In the competitive world of e-commerce, businesses are always looking for the latest innovation or gimmick that can give them the edge over their competitors. Some such approaches can be something of a dead end, but one tried and tested scheme which has added value to many websites and businesses across the planet, is the customer loyalty scheme.
A well executed customer loyalty program can not only incentivise your existing customers to generate more business for your site, but also entice new blood to your site as well. On the other hand, a poorly conceived program can simply cost your business money. So what are the key elements to ensuring that a customer loyalty program is successful and adds value to your business?
Here are three elements of a customer loyalty program that you may particularly wish to consider before setting one up.
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Small Business Opportunity
The first thing to note is that many owners of small or even medium-sized enterprises fallaciously believe that offering a customer loyalty program would be disadvantageous to them. In reality, Forbes magazine has argued that offering a customer loyalty scheme is one of the best ways for a small business to differentiate itself from competitors.
Exploiting Consumer Psychology
If anyone doubts that businesses can take advantage of basic consumer psychology, ask yourself this simple question. Why does every single retailer in the world sell its products for some variation of 95 or 99 cents? $4.99 just psychologically feels less than $5.00, even though in practical terms the distinction is almost completely meaningless. Similarly, a customer loyalty program can take advantage of human nature by making customers feel that they are closer to their goal than they actually are. This can be achieved, for example, by stating that customers will receive two of the ten points that they require to receive a free reward just by joining the scheme. This will actually work far better than merely stating that they need to collect eight points; people try harder to achieve a goal when they perceive that they are closer to achieving it. Artificial progress actually works nearly as well as real progress. Another important element of building a successful customer loyalty program is to actually make the customer feel that their loyalty is being rewarded. Loyalty works both ways; of course, a business hopes to retain the loyalty of the customer moving forward, but this will be far easier if they feel that the business has been genuinely loyal towards them.
There are several key components to building this loyalty, and in many ways they resemble the qualities of loyalty involved in healthy human relationships. Trust and transparency are particularly important, thus a business should strive diligently to ensure that the customer loyalty program is both straightforward and delivers exactly what it purports to do. The last particularly powerful element which will help customer relationships is the element of surprise. Everyone likes nice surprises, and occasionally offering the customer something valuable that they weren’t expecting (regardless of whether it is actually anything out of the ordinary) will always be perceived positively. If you can tie this to a celebration which also elicits positive feelings such as a birthday or Christmas then you can reap further Pavlovian benefits from this.
Rewarding the Right Behaviour and Targeted Marketing
One should never view a customer loyalty scheme as a way to compensate for a poor bottom line, or a way to resurrect an ailing business. They are a useful supplementary tool for an already successful and fundamentally sound business. But a customer loyalty program can enable a business to engage in targeted marketing based on the data gleaned from it. This is extremely important, as successfully offering customers something that they actually want that they didn’t know existed will make them value the program and your business.
Additionally, it is possible to reward what your business views as ideal customer behaviour by aligning your loyalty program with such behaviour. This enables you to ‘select’ ideal customers, and hopefully to influence non-ideal customers’ behaviour favourably. There is a great deal to be gained by running a customer loyalty program, and it is not something that should be dismissed lightly, and certainly not without investigating the prospect first.