How you build the programs that build a loyal customer base

How you build the programs that build a loyal customer base

No business can exist without a customer base and revenue streams!  This is a basic fact of life, however building a loyal customer base can be challenging because few people visit an online store with the intention of purchasing its products or services right away – they have to be persuaded into parting with their hard earned money.  However, the task is not impossible, and with the right advice, any business owner can build the customer loyalty programs that will keep his or her business successful for years!  These tips are the subject of this article.

The statistics speak the facts:  it costs a business between 5 – 25 times more to acquire new customers than it does to sell to existing ones, and existing customers spend 67 % more on products and services than new customers do!  Business owners want to build effective customer loyalty programs for these reasons!

The definition of customer loyalty

Customer loyalty is defined as the willingness of a customer to make repeat purchases of a brand.  Customer loyalty is derived from the great experiences, satisfaction, and value of the products or services customers receive from the transaction.

Additionally, loyal customers tell those they know about the efficacy of certain brands and their good experiences; this is word of mouth advertising which is by far the most effective form of advertising in terms of acquiring new customers who will be loyal.  Customer loyalty is the backbone of sales for retail store owners in America with 40 % of online sales coming from loyal customers who only comprise 8% of total site visitors!

It is obvious then that any company needs a customer loyalty program which is defined as a rewards program that companies offer to repeat customers as an incentive to get the customers to continue to do business with them!  These programs consist of a combination of free merchandise, rewards, coupons, and the advanced release of products.

Customer loyalty programs and point systems

The point system is the customer program that a lot of companies, and online companies in general, use most often to generate a loyal customer base. With this type of program, loyal customers earn reward points for repeat purchases.  These points can lead to product discounts, free products, and/or special treatment.  Customers receive these points after having made a certain money amount of purchases.

Companies using point-based loyalty programs should make the stipulations for these programs simple.  Additionally, these types of programs work best with businesses that encourage frequent purchases which are short term.  A good example of such a company is Sephora.

Customer loyalty programs and tier systems

Companies can use a tier system to strike a balance between the rewards that customers want to and can earn.  These systems reward initial loyalty and encourage more purchases.  Tier system programs offer customers small rewards for making initial purchases and encourage repeat purchases by increasing the value of these rewards as customers increase purchase amounts, and frequency – loyal customers, in essence, move up on the loyalty ladder with this system.  Tier systems are valuable because they give customers long-term value and satisfaction for their purchases.  These programs are ideal for businesses with high commitments, and higher price points.  Companies in the airline, hospitality, and insurance industries are perfect candidates for these types of reward programs.

Customer loyalty programs which charge an upfront fee

This type of a customer loyalty program can actually be quite effective in allowing customers access certain key benefits by paying a nominal fee to bypass common purchase barriers, thereby leading their satisfaction and loyalty.  These types of programs are effective at discouraging cart abandonment which occurs 75.6% of the time in the retail, travel, and fashion industries.

The driving factor behind cart abandonment is shock at high retail prices which is caused by the high cost of goods and/or services after taxes and shipping costs have been factored in.  Amazon found this type of program to be very effective in discouraging cart abandonment.  This type of customer loyalty program is most effective for those businesses whose sales depend on frequent and repeat purchases.  With the case of Amazon, customers paid an upfront fee to avoid high shopping cart prices – this lead to increased customer loyalty.

Non-monetary customer loyalty programs which are built around the customers’ values

Businesses can effectively design customer loyalty programs only when they truly understand what they value in brands, and the sense of worth and shared value they derive from these brands.  Some surveys have found that customers are loyal to beliefs and not brands or companies.  The key to building these types of customer loyalty programs lies in providing customers value in non-monetary ways, thereby ensuring that the businesses can connect to those in their target audiences in unique and novel ways.

One example of a company that builds such a program is Toms, the great online shoe retailer.  One of Tom’s missions is to provide shoes to communities needing them most.  Its objective is to sell products that “improve lives.”  Therefore the company promises that it will help a needy person every time a shoe is purchased.  The company initially donated shoes to the needy but has since expanded its program to ensure that the needy have access to clean water, and good maternal health care.  Toms partners with other organizations that provide these services with its themed products to carry out its mission and objective.

The result of this non – monetary program is customers who are satisfied with Toms noble community service initiatives – the company has built a strong and loyal customer base as a result.

Conclusion

While this is by no means an exhaustive list of customer loyalty programs, it does show that companies can build up a strong base of loyal customers who will maintain revenue streams through repeat purchases by being creative and innovative in the incentives they offer to those customers who do repeat business with them.  These companies also benefit through the extra sales that they gain from word of mouth advertising which is a positive externality of their customer loyalty programs!


Author Bio

Manish Kumar works as a content marketing head at a leading  SEO company – Tangensys. He has been working in this field for some time now and knows how to balance creativity and technical side of content. He loves making new content marketing strategies for his customers.

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