5 reasons your customer loyalty programme is broken (and how to fix it)

/ 13 August 2020

Put simply, customer loyalty can be described as a measure of how likely your customers are to do repeat business with your brand. A loyal customer typically provides a high lifetime value, is less easily swayed by price and can be a rich source of referral business. With that in mind, it is not hard to understand why cultivating relationships with existing customers makes sense for brands hoping to supercharge overall business growth.

Let’s not underestimate the financial importance of developing a successful customer loyalty strategy; the rewards are indeed great. In a recent study Harvard Business School estimates that a 5% increase in customer retention equates to an increase in overall profitability between 25 and 95%.

If the case for building an effective customer loyalty strategy is so abundantly clear, why is it that brands so often get it wrong? Here are 5 common mistakes.

  1. Offering inadequate rewards

We’ll make no bones about it; rewards will make or break your loyalty programme. If the rewards your brand offers do not serve to incentivise your customers, they’re pretty darn useless.

The best rewards needn’t be the most expensive. Think innovatively! Rewards could come in the form of exclusive offers, content, early access to sales, points or badges as well as monetary discounts.

  1. Treating all customers the same

Whether you’re hoping to encourage your customers to make a new purchase, to refer their friends, or to renew a service or subscription, the most effective, most motivating rewards are the ones that your individual customer actually wants.

Your existing customers expect you to know them, and to be treated as individuals. After all, you know their purchase history, their age and gender demographics, location, preferred channel and you probably even know they’re celebrating their birthday! Nothing exposes a blanket customer loyalty approach more clearly than being offered a completely irrelevant and impersonalised incentive.

The rewards your loyalty programme offers to incentivise loyal customers must be relevant, and personalised if they are to truly motivate.

  1. Failing to analyse loyalty programme data

Ignore data at your peril. 

Analysing customer data generated via your loyalty programme will help you to optimise your incentive strategy. It will help you to understand which incentives work best to motivate your customers and the learnings can then be applied in order to make improvements and to optimise your customer loyalty programme moving forward.

  1. Poor customer service

Customers have higher expectations than ever, and 93% of all customer service teams agree with that statement (Forrester).

Good customer service is one of your best customer retention tools. Get it right and your customers will remain loyal, make repeat purchases, leave great reviews and make recommendations to their friends and families. But get it wrong and your customers will run for the hills, and you won’t get a second chance.

As well as the obvious need to deliver a good face to face customer service at every touchpoint, creating steps and using technology to create an automated customer experience that feels human can be a great strategy to help streamline the overall experience.

  1. Failing to measure customer loyalty

You will never be able to improve customer loyalty if you are unable to measure it.

You’ll need to find meaningful metrics that track loyal behaviours, which could include elements such as the net promoter score, repurchase ratio, customer lifetime value, customer engagement score and your customer loyalty index. Only by tracking customer loyalty will you be able to monitor how the retention rate increases and decreases and turn that data into actionable insights.

Developing a successful loyalty programme helps organisations to acquire and retain new customers, build loyalty and create long term advocacy.

Find out more about how brands can use gamification techniques to:

  • Increase acquisition
  • Build and emotional connection through fun and rewards
  • Maintain a high level of engagement, trust and loyalty

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