Tips to improve customer loyalty an profitability

This is how to increase customer loyalty and profitability in 2020

Last Updated on

Running a customer loyalty programme is one of the most effective initiatives that a company can take to retain and increase the profitability of their existing customers. With the right strategy, a customer loyalty programme can also help improve customer service, product quality and customer experience. 

InMoment’s 2018 US Retail CX Trends Report states that, “77% of customers say that they have maintained long-term loyal relationship with the brand that they trust, some for 1o years or more.” Simply put, loyalty programmes play a major role in increasing customer loyalty and profitability and maintaining excellent customer relationships. 

Maximise the value of your data

Customer data and insight are the bedrock of any customer loyalty or engagement programme. By correctly leveraging customer insight and data, companies can deliver more effective and personalised marketing which engages the customer and increases customer loyalty and profitability. Contrary to the backlash against retargeted ads and personal privacy, customers prefer tailored and more meaningful messages to their generic counterparts. It just makes for a better experience.

Staying on the right side of GDPR whilst also delivering tailored content and experiences is the holy grail of marketing. But if you can also add in an incentivised loyalty and retention programme into the mix, you are sure to increase customer loyalty and profitability.

Brands need to respect the data that they hold and use it strategically to deliver an individualised customer experience that meets the needs of each customer. By gathering data and shaping it into actionable customer insights, brands are able to optimise their customer experience, innovate their products and improve customer retention.

Boots Advantage Card continues to be one of the most established loyalty programmes in the UK today. Over the many years that it has been operating, Boots have strategically used the data from their 17.1 million active members as a core business asset to increase basket size, customer lifetime value and retain their customers for the long term. By observing the purchase and transactional behaviour of their customers, they deliver individualised product discounts, promotions and recommendations that are most relevant, which helps to drive repeat purchase as well as building brand loyalty. 

Create real customer value

Ideally, a brand’s goal is to create and deliver individualised customer experiences. Ground zero for this is to firstly deliver tailored communications and messaging. 

By combining data analysis and using advanced RFM/RFV modelling, brands can deliver one-to-one messages and customer experiences that are relevant, increase customer loyalty and profitability. This approach allows brands to perform advanced customer segmentation which can drive long term marketing performance.

Source: Mathan Systems

A deeper understanding of each segment will allow brands to provide fully tailored customer engagement across marketing, sales and customer service to deliver a bespoke customer experience. 

Using RFM modelling Costa Coffee utilises loyalty programs to help them define important customer segments based on customer buying behaviour. The frequency, recency and cash value of a customer is evaluated to help Costa know who their VIP customers are. The metrics do not merely represent the total amount spent because there are customers who spend a lot on one time purchases. Instead, the top value segments are categorised depending on who is consistently visiting and spending in their stores. This type of data segmentation allows Costa to provide “exclusive” services to their VIP and encourage a long term relationship. 

Loyalty is for the entire organisation

Simply put, the entire organisation needs to be aware of the brand’s customer loyalty programme – not just the marketing department. Real value can be added to the customer’s experience when employees understand the organisation’s loyalty vision and goals. Customer service staff play a key role in creating long-lasting brand advocacy among customers.

In the retail industry, how employees interact with customers is a crucial element for building brand advocacy and long term customer loyalty. In-store employees who are often in a customer-facing role can help by getting direct feedback from customers and finding out about their shopping experience. Having a robust system to capture this customer feedback (by store, time, department and customer) is invaluable and can help shape strategic direction and inform how the customer experience is optimised.

Carphone Warehouse capitalises on its employees to get information from their customers. Employees are incentivised to log feedback from customers in exchange for recognition and rewards. This forms part of a wider performance measurement and management programme and creates a healthy sense of competition across their retail stores. With this additional stream of data being generated from the ground up, customer loyalty starts to become the responsibility of all staff across the organisation.

Source: Salmat North Sydney

Relevant 1 to 1 communication

Data-driven marketing and customer experience may be the new buzz-words on the lips of marketing directors but the age old mantra of giving the right person the right message at the right time is still critical in any customer engagement strategy.

Optimising the customer relationship from the start with a clear welcome programme will help – a lot. Brand communication should be based on the individual journey of every customer. Brands can provide customers with targeted and relevant content based on their transactions and interactions with the business.

You can use insight derived from customer data to target customers on a more individualised level including:

  • Welcome programmes – To give customers an introduction to your brand, communicate the value proposition and deliver a tailored initial welcome message. 
  • Lapsed or reactivation campaigns – For customers where transaction frequency and engagement is going down, you can create a “come back” campaign which reels these customers back in with an incentive or promotional discount, based on their purchase history.
  • Personalised content – Delivering tailored messages, imagery, promotions and value propositions based on customer preferences.

Fashion retailer M&Co. tailored their customer messaging so they achieve optimum results based on the geography of their members. If members live within a specific geographical area of one of their stores, they target specific messaging and any relevant promotions to drive in-store footfall. If outside of a store catchment area, they tailor their approach with the website messaging to drive website visits and highlight relevant promotions on their online store.

Taking care of your customer loyalty programme is an excellent way to drive sales and improve customer satisfaction. With the immense data that a customer loyalty programme can provide, brands are empowered to improve the customer experience, increase customer loyalty and profitability, optimise marketing performance and innovate their products to better meet customer’s needs.