Starting a loyalty program is one of the best decisions you can make for your business. Not only does it make your brand more attractive than your competitors’, but it also helps reduce your marketing spend by shifting the focus from customer acquisition to customer retention. Since acquisition costs show no signs of getting lower, retention is becoming an increasingly popular conversation.
However, in order to get the most out of your loyalty program, your customers need to find it valuable. With more brands rebalancing their marketing budgets, you’re no longer the only one offering customers rewards for their business which means you need to build a program that truly exceeds your customers’ needs.
Empathy is the Key to Delivering Value
Your customers are surrounded by ads every day. Everywhere they look, another brand is trying to get their attention, and this relentless storm of acquisition marketing leaves little room for customers to feel like individuals. Instead, they feel like just another number -- one of many shoppers being funneled through your store in the hopes of becoming the next sale.
This type of marketing can create an extremely negative association with your brand, and is largely responsible for the divide that still exists between offline and online retailers. Offline, customers are still greeted one by one, asked if they need assistance, and offered personal recommendations. These small interactions are what allow brands to build real, emotional relationships with their customers which, while not impossible online, is much more difficult online.
That’s where loyalty rewards come in. With a rewards program, you can easily make your customers the priority by offering an experience inspired by, and tailored to, their needs and desires. The success of any good rewards program lies in understanding who your customers are and building it from their perspective. By putting yourself in their shoes, you can begin to see what attracted them to your brand in the first place and play to those strengths, building out a customer experience that is second to none.
A loyalty program becomes the key to bridging the gap between offline and online customer experiences, but only if done properly.
How to Build a Customer-Based Loyalty Program
If you want to offer a truly customer-based rewards experience, you need to let your customers drive the decisions you make. This is done by considering who your customers are, how they prefer to interact with your brand, and what motivates them to complete a purchase.
You can apply the answers to these questions to three key areas of your rewards program.
Consider What Your Loyalty Points Are Worth
The first question your customers will want to know about your loyalty program is “what’s in it for them?” Regardless of how much they like your brand, they care more about what you’re offering them in return for their business, and the value of your loyalty points plays a huge role in this.
This value should be tied and proportionate to the rewards you’re offering. It should also make earning each reward challenging but attainable. Most importantly, though, this value should be easy to calculate and understand for both you and your customers.
The best way to do that is by offering 1% back on every purchase. Not only is it easy to understand, but it also allows you to build an earning and redeeming structure with a higher perceived value. This works as a very effective motivator that keeps your costs lower.
No matter who your target customer is, this simple to calculate reward-to-dollars spent ratio makes your program look and feel valuable as soon as they sign up.
Strategically Set Up Earning Rules
If you want your rewards program to be customer-based, you need to understand how your customers engage with your brand. Depending on their demographic and purchase patterns, members will want to be interacting with your store in a number of different ways.
From social media to product reviews to purchases, you need to consider how your customers want to engage with your brand. If your target audience doesn’t use social media, don’t rely on that to encourage program engagement! Consider how your customers want to engage and reward them that way.
Whether you’re starting a new program or updating an old one, it’s always best to start with what you know. Keeping your earning rules simple to start will give you room to grow as you reward customers for completing valuable actions. That type of attention is the key to their ongoing loyalty and satisfaction.
Experiment with Rewards
Rewards are the third major consideration when aligning your program with customer priorities. While rewards like discount coupons and free shipping are both highly popular, there are many other ways you can reward customers for their business -- ways that might be more in tune with what your customers are looking for.
This is impacted by the type of program you’re running. If your program is only points, it makes sense to offer more transactional rewards that appeal to the overwhelming percentage of customers looking to save money with rewards. In a VIP program, however, you need to consider that your customers are looking for more than a couple dollars off. In this case, exclusive access and free product rewards might be more appealing.
These considerations are what help you put the customer front and center. Since rewards are intended to motivate your members, they need to be what they consider valuable. This way of thinking is what will ultimately separate you from your competitors, so make sure you get it right!
How to Ensure Customers Are Having a Valuable Experience
While building your program with the best intentions is a great start, you can only really understand if your program is valuable if you’re tracking its success. A rewards program is not a set-it-and-forget-it tool, which means you need to monitor it regularly in order to understand how it is performing.
The trick is focusing on the data that makes sense and shows you what’s actually going on in your program. Avoiding “vanity metrics” and those that don’t inspire action is crucial if you want to effectively and properly measure your program’s value.
Luckily, there are three metrics that can help you effectively take your program’s pulse.
Number of Program Members
If your program’s rewards are appealing and seem relatively easy to earn, people will want to join. This will increase your number of program members, and give you an idea of how valuable your program’s first impression is.
Since your rewards and program earning rules are two of the first things your customers see, a stagnant number of program members will give you the incentive you need to reassess your program’s structure and incentives.
Your redemption rate is calculated by dividing the number of rewards customers have redeemed by the total number of points you’ve issued. People redeem points because they see value in the rewards you’re offering.
If your rewards fit the bill, customers will want to redeem and re-engage with your brand in order to keep that cycle going, making this the most eye-opening metric you could be tracking.
Customers are only willing to refer more customers if they’ve had a fantastic experience with your brand. Based on their first, second, and ongoing impressions of your program, products, and services, your loyal members will share their positive experiences with their friends -- especially if the price is right.
An increasing number of completed referrals is a sign that customers think your brand is valuable enough to share with their friends, and you can bet that your rewards program has a lot to do with that! This, combined with an increase in referral traffic, is a great sign that new customers also find your brand and rewards valuable, as a recommendation from your existing customers was enough to push them to make their first purchase.
Value is an Emotion
At the end of the day, you need to remember that your customers will only find your program as valuable as you make them feel. When customers truly feel valued, they begin to associate that emotion with the brand that made them feel that way. This is the power of an effective rewards program.
The key to this type of success is in your program’s ability to live, evolve, and breathe as a fully integrated part of your brand experience and community. Unless a rewards program is fully integrated into the rest of your brand’s experience and community, it will not truly succeed.
In other words, a rewards program cannot be an add-on.
Evy’s Tree, a California-based fashion brand, is one of the best examples of this idea at work. From the moment they decided to start a rewards program, the Evy’s Tree team knew that it needed to fit into the rest of their customer experience. They considered their entire customer journey and began to consider how a rewards program could enhance and complement their already blooming brand community.
From there, it was easy. Evy’s Tree quickly and effectively incorporated their Who’s Hoo program into high traffic areas of their website and worked it into existing marketing campaigns. Through social media and targeted email marketing, they were able to let their customers know that their program existed without hurting their existing brand image. This allowed them to experience huge success, including a 58% increase in repeat purchase rate!
These types of results are only possible when customers buy into and fully experience the value your rewards program has to offer them. By turning your program’s value into an emotional experience, you have the power to join top merchants like Evy’s Tree with a brand community that is united, excited, and most importantly, loyal.