When people are continuously assaulted with both online and offline adverts, it's understandable for consumers not to notice your messages amongst thousands of information.
And we all know customer loyalty is the key to sustainable growth and a solid competitive edge over others.
The burning question is: How to earn loyalty from the business's existing customers in practice? And What inspires their loyalty?
In this post, we will get closer to the value around the point reward system and the secrets behind a winning customer loyalty program.
Without further ado, let's dive in!
In the past, customer rewards used to be widely misunderstood as cheap and short-term promotion devices with no actual value. Still, many people now get the essence of the reward program wrong.
In fact, rewards have the ability to motivate both new and existing customers to purchase a product or service. Only when rewards are designed to be a part of a loyalty program can they create additional long-term benefits.
When you realize the importance of customer loyalty and loyalty programs to your business, you admit the truth that not all your customers are equal.
There will be some who bring superior profits and long-term value for your company and some not. Apparently, those with higher potential and profitability should enjoy adequate benefits.
In return for nurturing relationships with these customers, things you get are that customers will become more loyal and profitable.
Generating customer loyalty can cost a great deal of money if your purpose is to focus on the short-term benefits. A one-time or short-term reward program indeed changes customers' behavior in a certain way when your rewards are compelling enough.
For instance, a promotion can ask people to buy their product to feature a chance at a 2-day & 1-night vacation in a famous tourist spot. In the short run, your business's conversion rate will increase, but in the long run, it's no better off.
It's important to understand that customers are sustainably loyal to a business only when they see long-term benefits in the relationship with your business.
A loyalty points program is where you create a unique form of currency for customers to earn and spend at your company. In other words, customers will get points for specific actions you set for your program. At the same time, they can redeem these points for discounts, vouchers or products, etc.
A typical example of this is The North Face - One of the most popular clothing & footwear brands around the world.
3 simple steps to be a member of VIPeak
As you can see in the above image, in The North Face VIPeak:
3 VIPeak Rewards levels of The North Face
In short, any loyalty program gives customers a strong incentive to return. Furthermore, point-based reward programs assist significantly in collecting customer data for different marketing purposes (cross-selling, personalization campaign, and so forth).
The strategy behind point reward programs
Reward programs don't stand alone. It needs to incorporate a business's overall strategy and capabilities in order to get sustainable growth.
There are various factors to consider when you decide to invest in loyalty programs. It indeed wastes time and effort since not any loyalty strategy works. It's not just about what gift you will reward your customers. Along with that question, you should also think about:
These questions will be a great starting point for you to come up with excellent loyalty program ideas. Just bear in mind that a successful loyalty program always starts from a well-prepared strategy.
Incorporate with a tiered reward system
A tiered reward system is when you offer different rewards based on each point milestone a member cross. This multi-tiered structure is helpful in increasing member engagement since it adds a level of exclusivity to the program and making them feel special.
You provide your members with a certain number of milestones to strive for. As a result, members will push their way even higher to achieve their desired rank and redeem more valuable rewards.
Some suggestions to make your tiered reward system exceptional:
Moreover, since the higher levels provide better benefits, these programs make your most loyal customers feel the most valuable. They know that the rewards they receive are not available to everyone.
2 tiers in Starbucks rewards program
Starbuck does its best for implementing its point-based loyalty program via 2 main tiers:
Your loyalty program is to appreciate customers for their trust in your brands, not to create annoyance due to the unnecessary complexity of point redemption.
It comes as no surprise that your customers refuse to join your loyalty program if they have to go through several steps to sign up or redeem rewards. So keep your redemption process straightforward and easy to understand.
Though it's essential to avoid complexity for your loyalty program, customers are not equal. That is, you need to make the most profitable feel valued. A simple way to do this is to establish a tier system. Those most loyal ones, as a result, get more privileges compared to others.
3 ranks with benefits of Sephora’s reward system
For example, Sephora - a famous beauty brand, has separated these members into 3 different tires. Obviously, members in the highest tier (Rouge) get privilege benefits compared to 2 left levels.
Personalization is one of the determining factors that establish an emotional connection with customers. In fact, it's no longer a nice-to-have like in the past, but a need-to-have, instead.
Have you ever wondered why Amazon became one of the most popular eCommerce sites around the world? The secret behind its success is personalization:
High personalization on the dashboard of Amazon website
So how can you personalize your point-based loyalty program?
A company's most loyal customers are also the most profitable ones. Plus, as mentioned above, customers are not equal, and a loyalty program is where you nurture the relationship with that long-term customer group.
Thus, it makes sense for you to treat customers with long-term potential in a unique way compared to others.
In other words, you should focus on offering a heightened user experience for your most loyal supporters via your loyalty program, not just simply a gift card to get free items.
You can create a pack of privilege benefits for those who achieve certain point ranks with, for instance:
There're many ways you can do to nurture a long-term relationship with loyal customers. No matter what, try your best to facilitate the repurchase process of customers incorporating various extra benefits.
Even when you create an attractive loyalty program for your customers, it's still hard to succeed without the necessary communication. In other words, customers won't pay attention to your programs unless you announce and promote them on social media or email campaigns, etc.
In the worst case, your point-based rewards program is not only forgotten but also ends up making customers feel less valued. This is a warning sign of failure that no one wants to see.
The solution is to try to keep in touch between your loyalty program and customers. Social media and email are the 2 most effective tools to send your program notifications, thus keeping it engaged with all members.
No matter how you establish your point rewards system, pay attention to the balance point between your rewards and profit margins. Your end goal is always the same: satisfy, retain and nurture the loyalty of your customers at the lowest possible price.
Finally, all loyal customers, over time, become essential building blocks by buying more, paying premium prices, or bringing in new customers via referrals.