Why Customer Loyalty is Pivotal for the Post-Covid 19 World
As we stare down the barrel of an upcoming recession, whether that’s V shaped, or U shaped, customer’s discretionary spending may be limited in future. Even those that have maintained employment, may be more wary about spending or have re-evaluated their priorities during lockdown.
YouGov is currently conducting research on what consumer sentiment will mean for the economic recovery. There are no firm conclusions yet, but Amelia Brophy, Head of Data Product at YouGov UK stated in a recent CBI webinar that: “People are feeling okay about their own finances, but not feeling good about the general world. If they were going to get a windfall now, they would save it rather than spend it.”
If we assume consumer spending may be reduced, at least over the short term, it’s more important than ever for brands to make sure they create deeper connections with their customers and develop initiatives that will engender customer loyalty. Whatever money they are spending, you want your brand to be top of mind, whether they’re spending online or in store. If you’re a brick-and-mortar only retailer, you’ll have the added issue of trying to convince customers it’s safe to return. Incentives offered through a loyalty programme may be one way to entice them back to store.
Why Is Customer Loyalty Important?
Customer loyalty can be defined as a customer’s willingness to return to a business due to the delightful and remarkable experience they’ve had with that brand. Ultimately you want to build a legion of happy customers – happy customers spend more money, more often. Research conducted by Frederick Reichheld of Bain & Company showed that just a 5% increase in customer retention can increase profits between 25-95%. That’s significant.
There are a number of initiatives that businesses can implement to help improve the customer experience including a review of your user experience, a 360 evaluation of your brand experience or making sure your marketing communications foster customer engagement and deliver meaningful experiences. Doing a good job in these areas will improve your customer experience and is likely to deliver more repeat customers. Introducing a loyalty programme is another more “concrete” way of building up a loyal customer base which provides both a reason for customer to shop more frequently with you and also a framework to predict revenues and customer lifetime value.
How Will a Loyalty Programme Grow My Business?
According to Nielsen, 84% of customers say they’re more likely to stick with a brand that offers a loyalty program. Plus 66% of customers say being able to earn rewards actually changes their spending behaviour. A loyalty programme is simply a rewards programme that a brand offers its customers to encourage loyalty and repeat business in exchange for rewards, vouchers, VIP experiences or priority booking.
The benefits of a loyalty programme include:
- Customer Retention
- Rewarding repeat purchases provides an added incentive to shop with you over a competitor. However, a loyalty programme isn’t just about points, it needs to be designed with a strong understanding of who your customers are and what will encourage them to repeat purchase and engage ongoing with your brand.
- Increased Lifetime Value
- Members of loyalty programs typically spend up to 18% more than other customers. Building a loyalty programme which incorporates tiers will provide an added incentive for customers to increase their spend.
- Advocacy & Word-of-Mouth
- Customer advocacy is a very cost effective way of driving acquisition. Incentivise recommend a friend schemes to promote positive recommendations and grow your customer base.
- Cost efficiency
- It costs you five times as much to acquire a new customer as it does to retain a current customer, therefore focusing on customer retention is key to reducing marketing costs, increasing ROI and ultimately business growth.
- User-generated content
- Reward loyalty customers for reviews and ratings on your website or social media channels to encourage (hopefully!) positive comments from happy customers which will, in turn, help with the decision-making process for new customers.
How to Implement a Loyalty Programme
There are numerous loyalty programme strategies you could employ but the main principle is to keep it simple, so your customers understand what they’re getting and make the sign-up process simple. Customer understanding and engagement is critical to the uptake of your programme and its ongoing success.
Over our 18 year heritage, we’ve designed multiple loyalty programmes and built technology solutions designed specifically to implement powerful loyalty programmes that drive results. We’ve also built up some impressive case studies in the process. Such as Morleys where we drove over 20,000 loyalty customers within 6 months – contributing over 40% of sales. Or Wetherells who saw a 14% increase in revenue since our loyalty programme refresh with loyalty customers contributing an ATV 66% higher than non-loyalty customers.
Our Wallet technology also allows customers to save their loyalty card on their phone which can be scanned at checkout, rather than handing over a physical card. This will be an important hygiene factor in the post-lockdown world.
Get in touch to discuss how we can design a loyalty programme to drive growth for your business.
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