When researching customer loyalty, many articles define it as having a competitive advantage through high customer retention.
Having this advantage is the key to retaining your customers over time, preferably long term.
But this mindset, which defines customer retention, misses the mark on what it truly means to create customer loyalty.
This article will take you through the top misconceptions about building customer loyalty and offer ways you can rethink your loyalty strategy to create long-term loyal customers.
1. It’s All About Having a Competitive Advantage
While being a top competitor is a great metric to reference, that should not be your only focus when building your loyalty strategy.
If you want to build a successful customer loyalty strategy, your focus should be creating a connection with your customers.
What is important to them? What are they looking for in your products?
For example, members of REI Co-op pay a $20 lifetime membership and enjoy a variety of great experiential benefits from the program.
Anyone can go on an adventure, but they are heavily discounted for members. REI Co-op members truly experience the brand lifestyle, and this creates loyalty moments that build emotional connections.
Also, lululemon’s premium loyalty program mixes transactional and fitness-focused experiential benefits.
Recently, lululemon held membership launches in Edmonton, Toronto, Chicago, Denver, and Boulder.
For $168, members enjoy their choice of exclusive lululemon membership gear valued over $100; 12 passes to their choice of the hottest sweat classes or events; 20% off lululemon gear on members’ birthdays; and live digital workshops designed and facilitated by lululemon.
The goal is to make customers repeat purchase by matching your value proposition to their needs.
Knowing what interests most of your customers is a great way to build your loyalty strategy.
2. The More Loyalty Program Signups, The Better
Creating a loyalty program where you are capturing customer information through signups is a great move.
This allows you to capture customer data to use for personalization and understand their shopping habits and what they love to purchase.
By focusing only on getting consumers to sign up for your program, however, you’re missing the true point of creating loyal customers.
A free loyalty program is a nice recruitment tool for your brand, but the rewards come much later and aren’t enough to differentiate.
If you are seeing high signups, but low usage, you don’t have loyal customers.
This is where a premium loyalty tier can take your best customers and make them exponentially better.
In a premium loyalty program, your customers pay an annual membership fee. In return, they receive a variety of enhanced, instant benefits.
Members who use these benefits not only spend more with your brand, but they develop strong emotional connections, engage more, and become advocates.
In fact, 89% of consumers would recommend a retailer to family or friends if the retailer’s premium loyalty program offers valuable benefits.
Offering enticing, instant loyalty program benefits is a great way to connect with your customers on transactional and emotional levels.
Premium loyalty programs target a brand’s best customers with instant benefits available 24/7/365.
These programs provide retailers elevated engagement from a brand’s best customers, more order frequency, higher AOV, and more valuable data.
Creating a loyalty program that customers consistently use is the key factor to continued success.
3. Change for the Sake of Change
With an ever-changing world there is a perception that your brand constantly needs to change and evolve with it.
And while this is true, this can make marketers feel that they need to change for the sake of change.
This is dangerous because this can become brand-centric rather than customer-centric.
It’s important to spend time and money trying to make more appealing products or loyalty program benefits to keep consumers coming back.
But you can’t lose sight of your customers.
The truth is most customers look for familiarity, and things that are convenient to buy.
Your loyalty strategy should only evolve to create more value for your customers.
Starbucks Rewards is a prime example of customer-centric evolution.
Starbucks recently added more payment options to simplify the customer experience and make it more seamless.
This was the company’s most requested enhancement.
Now, customers can link their credit or debit cards, or PayPal accounts to pay within the app, making it easier for Starbucks Rewards members.
But, changing your products or brand for the sole purpose of “looking fresh” to customers could be a disastrous move as you are making it about your brand, rather than the customer.
Keep open communication with your customers and listen to their needs to ensure you’re making the right adjustments at the right time.
Keep Your Eye on the Loyalty Prize: Your Customers
Now that you know what ‘not’ to do, let’s recap the four main things you should be doing from a customer loyalty perspective.
Figure out what your unique customers want the most.
Then, turn that into a competitive advantage that retailers in your category would have a hard time replicating.
Don’t focus only on signups. Focus on long-term engagement by giving your members value all the time. This should come from a mix of transactional and experiential benefits.
Don’t change for the sake of change. Change your program to address any pain points you learn from listening to your customers.