Customer Loyalty Marketing Series Part 1: Where to Begin

Our third guest post comes from a well-respected leader in marketing circles. Margaret Murphy, President at Olson, kicks-off a series on customer loyalty by walking through the basics of a loyalty program – such as outlining objectives, success metrics and key considerations as marketers start or redesign their offerings.

When it comes to the power of customer loyalty, there are many metrics that should make you take notice.

  • A 5% increase in customer retention can increase a company’s profitability by 75%. [Bain & Co.]
  • 80% of your company’s future revenue will come from just 20% of your existing customers. [Gartner Group]
  • Attracting new customers will cost your company five times more than keeping an existing customer. [Lee Resource Inc.]

Customer loyalty programs come in all shapes and sizes. And, in today’s world, companies who don’t want to start a program can still focus on driving loyalty through strategies and tactics that may be less programmatic and more experience-based. The caveat to note when focusing on experiences with no programmatic structure is you do lose some consumer buy-in. Consumers like to know what they get and when. Programs offer that structure and the incremental results are proven to be higher as well. Whether your goal is to start a customer loyalty program, or simply begin to understand your customers better, the first question to ask is:

What are my objectives?

It seems like a ridiculous question, but amazingly, many businesses want to deliver a unique experience and don’t really know why. Objectives may range from things such as customer identification, share growth, competitive threat or retention. Customer identification is a big benefit of loyalty programs that many companies don’t fully appreciate. Getting your customers to self-identify can save millions in marketing spend and enable a much more targeted communications plan, including channels such as direct mail.

After you have determined your objectives, the next challenge to tackle is:

How will we measure success?

How are you going to demonstrate to colleagues in executive management, operations, finance and customer service that the effort is worth it? Outlined below are key topics to explore and define. Developing clear rationale for a program or loyalty initiative will enable you to better engage your organization and deliver an incremental return to your bottom-line. Things to think about as you’re looking at starting or redesigning your customer loyalty program:

Study your customers’ past behavior.

Many companies focus on year-over-year analysis to understand how their business is trending. Travel industry programs focus on business travelers, who are likely to continue behaviors year after year, making the trends easy to understand. However, for another industry, such as specialty retail, the same is probably not true.

Consider the electronics consumer who spends $6,000 on a full home theater setup. Are they going to do that again next year? Probably not. So be sure to analyze the data through the lens of the customer lifecycle, not simply year over year.

Identify the right benefits.

The right benefits will be a combination of what customers say they want, what assets you have to work with, how much growth or improved retention you can drive among those in the program, partner relationships, and what you can afford to deliver based on the projected number of members. All of these factors are interdependent and should be evaluated together.

Execute consistently.

If customers are going to give you their personal information, it’s because you have promised them something in return. Maybe it’s exclusive offers, expedited services, unique products, a better brand experience—whatever it is, you must be true to your word. And you must engage the member. As you think through your communications plan, focus on the lifecycle. What experience does the member get once enrolled? During the first 45 days? After the first purchase? If they haven’t transacted in a while?

A combination of direct mail and digital communications has proven to deliver the best results. Focus on your customer segments as you plan the channels of communication. Your best customers want more than just a daily email from you. They want a tangible welcome kit, a real invitation if you’re going to invite them to an exclusive event, or something that enables them to feel recognized by the brand for being a valuable customer.

Whatever you provide, target it. Relevancy is crucial in today’s 24/7 world and loyalty programs enable you to know who your customers are, what they buy, what they do and what they may like. Show them you know them. Why wait? Begin today!

Blog Author

Margaret Murphy
Margaret has more than 20 years of experience in marketing services. She assumed the role of President at Olson in February 2011 where she works internally and externally to integrate Olson's 520-person staff, seven offices and expanded capabilities. She has helped many Fortune 500 companies focus on building deeper relationships with their key audiences by identifying, developing and delivering insight-driven marketing strategies and initiatives. Click here to learn more about Margaret and Olson 1to1.

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