How to Create Loyalty Programs People Actually Like
Loyalty programs have been around for ages but thanks to social media marketing firms, they are taking on an entirely new life of their own…at least among those that understand how to properly implement a new generation of loyalty programs. Social media marketing firms are often faced with the challenge of taking old ideas and breathing a bit of new life into them; that is certainly the situation with most loyalty programs. Going all the way back to the infamous “green stamps”, shoppers have always enjoyed the advantage of loyalty programs…but do they actually make sense in modern day marketing?
Why Create a Loyalty Program?
Before getting into the nuts and bolts of how to create a loyalty program, it’s probably a good idea to actually explain why a small business owner would want to have one in the first place. We know from years of research that it typically costs the average business 5 to 10 times more to acquire a new customer than it does to sell to an existing client. As if that statistic alone wasn’t sufficient to convince anyone of the value of a loyalty program, consider this; current customers spend an average of 67% more than new ones! It doesn’t take a rocket scientist to understand that spending 5 to 10 times more money to attract a client which spends less simply doesn’t add up. Now, obviously every company needs new growth but expanding should never come at the price of losing current clients. Instead, keep current clients happily engaged (and spending at their fullest capacity) then add on new clients. One of the best ways of keeping current clients happy is to implement a great loyalty program which rewards clients for continuing to spend, shop and share the great news about your company.
Do Loyalty Programs Work?
Yes! Before writing off loyalty programs as the left-over marketing ideas from a bygone era consider this; nearly every credit card, airline, grocery store and pharmacy in the nation has some sort of loyalty program. What do they know that could help your business? What about marketing companies themselves? Once again, research has found that 2 out of every 3 marketing firms also use at least one loyalty program…and they are in the business of making marketing work!
However, all is not well. According to the 2011 Colloquy Customer Loyalty Census, of the $45 Billion dollars worth of reward points, miles, travel incentives and other items distributed each year, one-third are never even redeemed. While superficially this might seem like no big deal, in reality, it demonstrates a rather severe attrition rate. Unused loyalty points may be due to many causes such as relocation or even death of the client but in most instances, it reflects a change of shopping pattern or lack of awareness regarding the value of the loyalty plan. If clients don’t value the loyalty rewards or find them difficult to use, the entire program may actually backfire. They key is to create great incentives that are easy to use, reward long term clients and promote future purchases.
Not Your Gramma’s Green Stamps!
Great. Loyalty programs work but how do you make them relevant for a digital age and avoid the stigma associated with good old fashioned “green stamps” or even frustrating pharmacy discounts? If you’ve ever had to jump through a million hoops only to find more blackout dates on your “reward” than days in the year…well, you know what we mean. Not all programs are created equal and a few are so complex they actually tend to infuriate the user. So here to help are a few tried and tested methods used by social media marketing and traditional entities both large and small to reward clients:
1. Keep it Simple! The first rule of thumb is to just keep it simple. No complex formula’s needed. As a general rule of thumb, for every dollar spent one point is earned. In general, it’s better to increase the required number of points rather than trying to institute some convoluted process that requires 12.5 dollars spent for every 1 point earned except on Tuesday between 3-9 PM when you earn double points and an extra 10% off all items purchased. Get our drift? If consumers can’t figure it out while standing in the check-out line and talking to their mother-in-law on the phone…forget it! It needs to be simple, straight-forward and sensible.
2. Use a Tiered Reward System. The credit cards understand this approach which is why they start off with small rewards and move all the way into gigantic, enormous ones. Social media is an especially easy way to implement a tiered reward system by inviting various users to join different levels with special savings and promotional offers. Gold, Platinum and Diamond accounts anyone?
3. Charge an Fee. While it might sound a bit risky to charge a fee for a loyalty program there are several precedents to this including one of the most well-known; Amazon Prime Membership! Originally started as a way to save on shipping, Amazon Prime is now known as much for their free library of on-demand movies as the reduced rate shipping fees. So, how would this work for social media? Simple, on-demand exclusive content, webinars, one-on-one encounters and much more are just a few creative ways business owners are using loyalty programs to reach out to their best clients.
4. Partner with Another Provider. Social media was practically made for this next loyalty program; partnerships! Whether you are local or nationwide, partnering with other companies is a great way to create a win-win for all involved. Providing early access to an exclusive event, key discounts to try new product lines or some other promotional incentive allows clients to get more value from their relationship with you while simultaneously providing bigger benefits to your business partners.
Last but not least, if you still aren’t sold on the potential value of creating a loyalty program for your social media clients consider this; the author of the “Loyalty Effect” found that a 5% increase in customer retention leads to a 25 to 100% increase in profit and increased likelihood of sharing positive experiences with friends and family which is the heart of social media marketing.