OptCulture Presents: A Retailer’s Guide to Selection and Use of Customer Loyalty

Benji Gault - April 26, 2019

A loyal customer base is a crucial ingredient for a successful retailer. However, the ability to enlarge this base and track their activity can be difficult. We have created this guide to help you understand the benefits of customer loyalty, select a loyalty program, and how to nurture your loyalty program in order to ensure growth and expansion of your loyal customer base.

What it Means to be a Loyal Customer

Loyal customers spend, on average, 60% more per store visit and shop at a frequency of 90% greater than non loyalty customers. These customers are also 70% more likely to share information about the store to friends and bring in new customers. While these loyal customers usually make up only 20% of a stores total customer base they are responsible for around 80% of the stores total revenue. To acquire a new customer can cost anywhere from 5 to 25 times more than retaining an existing customer. In order to make the highest return on investment and to ensure longevity, marketing resources should target turning new customers into loyalty customers.

Creating Loyal Customers

There are several ways to create loyal customers, some of which you are probably already doing. Simple things such as knowing your market’s demographics, understanding their needs and wants, exceeding these expectations and delivering uncompromised customer service are priority for any business wanting success in the retail world. While customers will definitely enjoy your quality products and superior service; 84% of global consumers say they want to visit stores where they are a part of a loyalty program.

Choosing a Loyalty Program

Now that you are aware of the benefits of implementing a loyalty program its time to narrow down the choices to what would be best for your company or business.Important to consider when making these decisions are what types of rewards will appeal to your customers? What are the goals of the loyalty program? Repeat business? Increased spending? New customers? Growing your database? What is the margin that you would like to experiment using and what is the average profit margin for merchandise and goods? Here are a few ideas to get you started.

  • Currency vs. Points - using a points or currency based program that equates to a dollar amount off is the most popular option. It allows the customer flexibility in choosing the items they prefer and receiving discounts on those items. Knowing your profit margin and having an idea of what margin you can play with is an important factor in any type of store credit loyalty program. It is also important to decide whether you are going to include sale and discounted items in your loyalty program. Will discounted items count as purchases that accrue loyalty? Are these discounted or sale items eligible for further discounts using loyalty rewards? If you choose a high level of reward, say 6-10% back on purchases, you will most likely want to exclude sale and discounted items from earning loyalty rewards or from being eligible for further discount using rewards. With implementing a high level of reward and excluding sale and discounted items the risk of affecting profit margin is minimized.  By choosing a low level of reward, rewards can be earned or used for either regular price purchases or sale purchases. By not excluding sales items the program is quicker and easier to explain, a trait that both customers and your sales associates will appreciate.While these types of programs are the most popular of loyalty programs, it is not the best fit for all businesses. This type of program is geared towards a business that encourages frequent visits and short-term purchases.   

  • Tier based program - This is a type of store credit points based system where more points equate to a higher percentage or tier of reward. For instance every dollar spent a customer receives one point.They can redeem 150 points for $10 off their next purchase or they can hold onto their points until they reach the next tier of points which allows the customer to redeem 300 points for a $25 discount on their next purchase. By running a tier based program customers are motivated to visit frequently, spend more, and hold on to their points in order to redeem at a higher level.

  • Access to promotions - instead of just a percentage based points or currency program consider giving access to promotions for special e vents and services just to loyalty members. This is a great way to give back to loyalty members and make sure those members feel unique to the program. You also have the ability to combine a store credit rewards program with a promotional program by offering double points redemption for a limited time, such as for one weekend only. Running an event like this a great way to drive loyalty traffic to your business or store.

  • Discounts on specific items or services- providing loyalty members with discounts on selected items or services is a great way to appease loyalty members as well as help move selected inventory. This can also be applied to services as well such as free fittings or instructional classes for members.

Implementation of a Loyalty Program

So you have an idea for what type of loyalty program would be best for your business, now how do you go about introducing the program to your customers and enrolling members? The most important step now is training staff on how to enroll customers and how to clearly explain the program in a way that gets customers excited and motivated. Your program should appeal to customers wants and needs and be simple enough that staff can quickly and clearly explain the benefits of being a member. To spread the word of your new loyalty program, staff should be sure and ask all customers “Are you already a member of or loyalty program?” and if they are not a member, offer to help them enroll. Your business’ website is a great place to announce a loyalty program as well as through the use of social media which will allow others to share this exciting news. 

Big Data

Loyalty programs need a channel for communicating the benefits of a rewards program. The most popular avenue is through email communication. SMS or text is also an option but tends to see a higher level of opt outs than programs using email to communicate. How do you get a database with a healthy number of email addresses to market your loyalty program and promotional events to? A great way to do this is to offer a digital receipt. In keeping with the social movement of reducing pollution, offer for your customers to go paperless and receive their receipt via email. Another way to collect email addresses is to offer a newsletter sign up that makes a customer eligible for a one time discount or promotion.

Continued Customer Engagement

Great! Your business now has a solid loyalty program in place and customers are enrolling! Things are looking good. Yet with all the new customers and a growing customer base how do you continue to keep this base actively engaged? At this stage communication and education are both essential to continue to excite customers. Studies have shown that customers are prone to what is best described as a honeymoon phase. This initial phase where the customer is interested and excited about a product or service which is followed by a phase where the product or service is attained and the customer loses excitement or interest in that purchase or service. Continuing to educate the customer about the products and services and how or where to use your merchandise will help keep them interested. Consider keeping your customers up to date on new merchandise releases, local events, locations to use their products as well as education on what makes your products superior. Keeping communication open will allow for critical customer feedback to not only help improve your products and services offered, but also your marketing and sales processes.

Going the Distance

Your company offers the best merchandise available on the market, offers outstanding customer service, and now has a loyalty program that is rapidly growing. Continuing to monitor your loyalty base and identifying those that have stuck around the longest will allow you to better target them in marketing efforts and prioritize them in the sales process. Maintaining to be an active part of the community through participation in social media and forums, hosting local events or workshops allows customers to discuss how they are using your products and services. Employee culture is essential to longevity in the retail world. Your employees are on the front lines interacting with customers daily and ensuring that your employees are enthusiastic and excited about the products and services offered will translate directly to customer excitement. Continued investment in premier level employees and product development combined with an intelligent use of loyalty and promotional programs is a sure fire way to provide your company with a clear path to success in the world of retail. Here at OptCulture we provide your business with the tools and consultation to streamline these loyalty and promotional programs in order to allow your staff more time to focus on customer interaction and sales processes. OptCulture is constantly evolving and has helped numerous clients achieve higher levels of customer engagement and establish loyal customer bases. We are confident we can do the same for your business.