How Customer Loyalty Programs Can Help with Cash Flow
by Kelly Clay
Building a successful business means not only attracting customers, but retaining these customers to establish brand credibility and stable cash flow. By appreciating and leveraging customer loyalty, you can ensure the customers you attract continue to choose your business. Fostering customer loyalty also empowers you to control when they'll be spending money with you - as well as how much.
"Customer loyalty is when your customers choose you over a competitor because they feel loyal to you," says Joanna Lord, CMO of BigDoor. BigDoor, based in Seattle WA, powers loyalty campaigns behind some of the biggest companies in the world.
"At BigDoor we talk a lot about customer loyalty being reciprocal, where it mutually benefits a customer and a brand," Lord says. "The brand is rewarded through engagement, purchases and social advocacy, and the customer feels appreciated through great user experience, beautiful touch points and rewards."
The competitive edge of loyalty
As a brand, customer loyalty is a big advantage in today’s hyper-fragmented, noisy ecosystem. Lord explains that there are more players than ever before, and all of them have compelling, unique value propositions.
"If a brand invests in loyalty sooner and spends its resources engaging their customers in valuable ways, the customer will not only be loyal, but they will share and advocate on the brand’s behalf," she says. "With word of mouth and referrals being a key platform for product and company discovery, customer endorsements mean more than ever before."
She stresses that customer loyalty isn’t just important; it will literally mean the difference between those brands that succeed and those that don’t. Customers are more empowered than ever before and they want to stand behind, buy from, and endorse the brands that put them first.
In fact, as businesses look to acquire new customers, they will likely be looking to younger demographics - especially millennials, which are prime potential customers to lock in. PunchTab, a multi-channel loyalty and engagement platform, surveyed more than 1,000 U.S. millennials in late 2013 and early 2014 and found nearly 75% of 18- to 33-year-old, female consumers engage in brand loyalty program. The demographic's willingness to join loyalty programs indicates that millennials can be encouraged to keep returning to the store as a customer with cash to spend.
The right timing for loyalty
This data also demonstrates that brands must know how to focus on customer loyalty - and when.
"Historically, companies only invest in loyalty after a purchase is made," Lord says. "The main purpose was to encourage a second purchases or possibly higher priced purchases. But today’s loyalty marketing can do that and so much more."
This means brands that invest in loyalty at the moment of discovery see the benefits throughout the customer lifecycle, not just post-conversion. These benefits include more customer data collected, deeper engagement, more sharing and advocacy, as well as more and higher valued purchases.
One brand that realized it needed to invest in loyalty, not just after a purchase, but at the moment of discovery was Yamaha. BigDoor worked with Yamaha in 2012 to help the big brand double-down on customer loyalty, launching their loyalty program in October of 2012. With the program, Yamaha offered not just paying customers, but all of their fans a place to interact with each other, share experiences with the brand, and earn rewards for completing incentivized quests.
The community flourished, with a surge in new program members signing up over the first two weeks. Additionally, Yamaha saw a 31% lift in customer engagement per customer by leveraging customer loyalty. These are the types of numbers that can result in more leads, as well as more repeated conversions and sales from the same customer.
Of course, businesses don't need to be as big as Yamaha to see a benefit to using loyalty programs. Manta’s and BIA/Kelsey’s joint report “Achieving Big Customer Loyalty in a Small Business World” found that when smaller businesses established a loyalty program, 64 percent reported it has been been effective in driving repeat customers.
Even though your marketing team may be busy, it's important they understand the potential impact of prioritizing a loyalty program along with everything else they do. As Lord says, "They have a lot competing for their attention and resources, but the truth is, investing in loyalty can actually help across the board. All marketing campaigns get a boost when there is a loyalty campaign or loyalty product set up and running."
At BigDoor, they have seen brands that prioritize loyalty over other initiatives make more money, show higher engagement per user, and increase customer retention.
"Consumers want to support the brands that put them first, and they will simply stop supporting, visiting, and buying from the brands that don’t value their loyalty," says Lord. There are undoubtedly challenges to implementing loyalty programs - especially if you're a smaller business. These challenges can include a lack of upfront resources to establish a program, a lack of staff to manage the program or a lack of engagement when first launching a program.
However, almost all businesses that take the time and money to invest in loyalty programs - regardless of the size of the business - not only eventually see stable revenue, but also huge ROI. Lord explains that on average, they see user engagement increase by over 60%, social advocacy increase by 500%, and revenue per user increase anywhere between 10% and 20%, depending on the campaign.
"This data doesn’t lie. Customers want to discover great content and experiences and they want to be rewarded for their time and support," Lord explains. "Loyalty programs and campaigns are the best way to do this in ways that enhance the customer journey."
About This Author
Kelly Clay is a freelance writer from Seattle with a focus on social media and technology trends. Her work has been featured on Forbes, VentureBeat, WearableWorldNews, LockerGnome, and TechNewsDaily.
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