Amidst the fog of a sluggish economy, business owners are all about chasing after fresh faces to keep the growth engine running and revenue soaring. Don't get me wrong, attracting new customers is important, but let's not forget about the old faithfuls who've been with us through thick and thin. Embracing this sustainable long-term strategy might probably be the key to survival during these challenging times.

 

Research conducted by research firms such as McKinsey consistently shows that retaining existing customers can be up to five times more cost-effective than acquiring new ones. This rings especially true for businesses operating in industries such as fast-moving consumer goods, services, and food and beverage.

 

So, you've decided to prioritise customer retention. What's the next step? What growth strategy can businesses adopt to foster loyalty?

Understanding the consumer psychology of loyalty

To begin with, loyal customers tend to spend a whopping 67% more than new customers. It's not just about repeat purchases; it's about the customer relationship that translates into a willingness to explore other offerings or premium options.

 

But let's not forget the reality of the situation. Just as we, as a brand, carefully choose our desired consumers, consumers themselves are making choices. Surveys tell us that an average consumer belongs to approximately 14.8 loyalty programmes, but actively engages in only about 6.7 of them.

 

Here's a rule of thumb: we mustn't confuse reward campaigns with loyalty programs. Many companies often view rewards as nothing more than short-term promotional giveaways or impulsive tactics to boost monthly sales.

 

While rewards can generate some value by enticing new or existing customers to try a product or service, their true potential lies in building customer loyalty. Unless rewards are designed with loyalty in mind, they will only return a fraction of their potential value.

 

Loyalty can be broadly classified into two types: behavioural loyalty and true loyalty. Behavioural loyalty is driven by observable behaviours and can be influenced by external factors or habits, for example just because the store is close to your home.

 

Attitudinal loyalty, however, goes beyond external influences and represents a deeper commitment to a brand, persisting even in the presence of competitive alternatives.

 

Think of a popular chain coffee shop that many of us love. Despite being a fast-food chain, their drinks are priced at a premium range. Yet, people keep coming back for more, and some have even made it a part of their daily morning routine (behavioural loyalty).

 

This can be attributed to three main factors: their branding and communication efforts (attitudinal loyalty), and the strength of their loyalty rewards program (behavioural loyalty).

 

A fantastic example is the brand ritual of personalising each customer's order by writing their name on the cup and calling it out when it's ready. This simple psychological reward plays a significant role in fostering attitudinal loyalty, making customers feel like they're part of the family.

 

So, when we design loyalty apps for our clients, how can we replicate this personalised experience in a digital platform? The trick lies in not just rewarding customers, but making the interaction engaging and enjoyable.

 

In essence, loyalty isn't just a metric that you can measure from every aspect; it’s about fostering customer relationships that sustain and push a business forward.

 

Motivating consumers to stick with your loyalty programme

At the end of the day, let's be real: the biggest draw of a loyalty programme is the sweet material incentives. However, the challenge lies in ensuring the consumers stay hooked and don't drop out. This is where the concept of the Endowed Progress Effect comes into play.

 

It tells us individuals are more likely to stay in a loyalty programme once they have experienced initial progress. To capitalise on this, offering easy new member signup welcome incentives that impart a sense of progress can be highly effective.

 

This approach has been proven successful, as demonstrated by a classic psychology experiment that showcased a 15% higher redemption rate for an old-fashioned car wash loyalty programme, where customers were already given two free punches on their cards from the start.

 

But how do we set goals that are challenging enough to be meaningful, yet not too difficult to discourage participation? The Goal Gradient Effect in psychology sheds light on the tendency of individuals to intensify their efforts as they approach a goal. It's like witnessing racers picking up their pace when they're closer to the finish line. We observe this behaviour in action with loyalty points programmes, where members increase their consumption as they approach the coveted next status tier.

 

Quick tips to kickstart loyalty?

To cultivate true loyalty, following are some of the strategies to consider:
 

1. Well-designed loyalty programmes: Create engaging programmes that offer value-added services, exclusive gifts, and personalised marketing to spark brand love. Make it more than just about points, ensuring it feels fun and expresses gratitude to customers.
 

2. Referral programmes: Amplify loyalty by incentivising loyal customers to recommend your brand or products to others. They earn rewards while fostering loyalty and expanding your customer base.
 

3. Genuine engagement: Foster authentic connections by hosting events, facilitating community interactions, and maintaining a visible presence. Building a brand community goes beyond selling—it creates loyalty and a sense of belonging.

 

Loyalty Tools for Success: Introducing KlikNGo

Just like a workman must sharpen his tools to excel, a well-designed and strategic loyalty programme requires the deployment of dynamic and flexible martech tools that cater to your business's unique needs. Kliknroll is proud to offer a comprehensive suite of tools specifically designed to ensure that loyalty marketing becomes effortless and effective.

 

With KlikNGo, you gain access to a versatile and complete customer loyalty solution, accompanied by a range of impressive features such as robust loyalty programmes, customer intelligence, customer service management tools, and more. Built on the concept of building blocks, KlikNGo empowers you to create a customisable CRM loyalty kingdom from scratch or support spontaneous member campaigns with ease.

 

To explore the full range of KlikNGo's offerings, we invite you to visit booth 1B-F24 during the Retail Asia Conference and Exhibition (RACE) at the esteemed Hong Kong Convention and Exhibition Center (HKCEC). Join us from 8 May to 10 May, 2024, and discover how KlikNGo can revolutionise your loyalty marketing strategies.

 

Published by Marketing Interactive on 6 May 2024

https://www.marketing-interactive.com/why-businesses-should-focus-on-loyalty-for-success