Since Black Friday, the headlines have reported stagnant U.S. retail sales. And the future doesn’t look much better. Predictions say the market will barely grow 2% annually over the next two to three years.
Malls are becoming a relic, and brick and mortar stores are seeing less traffic generally, as more consumers shop online. This deceleration of the retail market is putting even more pressure on brands as they seek to increase sales and profits in a traditionally low-growth sector, while developing a strategy to capitalize on both showroom and eCommerce opportunities.
One of the most important differences between successful brands and those that languish is their focus on the customer. Consider that 40% of an eCommerce store’s revenue is created by only 8% – the most loyal – of its customers. Those brands that consistently deliver an excellent customer experience across every channel can expect to thrive. And a key component to their success is a customer loyalty program that drives increased engagement and results in a greater lifetime value (LTV), all built around personalization.
The stats don’t lie when it comes to the importance of customer loyalty programs. Almost two-thirds of retailers say their loyalty or rewards programs provide the best way to connect with their customers. In a variety of surveys, consumers shared how customer loyalty programs impacted their purchasing decisions:
With customer loyalty programs, you can increase LTV by engaging and interacting with customers throughout their journey and providing them more reasons to continue purchasing from your store. Loyal customers are valuable to brands – up to 10x more than their first purchase – since the probability of selling to an existing customer is 60% to 70%, compared to just 5% to 20% for new prospects. Additionally, existing customers are 50% more likely to try new products – and will spend 31% more – than new customers. All totaled, a loyal customer yields real results: Studies show that just a 5% increase in customer loyalty can increase the average profit per customer by 25% to 100%.
These types of customer loyalty programs examples are evident at grocery stores, which offer points for every dollar you spend. These points then translate into rewards – such as a free turkey right before Thanksgiving, or significant discounts on gas – which encourage a customer to keep coming back to earn more points and collect more rewards.
You also are able to collect valuable individual customer data through loyalty programs. With the right approach, this data can yield a variety of insights – from purchasing patterns to product/service preferences to the drivers or incentives that encourage customers to change their behaviors. Then, you can take this information to more effectively fine tune offers that appeal to each individual customer. Such 1:1 personalization is not possible without continued insights into customers likes, dislikes, and knowing exactly what is needed for them to take the actions you prefer.
Individual customer data also can be used to motivate new customer behaviors. Let’s say a customer typically only comes into your coffee shop for a latte in the mornings. To motivate new behavior, you send offers for a discount on food items to accompany his regular purchase, upselling by encouraging him to try a muffin or a new breakfast sandwich. Alternatively, you can offer more points in the loyalty program for visiting at different times – maybe during happy hour, or taking advantage of two-for-one offers midday.
Simply offering a customer loyalty program that provides basic discounts to everyone or the chance to earn points is not enough to make the profit and engagement needles move. Some of the best programs incorporate three critical elements:
Step up from good to great.
Once you have these three elements in place, you can really drive positive impact for your customers and your business. Today, it’s table stakes for the best customer loyalty programs to leverage data and the program elements along with advanced machine learning and automation to make them truly personal. They tailor offers and experiences for each individual customer, with rewards that are valuable, and most importantly relevant, and use these personal offers to engage customers, motivate new behaviors and drive value for customers and for the business.
To learn more about the growing importance of personalization, and how to do true 1:1 personalization right, download our recent white paper, “Why Personalization Isn’t Always Personal.”