- Are you the CEO or Marketing Head of a business who is looking to start a Customer Loyalty Program?
- Do you know about the various kinds of rewards you can offer to your customers in a Loyalty Program?
- Have you looked at segregating your customers into tiers to help you create individual loyalty and reward programs?
When Customer Loyalty Programs first burst onto the scene roughly fifteen years back, most experts dismissed them. This was because these reward and loyalty programs were considered to be a cheap marketing gimmick.
However, rather than disappearing from marketing terminologies, customer loyalty programs have increased in popularity. From airlines offering frequent flyer miles to restaurants rolling out 1+1 bargains, we examine what everyone wants from a customer incentive program.
In this article, we are going to cover the following-
- Meaning and definition of customer loyalty programs
- What customers want from a loyalty program
- Segregation of customers and specialized loyalty offerings
- The future of customer incentive programs in the business landscape
Customer Loyalty Programs: Meaning and Definition
In very simple words, a customer loyalty program is a marketing strategy that promotes repeat purchases from the brand. The strategy intends to make existing customers connected to the brand and its offerings.
If the product or service that is offered by the brand is great, customers already value the brand. However, the challenge is that there is always competition among different brands for the same set of customers. This means wooing your customers with something extra!
For example, a burger chain that offers an excellent burger knows that there are so many others that do the same. The question then for its marketing team is- how can we provide something extra to the customer in addition to the quality?
This is the genesis of a customer loyalty or incentive program. Incentivizing purchases act, subconsciously on the minds of the customers who are always looking for better deals. With digitization, it has become possible for businesses to increase the scope of these programs.
What do Customers want and prefer Brands to do in Loyalty Programs?
In this section, we are going to look at the major types of rewards that customers look for in these programs-
- Reward Points-
The way Reward Points work is simple. For every sum or monetary value that the customer spends on the product or service, they get some reward points. For example, if they spend $200, they get 20 reward points. The fixing of the value in points can differ from brand to brand.
These reward points hold a set of values, mostly in monetary form. So, 20 reward points can become $20. The customer can then redeem the same the next time they buy a product or avail a service. This effectively means getting a major discount on the next purchase!
- Freebies with Purchase-
If you are a customer that is under a brand’s loyalty program, you can get additional freebies with your purchase. For example, if you are a loyalist of a tech brand that manufactures television sets, you can expect a freebie like a sound box being thrown in.
No matter what industry or niche you operate in, you can always create such reward programs. Yes, the costs need to be factored in, but ensuring repeat purchases is what brands should aim for. This is a simple, uncomplicated way of executing a customer incentive program.
- Buy-One-Get-One (BOGO) Offers-
This kind of reward program is something that the food industry excels at. If you buy one dish, you get the other one for free! There are terms and conditions involved as brands try to package their offerings according to what suits them best.
Just like the freebies mentioned above, this is also a simple, yet effective way of running loyalty programs. A spin-off on the BOGO is getting the second product at a heavily discounted price as compared to the first one. However, this still looks like a value-for-money proposition.
- Set/Established Discounts for Customers-
Gross discounts set on bills are another form of rewards that customers under loyalty programs are entitled to. Supermarket chains are famous for offering set discounts for their customers. This can be 20% or 30% of the total bill amount.
Even after buying products that are discounted on the aisles, you get this overwhelming discount at the counter. For the customer, this is special, as they feel that they have got the best pricing deals from the supermarket. This helps in promoting monthly grocery buying.
- Launches, Getaways and Exclusive Gifts-
While every business might be engaging in customer loyalty programs, some do not want to call it that. A good example of the same can be luxury brands that do not use words like ‘discounts’, ‘offer’, or ‘freebies’ to maintain exclusivity.
However, for them promoting customer loyalty means invitations for exclusive new product launches. Or, it could mean giving their customers getaway packages and holidays. A luxury auto brand like Lamborghini flies out its customer to exotic locations for driving programs.
While these are the five major types of rewards that brands offer, many permutations of the above are possible. Customers under loyalty programs are communicated about Black Friday Deals, or, upgrades (flight tickets), or even special jackpots.
How do Brands Segregate Customers for Loyalty Programs?
Every brand wants to put in place a loyalty program for its customers. However, not all customers are equal. Someone who already has three Mercedes cars, cannot be put in the same program as someone who has just purchased their first one.
This means for brands, segregating their customers into specialized tiers is important. In this section, we are going to talk about this in detail. You can also think of this section as a way to help you structure your customer loyalty programs.
- Third Tier: The Entry Point-
For a brand, these are the customers that are first-time buyers of the brand’s products or services. Make no mistake, they are very important for the brand. Providing them with a loyalty program can help in converting them into repeat buyers. Here the focus is on offering some freebies with their purchase. Car companies, for example, offer accessories like seat covers, additional free services, and a glorious delivery experience.
- Second Tier: The Middle Point-
At the second tier are customers who are repeat buyers and have already availed of the benefits of the loyalty program. Constant engagement and communication with this lot of customers are very important for the brand. Primarily because, if they have had a positive experience, they can get other friends, family members, and colleagues into the brand as well. This means that this tier can become a driver for the entry point clientele.
- First Tier: The Exclusive Point-
At this point, a customer is no longer dealing with a sales rep. He or she is directly being looked at by the regional heads. They are brand loyalists who have become ambassadors promoting the brand. They stand entitled to the best deals, offers, and discounts. For brands losing customers after they have reached this tier is the most disheartening bit. These customers generate repeat purchases for the brand and promote it in multiple ways.
The Final Word: The Future of Customer Incentive Programs
Increasing digitization has made it possible for brands to create engaging loyalty programs. Emails, social media, and Search Engines have become the new promotional drivers of these programs. Connecting with the customers and requesting them to avail of benefits is easier than ever.
Even though everyone dismissed incentive programs when they first launched, the truth is, they are thriving more than ever. Even the biggest luxury brands have put in place programs that are intentioned to make their customers feel special.
Software and technology have made it possible to create records and data about customers. Brands can specifically study patterns and see what loyalty programs work and what doesn’t. At the end of the day, it is providing a seamless experience for customers.
If you are a brand that is looking to start or optimize its customer loyalty program, we feel this is a resource that will help you. If you have any other questions on customer incentive or loyalty programs, feel free to raise them in the comments below.