Definition of Customer Loyalty in Marketing

Definition of Customer Loyalty in Marketing

When it comes to marketing, it’s natural to think of customer acquisition. However, loyalty marketing revolves around customer retention. By catering for your existing customers and keeping them happy, you can ensure they come back again and again for repeat purchases.

For a café, loyalty marketing might be as simple as offering customers a free slice of cake with every fifth purchase of a coffee – we see this strategy all the time.

However, while paper punch cards and digital loyalty programs can be highly effective in bringing familiar faces back through the door time and time again, customer loyalty in marketing isn’t defined by rewards programs.

There is no shortage of innovative techniques that brands can adopt to engage their existing customers, and this is what loyalty marketing is all about.

Repeat customers vs. loyal customers

First and foremost, I’d like to make something clear: a repeat customer is not necessarily a loyal customer.

A repeat customer might frequent your business for any number of reasons, including the following:

– value (perhaps you have the cheapest price)

– quality (perhaps you have the highest quality product)

– convenience (close proximity to their house, for example)

There’s no emotion in this customer’s decision to shop with your brand. All it takes is for another business to offer a cheaper or higher quality product, or a more convenient service, and their loyalty is instantly lost.

However, a loyal customer is far less likely to be influenced by these factors, because they are emotionally invested in your brand.

According to Motista, a customer who feels an emotional connection with your brand has a 306% higher lifetime value and will recommend your brand 26% more than the average customer.

In a nutshell, loyalty marketing aims to convert repeat customers into loyal customers, and increase consumer engagement with the brand by achieving the following goals:

– increasing frequency of visit

– increasing average basket-size

– strengthening emotional connection with the brand

So now that we’ve got the definitions covered, let’s discuss why customer loyalty is so important in a brand’s marketing.

Why is loyalty marketing important?

There are several key reasons why customer loyalty in marketing is not to be overlooked or neglected. The first is best explained with a couple of rather shocking statistics that are very well known in the brand loyalty world (for good reason!).

– Increasing customer retention by 2% is equal to cutting costs by 10% (Emmet & Mark Murphy).

– Increasing customer retention by 5% can result in a 125% rise in profits (Bain & Company).

– Existing customers spent two-thirds more than new customers (Bain & Company).

Source

It seems that keeping your existing customers happy is just as important as attracting new ones (if not more so), and loyalty marketing is the way to do this.

The second reason, as I mentioned above, is that loyalty marketing is crucial for fostering an emotional connection between a brand and its customers. This is true for every business, from the small independent grocery store out in the suburbs, to the international fast food chain.

And the final reason lies with the power of below-the-line marketing.

Think of traditional “above the line” advertising as a giant net that marketers throw into the ocean, with the hopes of catching as many consumers as possible. TV ads, radio ads, billboards, bus benches… the goal is to get the information out there and see how many people bite.

But with loyalty marketing, a brand is directly targeting a specific group of people, with a very tailored message just for them. The audience is smaller, but the return on investment is far higher.

For example, let’s say an online cosmetics retailer has a digital loyalty app. Customers open the app, browse products, add items to their basket, purchase them through the app and have their cosmetics delivered to their door.

In having that prime piece of app real estate on customers’ smartphones, this retailer can send tailored push notifications to each individual customer with special offers and exclusive deals just for them.

If traditional advertising is casting a net over consumers and hoping for the best, then this form of “below the line” marketing is more like a harpoon gun.

With good loyalty marketing, brands can incentivize all kinds of behaviour; from upgrading/upsizing and making a discounted purchase before the end of the week, to  increasing direct hotel bookings and bypassing third-party delivery apps.

Let me demonstrate with two examples of remarkable loyalty marketing. First up, Starbucks and its hugely successful Starbucks Rewards digital loyalty app.

Example #1: Starbucks

Starbucks has never had much trouble acquiring and retaining customers, but the fact that its former CFO Scott Maw attributed most of the coffee chain’s same-store sales growth to digital engagement means that Starbucks is clearly doing something right with its Starbucks Rewards program.

This mobile app-based loyalty program is so quick to download and sign up to, that customers can do it while standing in line waiting to order. From there, you gain access to numerous perks that enhance the loyal customer’s experience over the non-loyalty program member.

These include:

– the ability to order in advance and pay through the app, granting you skip-the-line benefits

– stars towards your next reward with every dollar spent

– access to “double star days” and other spontaneous promotions

The rewards program is heavily gamified to increase engagement. Each customer receives personalized offers direct to their device, encouraging them to try a new menu item in exchange for a free upgrade, and other incentives that ultimately benefit the business in the long term.

