Customer Portfolios' Blog

3 Questions to Determine if You Are Ready for a Loyalty Program

J&M Surprise&Delight.jpgOur data shows that on average 75% of customers never make a second purchase. That means most customers are one and done shoppers. One way brands attempt to address this is by creating a loyalty program to increase the number of repeat customers. However, jumping into any loyalty program without thinking about your customers and business goals can lead to a lot of wasted time and money.

The first step is to define loyalty through a customer-centric lens. We define loyalty as a greater than 50% chance to purchase from a brand in the future.  Having truly loyal customers isn’t as easy as having them join a points program. For a customer to be loyal, they prove that they are more likely than not to continue purchasing from your brand. For most brands, the loyalty threshold is at 4 or so purchases. Loyalty programs are a way to help achieve that threshold, but only if they are created and implemented with the customer in mind. For more information on customer loyalty, check out our blog post.

Below are three questions to ask your team to determine whether your brand is ready for a loyalty program:

  1. Do you have a full view of your customer and their journey? - This question needs to be addressed before you start to implement any customer-centric loyalty program. Connecting disparate data from all touchpoints online and offline will give you a full customer view that allows you to track customers, their purchase behaviors, and even their behaviors before and after they make a purchase. Having a full 360-view of your customers will help you create a loyalty program centered around your customers and their behaviors, so the program will easily fit into their lifestyle.
  2. Can you send offers that are targeted and relevant for each customer? -Your customer data needs to be robust enough to send the right message, at the right time, targeted to each individual customer. Once you have a full view of your customer, do you have the technology in place to personalize communications and offers for each customer? If not, you risk sending irrelevant messages and offers that can potentially alienate customers and cause them to stop purchasing from the brand.   
  3. Will your loyalty program encourage customers to grow their current behavior? Take a good look at the plan for your loyalty program. Whether a customer has purchased one time or 100 times, the program should still motivate them to make another purchase and grow their future value by make another purchase or going cross-category. This is where most loyalty programs fail. Instead of encouraging incremental behavior, today’s loyalty programs encourage existing behavior by rewarding customers for action they already take, instead of encouraging them to take further action that increases their lifetime value such as going cross-category or segment. A truly customer-centric loyalty program will motivate each customer to take incremental action, helping grow their future value as customers.

Success Story: How Johnston & Murphy Increased Loyal Behavior and Revenue

One of our clients, Johnston & Murphy sees 70% of their revenue generated from repeat customers. To reward these customers and encourage customer loyalty, they implemented a “Surprise and Delight” program, where their best customers received a $50 gift card as a thank you for being so loyal and encourage customers to make a next purchase. This gift card increased customer spending of those received it by 51%, and increased cross-category conversion by 71%. If they had not first taken the steps to organize their data and become truly customer-centric, they would never know who their Best Customers were, and they wouldn’t know enough about these customers to create a program that drives loyal behavior.

In sum, by analyzing your customer data to make your loyalty efforts more customer-centric, you will see an increase in repeat purchases, customer future value and ultimately, your revenue.

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