December 6

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Customer Loyalty Programmes

By Georgia Davis

December 6, 2019


Customer Loyalty Programmes

Customer loyalty programmes are tried, tested and well-proven. Here in the UK, supermarket giant Tesco's ‘Clubcard’ and the Boots ‘Advantage Card’ are Britain’s two biggest loyalty programmes, and they both do a good job of helping those big companies to keep their customers.

Customer loyalty programmes offer a couple of big opportunities: 

The first is that it opens the door to data collection. Think about all the data Tesco collect on their Clubcard:

  • who you are
  • where you live
  • how much you spend
  • how often you shop
  • what you buy
  • where you shop
  • whether you redeem money-off vouchers
  • even whether you use your own shopping bags

Although they all offer rewards to the consumer, these loyalty schemes are primarily designed to generate masses of customer information for the businesses that operate them. 

Loyalty, Database and Direct Response Marketing

As I see it, there’s little point in implementing a loyalty system without using the incentive of being part of the scheme to encourage your customers to hand over their details, allowing you to build up a database that you can then market to.

I’ve been in plenty of hairdressers, clothes retailers and coffee shops that hand you a card, you collect stamps up each time you go in, and you get a free cup of coffee, or haircut or whatever, once you’ve collected X stamps. I suppose at least they are trying to do something to keep their customers loyal but can’t help thinking that they’ve got it all wrong. The only people that they’re rewarding are already loyal customers, who were going to buy 10 cups of coffee anyway, so these shops are actually waving goodbye to profit, completely needlessly.

MUCH better to collect customer data and then use that data to market to your customers, turning one-off or irregular customers into loyal, regular, high-spending customers.

Collecting Data

  • Make the data collection part of every client dialogue “are you a VIP member?” “would you like to be?”
  • Make sure your data capture form isn’t too intimidating or time-consuming
  • You can always capture more information later
  • Make sure your customers will want to give you their details - 'WIIFM' – ‘What’s In It For Me?’

The Loyalty Part

In its most basic state a loyalty scheme simply offers an incentive to a customer in exchange for spending money with you. The more they spend, the greater the reward. It doesn’t have to be a monetary reward, so you can be a little bit creative here, but the most effective kind of incentive for most businesses to offer is a ‘good as cash’ reward, which the customer can only redeem with the business. 

Using the Data

Once you’ve built up your customer database, there is plenty that you can do with the information.

Whether you choose to communicate with your customers by phone, text, email or snail mail, the premise remains the same. You should be keeping your business ‘top of mind’ in your customer’s heads, and giving them reasons to spend with you again.

The Explosive System used a combination of email, snail mail, and text messaging, to generate a response rate that is typically between 12% and 20%.

One reason why the response rate was so high is that along with name and address, they also asked for birthday, spouse birthday and anniversary date when we captured the customer’s information. These three dates are when someone is very likely to be thinking about visiting a restaurant, along with mother’s day, father’s day, valentine’s day etc, so they make sure the customer is contacted a week or two before that key date. Making sure they are ‘top of mind’ at just the right time.

Personalisation

One thing that I haven’t really explained here and feel like I need to, is just how highly personalised each customer communication is. Every email, postcard and letter includes multiple mentions of the customer’s name, usually building it into the image on the front too (spelt out in knives and forks, for example, or in icing on a birthday cake). That makes these communications much more interesting, and much more of a talking-point than boring old letters.

Reporting

It’s really important that you have adequate tracking and reporting systems in place so that you know your return on your investment in your loyalty scheme.

Let’s say that your loyalty scheme cost you £5 per member per year to run, that would be great if you knew you were bringing in £100 revenue per member on average, but even better if you could see that 20% of your database were contributing nothing.

At a stroke, you could either stop spending money on these customers, reducing your costs by 20% and increasing your average revenue per member, OR you could hit them with a specific mailing designed to bring them back into your business. 

If you don’t know your numbers, you can’t take either action. Which is why reporting is such a key element of any loyalty/database marketing system.

Management Report 

Every Explosive business received a detailed report each month, which explained:


    • How much has been spent on the loyalty scheme
    • How much revenue it’s brought in
    • What activity has taken place, ie postcards, letters, emails
    • What each element cost
    • Individual ROI’s for each element
    • Individual response-rates for each element
    • Most valuable customers, by spend in month
    • Number and value of Reward Certificates mailed
    • Number and value of Reward Certificates redeemed

Overall ROI for the month.

This figure varies between businesses, depending on how long they’ve been working with the Explosive team and how much activity they’ve asked us to do on their behalf. In the early months, as the business is building up its database and getting a feel for what’s going to work for them, their ROI is lower but as the business matures, and their loyalty marketing is refined, we’d regularly see four-figure ROI’s, i.e. the business is getting more than £10 of revenue for every £1 spent on the system.

Need help automating your marketing?

As touched on in this article, there is no point collecting the data if you're not going to use it. But keeping up with the data and outreach schemes can be time consuming, and often not the most productive use of your time. That's why EXELA use Keap to automate are marketing efforts. Give us a call now to find out what Keap does and how it can help you save time, effort and money too.

Georgia Davis

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