How to Implement a Next-Generation Loyalty Program to Supercharge Customer Retention
One of the keys to attracting and holding onto customers is incentivising their loyalty to your brand.
Once you’ve built a customer base, you might think the hard work is done - yet retention is an ongoing challenge for many businesses. The average retention rate in e-commerce is just 38%.
Customer loyalty programs give your customers a reason to keep coming back to your brand to unlock discounts, access to unique products, or other perks. However, to entice savvy consumers, you need a robust programme that accommodates various desires.
Building a next-generation customer loyalty programme means tapping into consumer behaviour trends to understand what your customers are most excited about receiving from your brand.
What is a Next-Generation Loyalty Programme?
Loyalty programmes have been around for years as a way of tackling the issue of customer churn. While in the past, the programmes may have consisted of blanket discounts and generic perks, they have evolved over time to offer customers a much more personalised experience.
Epsilon research shows that 80% of customers are more likely to make a purchase when brands offer a personalised experience.
Personalisation should be a cornerstone of your loyalty programme, as it’s more or less expected these days. Whether you’re in hospitality or retail, your customers want to see offers that are relevant to their interests.
(Image Source: Gartner)
The data you collect from your email marketing and other forms of information capture should inform how, when, and what you offer your customers as an incentive to keep them around.
A next-generation loyalty programme should also cater to various sales channels to account for different customer profiles. It isn’t enough anymore to offer in-store loyalty schemes alone, you need to diversify with online offers and app programmes.
A study shows that brands with strong omnichannel customer engagement retain, on average, 89% of their customers, whereas there’s an average of 33% customer retention for companies with weak omnichannel strategies.
Types of Loyalty Programmes
Customer loyalty programmes provide a huge scope for maximising revenue and capitalising on existing business. According to Bain & Company, companies can expect to see their profits rise by 25% to 95% when they increase customer retention rates by 5%.
The first thing you need to think about when implementing a next-generation scheme is which type of programme you want to offer your customers.
Points-based
A points-based loyalty system is self-explanatory: customers earn points for taking certain actions and engaging with your business in different ways. This could be registering for your email list, downloading your business app, or spending money on your products.
Subscription
A subscription gives your customers the opportunity to access additional perks through a monthly fee. For example, anyone is free to use Amazon to buy products, but Amazon Prime users get faster delivery, access to Prime Video, and many other benefits.
Tiered
A tiered system is often associated with credit card companies. The more premium the tier, the more credit a customer may have, along with other perks not available to other tiers.
How to Build Your Own Loyalty Programme
Creating your own next-generation loyalty programme is a worthwhile use of company resources if you’re looking to expand your customer base and retain existing customers.
But where do you start?
Set Goals
First, you’ll want to get your team together and plot out your main goals for introducing a new type of loyalty programme.
During this planning and goal-setting phase, consider:
- Who your customer avatars are, and how you’ll appeal to their interests
- Which metrics do you want to improve, eg LCV (lifetime customer value) or retention rate
- What sales channels do you want to use to roll out the loyalty programme
Choose your Technology
Next, based on your initial discussions, research the best technology to use to host and deliver our loyalty programme.
There are a number of options available to you, including:
- POS systems - Traditional point-of-sale systems use in-store hardware to process orders and give you customer data which you can use to offer rewards for customers shopping in store.
- EPOS - Electronic point-of-sale systems are far more versatile, and allow you to visualise your customer data using software. You can more easily interpret customer behaviour trends and set up loyalty programmes.
- CRMs - CRMs are software solutions that let you manage your customer information in one hub, so you can pull data from elsewhere and get key insights to inform your loyalty programme.
- Loyalty management software solutions - Tailor-made solutions for setting up loyalty schemes, these software solutions give you the most options but you’ll need to invest in a dedicated solution.
Determine the Rewards
No loyalty scheme is complete without enticing rewards.
When thinking about your new loyalty programme, consider what your customer profiles are most interested in based on their past behaviour and any trends you’ve identified from historical data.
Think about how your reward system will work and what type of loyalty programme you want to set up.
Evaluate the impact of introducing gamification to the process too, whereby you use leaderboards, challenges, or surveys to get more customer interaction in return for rewards.
(Image source: Zippia)
Market the Programme
Now, all that’s left to do is promote your loyalty programme.
The primary goal here is to educate customers on what they could get or what they’re missing out on.
In some cases, it might be a no-brainer - for example, customers could save money if they pay a monthly fee to have free grocery deliveries rather than paying individual delivery fees every time. In others, you’ll have to get creative to convince your customers that it’s in their best interests to sign up for your loyalty program.
Use a combination of social media posts, emails, blog posts and videos to inform your customers and inspire them to take action and sign up for your loyalty scheme.