Brand loyalty has changed. We have more jobs in our lifetimes than our parents expected to have. We can compare deals on bank accounts, mortgages, utilities and insurance products at the click of a button. In fact, Havas’ Meaningful Brands study reported that if 74% of brands vanished overnight, most people wouldn’t care. It’s not enough just to have a great product any more. Brands have to work hard for our loyalty and trust.
It’s worth the work, when it comes. Loyalty has a significant impact on the bottom line, according to various studies. Bain & Co says a 5% increase in customer retention boosts brand’s profits by anywhere from 25% to 95%. Existing customers spend 31% more, and are 50% more likely to try new products than new customers, according to research by Invespcro. A study by Adobe finds that people who’ve made two previous purchases are nine times more likely to buy again than a prospective customer.
But loyalty is about more than creating a habit of buying the same thing again and again, and so loyalty programmes have to be more creative than simply rewarding people for habitual behaviour with vouchers or a free coffee.
Craft a loyalty scheme that’s built around sending customers money off vouchers and you’re giving them an economic reward. It might gain you a few short-term sales, but if someone else comes along and reduces prices further (or offers a better voucher for a different brand), it becomes a race to the bottom.
Two types of loyalty
Broadly, there are two types of loyalty. Loyalty built around convenience, and loyalty founded on emotional connections.
While it is possible to build long-term loyalty around convenience, it’s harder to do. Businesses like petrol stations and coffee shops often rely on convenience-driven loyalty, but find that when people’s circumstances change, or when they simply drive a new route to work, loyalty can evaporate.
Businesses selling expensive items, or experiences (the automotive industry, travel, hospitality and luxury and specialised retail) tend to depend on emotional loyalty. They identify and address people’s wants rather than their needs. These customers may not spend with the businesses every day, but when they do, they often spend big.
For those brands where purchases are few and far between (cars or holidays, for example), there may be other opportunities to engage customers beyond the sale. Airlines reward those who buy through partners such as hotel groups, for example, or even for engagement on social media.
Car companies might choose to offer value-added services such as a free oil check, or a driving experience. This way, people can feel connected to and valued by the brand even when not making a purchase.
Whatever type of brand you are, there are some common themes to achieve loyalty, and become part of the 26% of brands people care about:
Understand your customers. To understand what drives true loyalty, you first have to understand what your customers want from you (and, importantly, what they don’t want). A few pounds off a flight might not be as important to a regular traveller as remembering which seat they prefer. A regular guest at a hotel chain might prefer a room on a higher floor, or a massage when they arrive, or automated check-in, over the promise of a cheaper stay next time.
Get to know them. To understand what customers want means getting to know them, and using technology to share that knowledge across different channels, partners and touchpoints. Businesses that create successful loyalty schemes are always thinking about the customer and what they want. Predictive analytics help you work out what a customer is likely to want. Intelligent analysis will compare this data to how the customer actually behaves (extracting data based on behavioural segmentation), and apply all of this where is it most relevant to engagement and loyalty schemes.
Personalise rewards. For higher spending products or services, you can of course go one step further and personalise the programme for individuals. We all have unique likes and dislikes, and what better way to be greeted at a hotel than with an upgrade to a room with a view, or to have our favourite coffee brand in the hotel room? If you collect data effectively on your customers, surprising them with tailored rewards can be relatively inexpensive to do, but hugely effective. The trick is to work those surprises into your loyalty programme so they don’t rely on the memory of one individual, but on data and technology. That way, if the same guest buys from you in different stores across the UK, or flies with partner airlines, or hires a car from a different place, you can still give them the same level of personalised rewards across multiple locations, and the same level of service across different channels.
Keep it simple. However complex the technology behind the scenes is, a loyalty programme has to look simple and be easy to use for the customer. If it’s too complicated, no-one will bother to use it, and it will fail.
Gamify the experience. An element of gamification, such as progressing your position in a club, for example, or earning badges for contributions, will encourage participation. But again, make it easy to understand and easy to achieve access to the next level.
Think mobile first. The days of paper vouchers (although still surprisingly common) are over. Who can be bothered to fish around in a bag for a 20p discount voucher off a bottle of water when you’re doing a weekly shop? Put your loyalty mechanism on the device that’s used by your customers for everything else they do – their mobile. That way they don’t have to worry about matching a voucher to a product, or finding one of 12 ‘buy 10 get one free’ cards in their possession. It’s all on managed from one device.
The key when you’re developing a loyalty programme is to build something that your customers really want and are genuinely interested in. That means investing some time in listening and learning. People are driven to be loyal by different things, and it’s a two-way street. You can achieve loyalty from your customers, but you have to show them some love in return.