In the modern consumer world, new customers and existing customers are redefining their expectations from brands and their loyalty program. No longer impressed by the one-size-fits-all model, customers are now craving personalization, relevancy, and emotional connections from brands as part of their customer experience.
The brands that find the overlap between what business objectives will drive growth and fulfill these modern customer expectations can be more successful in increasing revenue and keeping customers loyal over their lifetime- a win-win when there are endless options for consumers to choose from.
One of the ways brands are moving into this new world is with a customer loyalty ladder. And defining and building a successful customer loyalty ladder to gain loyal customers is simpler than you might think.
As your customers progress through their relationship with your brand, they’re climbing what’s called a customer loyalty ladder. This ladder is essentially tiers that are defined by a set of behaviors your customer takes as they progress from first-time purchaser to ongoing, loyal customer.
Loyalty ladders allow brands to use the data already in their system to identify where they struggle to move these audiences through various ladder rungs or phases of the customer journey. Once recognized, brands can focus on campaigns that will accelerate those conversions.
Companies that successfully guide consumers up each step of this ladder engage them with powerful brand experiences, each one driven by personalized offers and tied to key business objectives.
For example, one rung of the ladder may be defined as customers who visit once a month for three consecutive months, build an offer for that. From there, the next rung might be customers that spend $1000 in the span of 90 days, create an offer around those customers.
Building an emotional connection, which drives customers to move to each new rung of the ladder, comes from the relevant, personalized engagements they have with dynamic offers.
Customer loyalty ladders are important because they allow brands to lay out a roadmap for customers to follow, and then dynamic offers create personalized incentives to move from each step to the next. It’s this combination that results in increased customer loyalty and brand growth.
Brands have to present opportunities for consumers to engage in new behaviors and actions, and when members of your customer base create a new habit, reinforce those behaviors with dynamic offers and rewards that demonstrate your brand is paying attention.
Let’s look at a sporting good retailer example of a customer loyalty ladder.
The brand has a five-step ladder showing which tipping points lead members of their customer base to the next rung of that loyalty ladder or where customers may need more nurturing to move to the next rung.
As mentioned, by using the data already in their system, the brand can identify where they struggle to move these audiences through various steps of the ladder – for example, getting net-new customers to move from Level 1 to Level 2.
Brands can then focus on campaigns that will accelerate those conversions instead of guessing where customers are getting stuck- which is a waste of time for the brand and the customer.
If a customer is in the lapsed customer audience, for example, a mass discount might encourage them to move from Level 1 to Level 2 by making a second purchase, but additional mass discounts won’t accelerate them further up the ladder.
A mass offer may not incentivize them to increase total spend over the year, but a dynamic offer that encourages purchases that are relevant to their lives and rewards them with additional points will have a higher chance of increasing their total spend.
Dynamic offers create the right experiences and motivations that trigger consumers to act in a certain way. By starting with a business problem, marketers have a clear map defining the kinds of actions they want to trigger and identifying where they need to reinforce those actions better.
We’ve mentioned how dynamic offers are key to the loyalty ladder. But what makes dynamic offers such a game-changer when it comes to customer loyalty and brand growth?
Dynamic offers use machine learning to analyze that data and provide a balance of highly-personalized rewards and non-transactional actions the consumer can use or take, which then builds that data-driven relationship.
When customers do receive a reward, it’s commensurate with both the action they were asked to take, their previous purchase history, and the information they’ve provided the brand in the past.
Using dynamic offers within your loyalty ladder provides customers with the personal, relevant, and emotional connections they’re now expecting from brands. At the same time, allowing brands to stretch customers into new categories or more frequent purchases, preserving brand value and still giving marketers a tool to enable customers to discover new and valuable brand elements.
Whether you’re encouraging a second purchase or stretching a customer to expand into a new category, it’s critical to personalize both the action and the rewards. This means customers get more of what they want, while brands are continually optimizing for the best results for your business.
If you’re interested in learning more about what dynamic offers are and the benefits they can bring to your brand. -> Click here.
Each brand’s customer loyalty ladder will look different, and there is no single right way to build one. There are some best practices for loyalty marketers to consider, however, as they design their own laddered approach:
We live in an omni-channel world, and brands must consider every available channel and assess how, when, and why customers convert to the next step.
Creating a ladder requires a map of critical customer conversion points. Adding personalized offers to an already existing slate of mass offers will not move the needle on customer engagement; it’s more likely to turn off customers who are bombarded by too many competing offers.
Instead, identify where dynamic offers will have the most significant impact on your ladder and use only those types of offers at conversion points.
Before you launch a program with your new loyalty ladder, make sure you’ve established success metrics with all stakeholders. Metrics of success look different for dynamic offers than for offers that have been in-market for a substantial amount of time.
Ensure your transaction stream is mapped cleanly to your individual customers and that your customer profile information and audiences are routinely updated to ensure the machine learning is making decisions on the most up-to-date data.
Consider using delayed rewards (such as points or future coupons) rather than immediate rewards. This enables your program to include multi-step actions that will help drive incrementality.
Customer loyalty ladders are essential for boosting customer retention and gaining customer loyalty. By utilizing your data, implementing dynamic offers, and accelerating conversions - your brand can start to transition into the new age of consumer engagement and digital consumers.
If you’re interested in learning more about dynamic offers and how your brand can maximize your customer loyalty strategies and master relationship marketing, download our Guide: Modernizing Loyalty Offers for the Digital Consumer.