According to Inc., 65% of marketers have implemented a loyalty program, and for good reason. Current customers spend, on average, 67% more than customers who are buying from your business for the first time. And acquiring those new customers costs 5 to 10 times more than selling to a current customer.
It’s quite clear just how valuable your loyal returning customers are to your business now, and in the future. While direct mailing tactics or a seasonal email campaign can keep your current customers interested, a loyalty program is the most strategic way to keep them interested and spending long after the holidays are gone.
Determine Your Customers’ Needs
The first step in creating a loyalty program is determining what your customers need. These needs may vary depending on the time of year; for example, the holiday rush is a lot more stressful and time-consuming than it is to shop for March birthdays. Figure out what your customers need from your company to get them through the holidays in one piece.
· Be sure you’ve researched and developed an in-depth customer profile for your company. Are your customers young adults, middle-aged moms, or retirees? Each group will have different needs from a rewards program, so know which one you’re working with.
· Know how your customers use your product or service, and then determine how you can add value to what your customer is buying. Holiday retail rewards could include free gift wrapping, free shipping, or extended terms on product returns.
· In “The Loyalty Effect,” Fred Reichheld claims that a 5% increase in customer retention can result in a 25 to 100% increase in profitability.
Offer Actual Value
In order to turn new customers into returning customers through a loyalty program, you need to offer them something with actual value. A points system that creates unattainable goals or a promotional game they have no chance of winning will frustrate your customers and can cause them to drop out of your program, which could then potentially drive them away.
· If you offer a points-based program, keep it simple: allow customers to earn a free item for every $50 spent, or give them $10 off for every $100 spent. For a holiday promotion to bring in more sales, consider doubling your rewards until the end of the holidays.
· If your products tend to be purchased less frequently, or your services aren’t conducive to a points-based system, you can implement a tiered system instead that increases rewards over time or with more purchases. Offer each tier special holiday rewards, move lower-tier customers up a level for the holidays, or give new program participants a special gift for joining during the season.
· No matter what kind of loyalty program structure you choose, it needs to provide customers with attainable, valuable rewards that they can redeem quickly and frequently.
There is a limit to how many rewards and discounts you can offer your customers on your own. Collaborating with another company can enable you to offer additional rewards beyond the scope of your own business and capitalize on the holiday shopping season.
· Coalition programs are strategic partnerships formed to increase customer retention and company both for all partners involved. The coalition can last for the length of the holiday season, or become a permanent partnership.
· If you understand your customer’s needs, you can find other companies that serve your customer and would be valuable partners in a coalition program.
Customer loyalty programs increase customer happiness and retention by offering them rewards and extra services they can use during the holidays. Whether you offer a coalition program, a points system, or a tiered rewards structure, make sure that it adds value to your customer relationships during the holidays and all year long.
Megan Webb-Morgan is a web content writer for ResourceNation. She writes about small business, focusing on topics such as business sales. Follow Resource Nation on Facebook and Twitter, too!