The Ultimate Guide to Customer Loyalty in 2017Your field guide to making more money by increasing customer happiness
Table of Contents
Why Customer Retention Retention vs. acquisition What is loyalty really worth?
Why most loyalty programs fail Customer experience shortcomings Lack of data
Big Data for Brick and Mortar Personalization Stop customer churn Identify VIP customers
Feedback rules all Getting responses that matter Why Net Promoter Score is the industry standard
Your customer loyalty adventure awaitsIf youre looking to drive more revenue this year, youre in luck. Weve crunched the numbers and theres a surefire way to do it and it all starts with the customers you already have.
We analyzed over 50 million transactions, and we compiled the most interesting information about customer loyalty and guest behavior. Dollar for dollar, its always worth investing in incentivizing loyal behavior but how do restaurants, retailers, car washes, and other brick-and-mortar businesses go about doing it?
Consider this your field guide.
For every 10 customers who walk into your business, only 3 of those customers are likely to return. Restaurants, retailers, car washes, and other brick-and-mortar businesses invest money into advertising to new customers, but when those new customers only come in once, its hard to justify the cost of acquiring a new customer. Thats why it costs 5-7x more money to acquire a new customer than to drive an additional visit from an existing customer. Dollar for dollar, its more lucrative to invest in your existing customer base especially
when, according to research from Harvard Business School, increasing customer retention rates by just 5 percent increases profits by 25 percent to 95 percent. A customer who already knows and loves your brand might be willing to come by again just from a personalized message. This is why targeting people who've already visited your business is easier and more cost effective.
Why Customer Retention?Part 1
Bottom line: New customers are expensive.
It costs 5x more to attract a new customer than it does to retain an
Why does retention have such a dramatic impact? Because, in addition to being a better value, loyal customers behave very differently than first-time customers in three main ways:
1. Higher spend: According to Small Business Trends, customers spend less on their first purchase because they see new brands as "risky." After building a relationship, customer spend grows alongside trust. Eventually, loyal customers spend 67% more than new ones
2. Increased Frequency: Customers involved in a loyalty program increase their visitation frequency to a particular restaurant by an average of 35%.
3. Better word-of-mouth: Retained customers are more powerful sources of referral business. A Bain & Company strategy brief reported that, on average, a first-time apparel shopper refers three people. After 10 purchases, that same shopper refers seven customers. Referred shoppers spend more money and are more loyal themselves.
Customers enrolled in a loyalty program visit 35% more frequently
Part 1: Why Customer Retention?
What is customer loyalty worth?
2017 Goal #1: Start building a customer retention engine to keep your customers
Why Loyalty Programs FailPart 2
Despite knowing how valuable loyal customers are, most loyalty programs dont actually do much to inspire loyalty. They make customers jump through hoops, they arent fun, and they dont always deliver measurable results for merchants. We once heard of a restaurant who had purchased 10,000 plastic loyalty cards for their POS-based loyalty program and after theyd handed them out, only 300 were registered, and only 76 of them ever ended up being used.
The idea behind loyalty programs remains sound; give customers a reason to come back and recognize loyal customers with a reward. However, there are the main failures with traditional loyalty programs:
1. It demands too much of the customer: Making a customer carry around an additional piece of paper everywhere isnt just inconvenient it flat-out doesnt work. While the typical consumer is a member of more than 27 different loyalty programs, they actively participate in less than half of those. Why? Because nobody is carrying around 27 loyalty punch cards!
2. It requires the customer to take an action every single time they transact: Thats a poor customer experience when trying to build brand loyalty, you should aim to make the customer experience BETTER to increase repeat visits, not worse. Yet, brands continue to come up with complicated schemes like QR codes, additional hardware at the POS, or even making customers write their phone numbers on the back of their receipts.
3. It fails to differentiate between customers: If I go to my favorite coffee shop every single day, I should be treated differently than someone who comes in twice a month. This is why some of the most successful loyalty programs in the world are status-based, like airline and hotel programs: They recognize that their big spenders drive a disproportionately high amount of revenue, and treat them like rockstars.
Loyalty Pitfalls to AvoidPart 2: Why Loyalty Programs Fail
2017 Goal #2: Get rid of friction when it comes to your loyalty program. Make it
effortless for customers to use.
Data is power but most offline businesses are seriously lacking in actionable customer data. When it comes to getting to know your customers better, data unlocks all of the secrets: who your customers are, where they like to go, how much they spend, and what types of marketing will convert. Online retailers have been using big data to help them build brand loyalty through extremely targeted messaging and advertising. Its time that restaurants, offline retailers, and car washes start using big data to their advantage.
Big Data for Brick and MortarPart 3
In the online world, businesses have the opportunity to develop very deep relationships with customers [by] observing their purchase behavior over time so that you can get individualized knowledge of the customer Then the customers are going to feel a deep loyalty to us, because we know them so well.
Jeff BezosCEO Amazon
So, how do offline businesses gather customer data? One great way is through a digital customer rewards program that ties to customer transactions. Without one, your customers are open season for competitors. With a good one, youll have your single biggest competitive advantage. Here are some of the most profitable ways to utilize customer data
Use your data intelligently (and profitably)
Part 3: Big Data for Brick and Mortar
Personalize every interactionIn a world where customers receive countless promotions every daythe only way to cut through the noise is personalization. And the only way to improve personalization? Better data. Email blasting your entire mailing list with an offer for 20% off of their next purchase isnt a smart marketing technique in fact, broadly discounting product can diminish the perceived value of your product. Send your customers timely, personalized communication when it matters. Send them offers when it counts, not just whenever your company is planning a generic email blast.
Stop Customer ChurnCustomer data can help you prevent once-loyal customers from slipping through the cracks.
Identify at risk customers by using your data to understand which customers were once loyal, but are now less frequent. You could do this by tracking customer behavior over time, and then setting up systems that alert you to any significant change in behavior.
CALCULATE CUSTOMER CHURN AT YOUR BUSINESS merchant.thanx.com/churn-calculator
Launch customer winback to convert at-risk customers into regularsIn a world where customers receive countless promotions every daythe only way to cut through the noise is personalization. And the only way to improve personalization? Better data. Email blasting your entire mailing list with an offer for 20% off of their next purchase isnt a smart marketing technique in fact, broadly discounting product can diminish the perceived value of your product. Send your customers timely, personalized communication when it matters. Send them offers when it counts, not just whenever your company is planning a generic email blast.
Identify and retain your VIP customersOne of the primary functions of a loyalty program should be to identify and retain your very best customers. ALL businesses have their superstar customers, but few can identify exactly who these big spenders are.
With 66% of sales coming from just 25% of customers, take action to identify and segmenting out VIPs the top 10-25% and then develop targeted VIP marketing that ensures these loyalists never churn out of your business.
LEARN HOW TO LAUNCH PERSONALIZED VIP EXPERIENCES thanx.com/vip
2017 Goal #3: Start collecting customer transaction data and running automated
marketing programs with it.
Customer Feedback is a compass for your businessHappy customers drive most of your revenue, so its important to be able to keep your finger on the pulse of customer sentiment. As your company grows, it becomes harder and harder to gauge the happiness of each and every