This personalized customer experience makes coffee-lovers feel valued and appreciated by Starbucks, and this kind of emotional connection can only be established through loyalty marketing.

After all, you can’t cater to a customer’s individual preferences if you don’t know who they are! Digital loyalty apps allow brands to accumulate more data on each customer with every visit, which can be utilized to offer them an increasingly tailored shopping experience.

Example #2: Amazon Prime

Okay, let’s step away from loyalty programs for a moment, because a business doesn’t necessarily need a loyalty program to execute good loyalty marketing. A prime example of this is Amazon Prime…

Amazon demonstrated a pretty innovative lightbulb moment in loyalty marketing a few years ago when it invited users to vote for which TV season pilots should be extended into full series.

The streaming service offered a wide variety of new TV shows that only consisted of a handful of episodes, and subscribers could watch them and vote for or against. Even non-Amazon Prime members could sign up to a 30-day free trial and get involved.

By offering new and existing customers an opportunity to contribute to the brand’s products, Amazon was able to forge an emotional connection and thus convert many non-subscribers to paying customers.

Viewers had helped decide which series got made into permanent fixtures, and now they wanted to continue watching the shows’ subsequent seasons. Amazon’s marketing campaign led to increased customer loyalty.

So, that’s how Starbucks and Amazon go about their loyalty marketing strategies. What are some techniques you can incorporate into your own business to increase brand loyalty and customer retention?

How to grow your brand with loyalty marketing

Every business adopts different techniques to encourage customer loyalty. First, figure out what you want your loyalty marketing to achieve, and then… promote, promote, promote!

While the sky’s the limit for how creative you can be with your loyalty marketing tactics, here are some initial strategies you can begin implementing into your business right away.

Staff & Signage

If you have a brick-and-mortar shop, your employees are the ideal loyalty marketers. They already know your highest-spending and frequently-visiting customers, and have presumably developed a relationship beyond, “Hello Sir, how may I help you today?”.

Your staff are in a unique position to promote your customer loyalty initiatives without coming across as “salesy”. In fact, most existing customers will be thrilled at the prospect of seeing rewards and additional perks for their ongoing loyalty.

Of course, a little in-store signage doesn’t hurt either.

Website & Social Media

For those of you who are running an online business, the same principle for in-store signage and staff advocacy applies… you just implement it through your web content.

Here are a few suggestions to get you started:

– at check-out, prompt customers to join your loyalty program right now for a 10% discount on their pending purchase

– offer your social media followers free shipping on their next purchase when they post a picture of themselves using your product on their personal social media accounts, along with the relevant hashtags

– create an online poll asking which of the following items customers would like to see added to your product offering, and circulate the poll on social media with a message that only loyalty program members can vote, but that it’s easy to join

The above ideas were the result of a hasty brainstorm, but your imagination is your only limit to how you can integrate loyalty marketing into your website and social media content.

Digital Loyalty App

For businesses that want to take it a step further, digital loyalty apps are an unrivalled method for growing your brand with loyalty marketing.

Once a customer signs up to your digital loyalty app, you can:

– send personalized communications and tailored offers

– keep them notified of their progress towards their next reward

– offer spontaneous instant prizes and “Scratch & Win” competitions to keep your brand front of mind

– offer discounts and rewards for referring friends to download the app

– create a more convenient shopping experience

– incentivize customers to purchase straight from the source, rather than via third-party booking or ordering apps like UberEats and Booking.com.

– countless other utilizations

Don’t underestimate the power of good loyalty marketing!

At the risk of sounding cheesy, don’t make the mistake of focusing on what you don’t have, instead of appreciating what you do have. By that I mean, make sure you look after your existing customers before you focus all your marketing efforts on attaining new ones.

At the end of the day, the best marketing a business owner can possibly ask for is a healthy pool of satisfied, loyal customers.

A crash course in the definition of customer loyalty in marketing, the importance of loyalty marketing, and some tips on how to pull it off.
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Brad Davis
Brad Davis is an expert in Loyalty Marketing. Brad is a copywriter with 10 years' experience writing engaging content for newspapers, websites, feature magazines, instructional ebooks, real estate agencies and more. In writing content for Stamp Me Loyalty Solutions, he has accumulated a wealth of knowledge in loyalty marketing trends and techniques.
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