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How to Use Loyalty Programs to Reduce Customer Churn and Boost Revenues

How to Use Loyalty Programs to Reduce Customer Churn and Boost Revenues

Blog post about loyalty cards

Virtually every online retailer offers a loyalty program these days, and people are perfectly happy to sign up for them (at least the free ones) in droves.

Unfortunately for many e-tailers, though, consumers don’t use every program equally.  According to The 2013 Maritz Loyalty Report, which surveyed over 6,000 consumers the average shopper has joined 7.4 loyalty programs. However, members actively use only 63% (i.e., 4.7) of the programs they join. And 53% had stopped using at least one program’s benefits within the previous year, although only 7% had formally cancelled a membership.

Loyalty Card Membership

On the plus side, 57% of program members say they’ve changed when and where they shopped to maximize their rewards.  Communicating well is vital for a program to experience this kind of success.

In the same study, 94% want of shoppers expressed that they like to receive communications from programs, and 57% “always read” them. 93% of members who strongly agreed that they received “relevant” communications were satisfied with the program. Only 20% of members who strongly disagreed with that statement said they were satisfied. Only 12% said they received too many communications.

These are critical insights for your loyalty efforts.  After all, the more satisfied your committed customers are, the more likely they are to keep shopping with you.  The question, then, is:  How can you optimize your loyalty program to maximize member engagement and participation?

The most important key to success is data collection and analysis.

You can’t measure, replicate, or improve on your results if you don’t know what’s driving them.  Therefore, your first step is to establish rigorous, reliable, 24/7/365 monitors on every element of your loyalty campaign and every action your members and other customers take (or don’t take, as the case may be).

The next essential step is continual testing of every last campaign facet to identify the best ways to engage your customers and thereby achieve your primary loyalty goal(s).  While those goals differ from retailer to retailer, many loyalty campaigns rely on “multi-motivators” — an array of enticing deals designed to influence shoppers’ behaviors — to drive audience participation and activity.

Loyalty Card

Particularly (but not exclusively) in paid loyalty programs, the multi-motivators are valuable, ongoing offers that encourage people to keep using the benefits (and therefore stay in the program) once they join.

For example, Amazon Prime members enjoy fast and free delivery on an unlimited number of Amazon purchases, as well as ongoing entertainment benefits. Another example is FreeShipping.com, whose subscribers enjoy 10% cash back, free shipping, and stackable coupon savings on multiple purchases at over 1,000 online retailers, along with additional savings opportunities.

Multi-motivators can and should take many forms, of course, depending on your specific needs, goals, and audience.  During and after the selection process, though, there are several things you can do to leverage your multi-motivators to enhance your loyalty program.

The first requirement is to choose your multi-motivators wisely and well.

Unless you’re a large, multi-category retailer with realistic hopes of dominating the online retail space, you’re not necessarily trying to attract (much less please) every shopper in the country.  Instead, you should define your program goals clearly, make sure they’re measurable, then select the action drivers that are best suited to achieve them.

Be sure to test all of your motivators again and again, and across every targeted demographic group, to confirm that they’re performing to your expectations.

A large part of that success will depend on where and how they reach your desired audience, so you also need to identify the right mix of channels, messages, and vehicles.  Test anything and everything, and be sure your program members, customers, and prospects can see and access your offers via their mobile devices; smartphones and tablets now play a major role in consumers’ shopping processes.

Throughout it all, keep your eye on the ball:  The ultimate purpose is to find the most effective ways to contact your best customers and prospects and, more importantly, to influence their behaviors to meet your needs.

Then Personalize Your Offers

Customers practically expect retailers to know their personal preferences these days.  Use your data collection and analysis to target each program member with specific offers that match her or his known interests.  Over time, you’ll also learn how individual members respond to different vehicles and channels, allowing you to send them customer-specific offers in their preferred format(s).

Tailoring the motivators to each shopper’s proven behaviors ensures that they receive relevant offers, which increases the chances that they’ll respond positively — and boosts your program’s value in their eyes.  Additionally, anticipating their wants and needs will enhance their experiences with your brand, a vital step in the loyalty-building process.

Be Sure to Refresh Your Program 

Every relationship changes, including your relationship with your customers.  As they grow up, get married, buy homes, have kids, change jobs, retire, or simply find new hobbies or pastimes, some of their interests will grow, wane, or move in entirely new directions.  At the same time, changes in the marketplace and/or society in general will create new trends and needs that can also affect their lives and therefore their purchase decisions.

Again, an ongoing analysis of their purchases and other website activities will be crucial if you want to recognize and properly respond to their evolving patterns of behavior.

Be sure to update your program’s multi-motivators (especially the targeted offers) to match each member’s individual lifestyle and latest desires.  By regularly testing and modifying your multi-motivators, you’ll also keep your program fresh, helping to ensure that it continues to serve the changing interests of the public at large.

Expand Your Reach 

The online shopping audience is vast and getting bigger, and the competition for its loyalty is growing along with it, if not faster.  Your ability to survive and thrive in the coming years will therefore depend in large part on your ability to increase your customer base.  To do so, you’ll need to continually test an assortment of multi-motivators that will attract a wider and wider range of customers.

By segmenting program members according to their different interests and behaviors, you can pinpoint the sorts of offers that appeal to specific demographic groups.  The further down you drill into each segmented group, the more detail you can uncover about their motivations and desires.  With that information, you can adjust your marketing plans and build an actionable strategy that will deliver not only more customers but also more loyal customers.

Stay Socially Engaged 

Your customers have more platforms than ever before to share their feelings.  This is great if they’re happy with your products and/or motivators; they’ll enthusiastically share their opinions far and wide.  However, if a particularly expressive customer happens to find fault with your company, you can be sure that he or she will also broadcast those negative thoughts on every virtual corner available.

Therefore, you need to have a strategy and action plans ready to go at a moment’s notice.  Set alerts on every platform imaginable so you’ll learn of potential risks to your brand as soon as possible, and make sure you react to adverse events quickly but rationally.  Responding to a complaint with a rash comment will obviously backfire, but so too could trying to resolve the issue with an overly generous motivator; other members may chime in with similar complaints and/or chafe if they don’t receive similar offers.  (Don’t expect any resolution, positive or negative, to remain secret.)

Customer Engagement

To paraphrase an ad from the last millennium, if it came in a bottle, every retailer would have a great loyalty program.  Attracting and retaining a robust, growing base of satisfied shoppers requires a tremendous amount of work, though.  The competition for the best customers is increasingly fierce because the stakes are so high; the long-term success of your company may very well depend on it.  Determining the most effective multi-motivators, using them properly, and refreshing them to continually enhance your loyalty program can help tip the scales in your favor.

Tom Caporaso is the CEO of Clarus Marketing Group, which builds and customizes subscription programs, including FreeShipping.comReturn Saver, and others. Tom has over two decades of direct marketing experience, specializing in e-commerce, subscription, and custom loyalty programs.

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