those who stay with the brand long term? These incentives do play a role in customer satisfaction, discounts may indicate that continued purchasing gets them preferential rates. However, in looking at ways of rewarding customers to nurture loyalty, it has to be much more rooted in what you know about the relationship between your brand and your customer.
To add to this, the main reason I wouldn’t advocate using only promotions and discounts is because they encourage a number of behaviors that are actually not typical or desired of loyal customers. These may include delaying purchase or reductions in profitability. As a result, your gesture will not be recognized as a reward by the recipient as it bears no relation to how they actually behave.
How to nurture loyalty
To nurture loyalty, you need to demonstrate that you get your customer. That you really understand what is important to them and then deliver on that. Loyal customers behave positively towards your brand and what you do and so the rewards given in recognition of those positive actions should be reflective of how customers are behaving.
Think about it like this, if your customer is a high spender, they like what you do and how you do it. High spend should be acknowledged with an invitation to spend more and get preferential services as a result. It’s a simple value exchange that customers understand – do more, get more.
Alternatively, if customers are shopping deep into a narrow group of categories, they know what they like. Rather than try to change this and appear to not understand their preferences at all, you could recognize it with priority access to launches and offers in these categories.
Conversely, if customers shop across multiple categories they are explorers, and so this could be rewarded by asking them to review or road test products or even new concepts directly for the brand.
Think not solely about what they are doing or buying but why they are doing this. How does their behavior relate to their personality and character and then create a reward that connects with that.
Contributing to growth/ tracking behavior
Of course, it’s not simply about how the customer would like to be rewarded but also about positively affecting behaviors that contribute to commercial growth. The days of waiting for your customer to stop visiting, engaging, and shopping with you and then winning them back are over.
As brands we have to work every day to keep ourselves relevant to our customers and make ourselves a crucial and valued part of their life. By tracking behaviors beyond the transaction, brands can pick up on dips in performance across a number of metrics and step in to alter that course.
In addition, it’s possible to get a greater understanding of how loyals behave and identify other potential loyal customers that you can nurture. If they are visiting you frequently, reward that regularity so that it’s maintained and if they are engaging highly they should be invited to be a ‘fan’ so that their excitement about the brand rubs off on others.
Rewarding from the very beginning
Aim to get it right from the start. In the immediate days after placing an order your brand has the opportunity to impress that customer, so do it. They just spent money with you so don’t spend that time sending them a cheaper deal for next time.
This is the opportunity for your brand to reward them for sharing with others or to let them know how you can make life easier next time. You can also share some information with them that shows you’re interested in what they bought and how they get on with it.
Whatever you use to reward your customers needs to come from a desire to increase their consideration of you as a brand and make them love you more. Not show them that they could have got what they bought cheaper.
Using loyalty currency
The other key question raised around rewards is a loyalty currency. Popular with the rise of loyalty programs twenty years ago, they remain, for the customer, a well understood method of communicating progress towards a reward.
But any brand can offer points and discounts and coupons and sales so don’t get hung up on what that currency looks like. If you think you need one, agree on one and then move on to defining how you deliver rewards. If you can work without a currency, I would argue that you should, particularly given the technology that is available. This gives you the advantage of being able to protect margin and retain some flexibility around your program as you test and learn without the customer being aware.
Most urgently find that thing that your customer trusts you to do and loves about what you do as that is where the answer to reward and nurturing loyalty lies. It might be delivery, it might be packaging, it might be that you offer a gift message inside, it will be different for every business. It is not, however, your discounts.
Think about rewards as value adding rather than price reducing. When considering any kind of loyalty currency, you must think about how attainable the reward is, how desirable it is, and what it’s going to feel like when they get it.
In sum
Loyalty is about intent and emotion – as well as action – and so how you create that is through experiences. Develop rewards that are achieved through the customer emotionally investing in achieving it and feeling celebrated when they do.
The reward is what’s in it for the customer, so it has to be worth the investment of their time and money but also something that cuts to the core of why they pick your brand. In some markets what you sell and what you charge will be identical to your competitors so it’s crucial that the reward is intrinsically linked to your brand. This will be partly about what you offer and partly about how you offer it.
Don’t instantly assume that rewards need to be a grand gesture and don’t make the mistake of thinking everyone needs or deserves them. Use your data and insight and commercial acumen to decide where that reward is best placed to grow and strengthen the emotional connection your customers have with you.
Done well, it leads to advocacy, reliance and quite simply, love.
Stay tuned for the next chapter in the Loyalty Series