The dos and don’ts of customer loyalty schemes

There’s a stat that people in the customer service and retention arms of businesses often like to cite – your chances of selling to an existing customer are in the region of 60 – 70 per cent, while your chances of locking in a new prospect are more like five to 20 per cent.

Existing customers are 50 per cent more likely to try your new product than new ones, and if they do they typically spend 31 per cent more. Similarly, it costs five times as much to attract a brand-new customer as it does to keep an existing one, while increasing spending on customer loyalty schemes by five per cent can yield gains in profits by anything from 25 per cent to 95 per cent.

And yet, many companies funnel vast amounts of resource into attracting new business compared to nurturing their relationships with existing customers. 44 per cent of businesses have a greater focus on client acquisition than on retention, while only 18 per cent are more focused on retention. Only 40 per cent of companies and 30 per cent of agencies focus on both equally.

The numbers paint a pretty clear picture – securing and strengthening relationships should be a massive priority across all aspects of a business, particularly in the customer service and marketing departments. One tried and tested way to do that that has become more effective than ever in the age of the internet and data-driven marketing is a customer loyalty program. Members of loyalty schemes spend up to 18 per cent more than other customers, and that’s just one reason to implement one The understanding of customer behaviour that can come from the data you might acquire can be a huge boon to your processes and purchasing. Here are some of the dos and don’ts of customer loyalty schemes.

DO keep is simple

A system that’s overly complex can be a frustrating experience for customers that ultimately alienates customers more than it attracts them (this post explains how badly Chipotle got it wrong with an overly complicated rewards scheme that ended in disaster). Make your scheme easy to join and, once customers are in, make it simple to navigate and follow. Overly complicated routes to claiming rewards can seem like they have been actively designed to stop users from ever cashing in.

This goes doubly if you’re a physical business looking to get customers to actively sign in to a scheme. If a customer has to remember to go online (or send something away by post) to register for your program then they already have one more barrier to entry in front of them than they would through a digital only scheme.

DON’T plan your scheme without knowing your customers

Don’t plan your program without understanding who your customers are, what they want and what their needs are. Your customers are only going to feel a sense of connection with the program you build if it properly takes them into account.

Find out what they want from a program, how they like to communicate, which digital platforms they are using, what their points of pain are. Armed with this knowledge, you’re in a great position to create a loyalty program that drives engagement.

DO make your scheme relevant to your customer’s interests and your strengths

So, hopefully you already have a solid understanding of your customers. At the very least you know that they are interested in your product. It makes sense to make use of that knowledge to make sure your customer values what you are offering through your loyalty scheme.

BingoPort is an example of a brand that understands its customers and offers a scheme that matches up with their wants and needs as well as BingoPort’s business goals. Players sign up through the website, which is already their main point of engagement with the company. They earn points whenever they are using the service, accumulating points that can be exchanged for rewards.

Rewards include consumer goods such as books and DVDs, home and garden items and technology products, but they also include more of what the customer came to them for in the first place – points and cash rewards that can be used on bingo sites.

It’s common sense really – recipients of a coffee shop loyalty card don’t want discounts on flights, they want coffee. Play to your strengths and your customer’s interest – your product.

DON’T be the same as everyone else

There are thousands of customer loyalty schemes out there. There’s a pretty good chance that you’re a member of several yourself. There’s a good chance, in fact, that you’re a member of a few you’ve already forgotten about.

If the program you’re offering is the same as those of every other business, it won’t stand out and be competitive in an already crowded marketplace. For ideas on how to do this, see the point about and dial in on your customers’ interests and what you do best.

DO keep the interest going

Part of the reason you might not remember a number of the schemes your part of is their failure to keep you engaged. Two thirds of loyalty schemes are dropped by consumers inside their first 12 months.

Keep your program evolving – pay attention to what your customers respond to, what makes them click a link or make a purchase, and continue to grow your scheme accordingly. Also, engage them with regular (but not excessively persistent) communication to tell them about the changes that you’ve made.

DON’T rely on a customer loyalty programme while neglecting other aspects of customer service

89 per cent of companies see customer experience as an important factor in pushing customer retention and loyalty, yet it’s surprising how many pump resources into a loyalty scheme while simultaneously offering poor customer service.

While a customer loyalty scheme can be a tentpole of your offering to existing customers, if it’s the only tentpole then the tent won’t stand up. Every aspect of your business needs to at least have one eye on customer retention.

Don’t make it difficult for your customers to talk to you – offer multiple channels through which they can contact you. If the nature of your business means that you have a physical, customer facing space then that’s a bonus. It’s easier to make someone feel valued through a face to face interaction with another person than it is through faceless communication channels. If you’re running a small business then this is magnified – your greatest strength is your ability to get to know your customers on a personal basis. A customer loyalty scheme can augment that experience, but it can’t make up for poor customer service.

While remote businesses lack that advantage, they can make up for it to some degree by making it as easy as possible for customers to get in touch with a customer service operative, with a minimum of chatbots and automated phone services running interference and generating frustration.

Once you’ve got these basics nailed down, going the extra mile to reward your customers with a meaningful, well thought out loyalty scheme can magnify a customer’s likelihood of sticking with you massively.