Long-term loyalty isn't 'love at first sight'
Most marketers have heard that it costs five times more to gain a new customer than to retain an existing one, and most would love to gather together a community of like-minded brand devotees who hang on their every word, respond to every promotion, and talk to their friends about how great the brand is. Here, though, Uber UK explains why long term customer loyalty isn't always a case of 'love at first sight'.
Instant revenue is almost guaranteed from margin-slashing sales, promising buy one get one free, and 75% off. But is this sustainable for your brand in the long term? Of course not. And what does this approach do to your brand image and your bottom line? Why do so many brands go after the coupon-clipping vultures when it is actually their most loyal customers they should be looking after with exclusive benefits?
A loyalty strategy is not a short-term sales fix: it takes time to get it right, for both you and your customers. To make loyalty a success, you need to get to know your customers as individuals so that you can cultivate a community of brand advocates by offering really personal community, benefits and rewards. Once you have a well-established group of customers who are engaged with you and your brand, the figures will speak for themselves.
It's a dating process A loyalty programme relies on effective customer relationship management (CRM) to get it right and you can think of it like you would any personal relationship. Let's look at an example relationship (okay, a customer) with a lady called Lucy.
On your first date with Lucy, you might buy her chocolates or flowers; they've got fairly generic appeal so are a good punt if you want to woo her into joining you for a second soiree. But what if Lucy's allergic to pollen or is on a diet? You might not be so effective at winning her loyalty to you, however much she protests that it's a 'nice gesture'.
If all goes well, Lucy might want to see you again. This time, you'll know a little bit more about her, so you might take her to the cinema to see a romantic comedy after she mentioned last time that this was her favourite type of film. She will love the fact that you remembered. Lucy will also appreciate you getting in touch again a few days later with a personalised little text message about her favourite TV programme after you discussed this on the way back from your film.
It's these personal little touches that really help nurture your relationship into something special and, as time passes, you'll learn more and more about her to help you treat her with even more gifts and little messages that you know she'll love. She'll become increasingly committed to you and the relationship as a result as she makes the decision to be loyal to you as your girlfriend and maybe even progress on to advocate your relationship to friends and family by getting married.
Driving active advocacy In that analogy, Lucy sounds like a fast mover, but patience is most definitely a virtue when it comes to customer loyalty. Investing in a customer loyalty strategy or loyalty scheme is all about driving active advocacy but, as you wouldn't propose marriage on a first date, don't expect miracles right away.
The 'Ladder of Advocacy' details how your relationship with loyalty programme members might develop. You might think that you currently have some customers in each of these segments naturally but loyalty is all about moving them up the ladder. There are seven rungs on the ladder, starting at the bottom and working their way up:
7. Active Advocates 6. Passive Advocates 5. Loyalists 4 .Satisfied Customers 3. Neutral 2. Detractors 1. Active Detractors
Customer retention is the priority of an effective loyalty scheme. Your programme should work to combat the loss of customers to competitors, converting them beyond the 'Neutral' and 'Satisfied' stages to become your 'Loyalists' (where they love the brand so much that they won't be tempted to look elsewhere and stray).
Advocates are the holy grail of customer loyalty - they're your most valuable segment because they give you the lion's share of their wallets and commit their hearts and minds to your brand. Passive advocates do you the courtesy of mentioning you to their friends (your potential customers) when the subject comes up, and active advocates believe in your brand promise so much that they're shouting about you from the rooftops. But motivating your customers to climb the ladder isn't quick and easy. As with Lucy, you've got to take the time to get to know them to 'woo' them effectively.
So, there are two obvious ways you can nurture long term loyalty:
- Get to know them The early stages of every effective loyalty programme are all about data, data, data. Record their every interaction with you, their personal information, their transactional information and their responses to any marketing activity you send to them.
- Act on their feedback The actions your customers take as a result of you getting in touch with them are all for a reason. Don't lose their trust by failing to use their data and feedback. Responding to them in a way that's highly personal will increase the relevance of each communication and reward that you offer them in the future, and that will develop more deep and meaningful, profitable, long term relationships.