Using loyalty to build strong relationships with your best customers

By Mark Maclure, Founder and Managing Director of specialist loyalty agency, Stream.

Whilst a customer acquisition strategy is important, if you are losing customers out the other end then the effort will have been pointless. With the well-known metric that it costs five times more to win a customer than it does to keep a customer, why are brands not putting more effort into implementing an effective customer retention strategy?

As we emerge from lockdown, the companies who have developed a well thought out, integrated customer retention and loyalty strategy will be the ones who thrive.

“When it’s over, companies will be judged by what they did during the ‘war’, how they treated their employees, suppliers and customers, by who shared and who hoarded.” (Mark Carney, Bank of England governor)

Mark Maclure
Mark Maclure

This all sounds very dramatic, but the relationship between brands and consumers has changed and it’s no longer just about offering the best price or the best service. Customers are invested in brands; they develop an emotional relationship and want to believe in the vision, practices and messages that they hear and see. The relationship must be built on trust and empathy. When Direct Line stated in their advertising that they wouldn’t be found on comparison websites, they were boldly announcing that customers could trust Direct Line to be offering best prices direct via their own website thus negating the need for customers to visit comparison sites. They were aiming to remove friction and make the process simpler and better for the customer. Yes, they will have lost some new customers but they will have built trust, empathy and value with their existing customers.

Over half of UK consumers state that Loyalty rewards are an important factor when choosing whether to stay with a brand. A loyalty strategy designed around customer retention can work hand-in-hand with a customer acquisition strategy to ensure that you are not losing customers whom you have fought hard to acquire.

Before you implement a customer retention strategy you need to make sure that you have segmented your customers, so that you can be confident that you are channelling investment to the right audience. Focus on your high potential and high value current customers. There are five key principles in designing an effective customer retention strategy that will foster long-term loyalty:

  1. Ease of earning

Customers need to clearly understand how they can earn rewards. Engagement with a loyalty programme increases the closer a customer gets to reaching a goal, so making sure that customer reward levels are achievable is key.

  1. Ease of redemption

Rewards must be quick and easy to redeem, without any high level of effort on behalf of the customer. Reducing friction in your programme will lead to better long-term engagement and brand advocacy. Why not use your existing customers to form a key part of an acquisition strategy?

  1. Reward choice

There are no hard and fast rules around rewards, as these are dependent on the programme. As loyalty appeals to both our emotional and rational conscious, it is important to have a mix of hard and soft benefits that appeal to your customers. You must have a mix of rewards that give customers something to aim for, as well as something that they can redeem quickly.

  1. Maintain excitement

Loyalty programmes must evolve or they will slowly wither. You want to keep your programme refreshed, whether that is by introducing new rewards or introducing new tactical campaigns overlaid onto the base programme. Introducing ‘surprise and delight’ rewards can be very powerful. A chance to win-as-you-spend or a birthday treat can result in the perceived value and memorability of the brand being amplified.

  1. Communication and engagement

Effective communication is the key to the success of any loyalty programme. It is important to ensure that customers understand the programme and what is being asked of them, as well as the value of what they are being offered. One of the key drivers for many companies in starting a loyalty programme is the amount of data that it can provide you with. Clever use of this data allows you to create a personalised suite of communications, from points statements and reward reminders to goal push emails and programme update emails.

Loyalty programmes reinforce desired behaviour and are a great way of building an emotional relationship. Loyalty bridges the gap between the emotional and rational sides of our brain. It gives rationalisation and reason to our emotional desire to engage with a brand.

“The essential difference between emotion and reason is that, while reason leads to conclusionsemotion leads to action.” (Calne, D. Within Reason: Rationality and Human Behaviours. Vintage Books, 2000)

Engaging in a long term loyalty solution which focuses on your high current and high potential customers–in other words, your best customers– will create relationships that last, and that ensure your customers have no reason to go elsewhere.