By Margaret Link, Thanx
Investing in customer loyalty isn't just a “check the box” initiative. It can be a businesses’ most powerful marketing channel, as it's 7x more expensive to acquire a new customer than to encourage an additional visit from an existing customer.
However, customer loyalty programs are tricky to get right. Businesses try hard to retain and delight their customers, but often they go about it in ineffective and cost-intensive ways.
When it comes to building a money-making, customer-delighting loyalty program, here are the seven deadly sins to avoid at all costs:
1. Don’t make your loyalty program too complex.
If you have to provide loyalty members with a page of instructions about how to qualify for credit towards a reward or how to redeem a reward, your program will fail to attract and engage customers.
Customers don’t want to jump through hoops in order to participate in your program — these are your most loyal customers, and they shouldn’t be subject to a confusing experience!
2. Don’t treat all your loyalty members the same.
Your customers are a diverse set of people. They have different spending patterns, different frequency, and a different relationship with your brand. Gather customer data so you can differentiate customers based on their behavior.
One of the most valuable ways that you can leverage the data generated by your loyalty program is to make sure every customer receives a unique loyalty experience, tailored to their preferences, buying patterns, and even lifetime value (for example, VIPs get treated differently).
Analog loyalty programs treat all customers the same (buy 10 coffees, get 1 coffee for free!) because at the end of the day, they don't know their VIPs from their occasional, low-value visitors. Utilize your data advantage to deliver the best possible experience to your visitors.
3. Don’t put VIP revenue at risk.
VIPs are instrumental to your business's long-term success. You have to make them an active part of your loyalty program. Your top 25% of customers drive almost 70% of revenue — they’re the backbone of your business! Offer them unique rewards once they achieve VIP status to keep them feeling the love from your brand.
4. Don’t slow down the checkout/payment process with additional steps.
For fast-casual restaurants & coffee shops in particular, keeping the line moving during busy times is a must. Timetrade reports that 75% of retailers will lose a sale because of wait-related issues. Why, then, do restaurants add additional steps to the checkout process?
While tech in restaurants is certainly evolving, it should add joy to the customer experience, not complexity. Scanning QR codes, typing in phone numbers, etc. are all examples of bad customer experiences. Seventy percent of retailers report consumers will wait five minutes or less before a customer abandons a purchase and leaves the store. Great businesses prioritize customer service absolutely; anything that distracts from a great experience cannot be tolerated.
5. Don’t settle for uncertain ROI from marketing campaigns.
Most marketing programs lack any type of data visibility, so you can't be confident that you're generating any ROI. Even when you get new people through your door by offering some type of incentive, you're probably getting less qualified leads. Deal-seekers wander in chasing "giveaways", searching for freebies and never returning. Now you've blown your budget and have no measurable results.
Instead, launch campaigns backed by data, and track progress digitally. A loyalty program worth its investment can demonstrate — to the dollar! — the return it’s generating, as well as other critical operational data (customer lifetime value, NPS, etc...). Any less transparency is unacceptable.
6. Don’t let people leave angry.
The best time to get feedback from customers is right after they transact. Make sure that you reach out in a timely manner and make sure that your best customers are also your happiest customers.
Studies have shown that simply asking for feedback can increase customer frequency by 7%. Responding to that feedback raises that number to 14%. Responding and then rewarding the customer with a personalized reward or discount? A 22% or more increase in frequency is much better than having to deal with negative reviews on Yelp.
7. Don’t be afraid to ask VIPs for referrals.
Your VIPs aren’t only your most valuable demographic — they’re your most vocal advocates. Catalyze your happiest customers to spread the good word about your restaurant, as there’s no marketing quite as effective as word-of-mouth from someone you trust.
According to Deloitte, customers required through word-of-mouth marketing have a 37% higher retention rate and spend 150% more. “Promoters” account for 80-90% of all business referrals and 92% of consumers turn to people they know for referrals above any other source. Give these promoters the tools to spread the word about your business.
About the author
Margaret Link is a customer experience advocate and product marketer at Thanx in San Francisco. She manages the official Thanx blog (blog.thanx.com), where businesses go to learn about customer retention, mobile, and loyalty.