Starting your loyalty program: 4 essential questions
Would you like to introduce a loyalty program? Are you taking your first steps towards customer loyalty? Then you should ask yourself four essential questions before launching your digital loyalty program! But first, some context for you about loyalty programs.
A loyalty program is about purchasing decisions, it's about people, it's about customer relationships and rewards for the users of your loyalty program. At the end of the day, for you as an entrepreneur, it's also about sales.
Therefore, there must be a benefit for the target group of your loyalty program as well as for your company itself. This has long been about more than the classic customer card and gifts or a simple reward for loyalty on your customers' birthdays.
Question #1: Why do customers choose your brand?
First of all, it is important to know how customers perceive your brand.
Knowing whether customers go to great lengths when choosing your products helps to determine the extent to which you are able to change your customers' behavior in the future.
Buying a car, for example, is a carefully considered decision by the customer, as the customer has to invest a lot of money and will live with this decision for many years. In contrast, buying your chewing gum in a grocery store is often a choice that is of lesser consequence to the customer.
Question #2: Why do customers remain loyal to your brand?
Understanding this helps to identify the factors that influence your customers the most. This is important to objectively analyze potential strategies and tactics to implement in your digital loyalty program.
Barriers to switching vs. reinforcing factors
There are several factors that influence a customer's decision to stay with a particular company. A study conducted by Colgate M. et al. on customer retention shows that the reason why customers stay is often a mixture of negative and positive factors. These can be divided into two categories: Barriers to switching and reinforcing factors.
Question #3: Why do customers not feel addressed by your brand?
While service recovery can be a reason for customers to stay loyal to your company, poor service experiences can also have the opposite effect - they can create distance between the customer and the brand.
It has been shown that there is a strong correlation between service and loyalty or customer retention. However, it is important to know that it is not only dissatisfied customers who turn away from a brand.
According to the Harvard Business Review, satisfied customers can also switch to a competitor. Only complete satisfaction guarantees that customers will remain loyal to your company. If customers have alternatives, they will also take advantage of this and switch to the competition if there are better offers.
Question #4: Which other customers can you reach?
This question refers to the customers of your competitors with whom they may have contact. If you look at your competitors' customer loyalty strategies, you will understand why customers don't just buy from you.
The example of the American bookseller Barnes & Noble is a good example of how customers can be tempted to buy only from their own company. With the Reader's Advantage loyalty program, members pay 25 dollars a year and receive a 10 percent discount in the Barnes & Noble store and a 5 percent discount on purchases in the webshop.
But why is this important in terms of customer loyalty? Once a customer has paid $25 to participate in this loyalty program, they will think twice about buying the books from another bookstore.
If your customers are already participating in a competitor's loyalty program, it can be a challenge to create the added value needed to get them to switch to your loyalty program. One option would be to develop your program so that it can coexist with others and, in the best case, offer more added value than your competitor's program.
Four specific questions, many specific answers for your start!
Ask yourself these four questions to get a better understanding of your customers and the business environment. Launching your digital loyalty program in a tactical way will help you increase the success of your digital loyalty program!
