HOW TO: Introduce a Customer Loyalty Programme into Your Sales Strategy

Repeat customers spend 67 percent more than new customers, on average, and the cost of retaining existing customers is around 5 to 10 times lower than the cost of acquiring new customers. Despite these compelling statistics, many companies focus their sales strategy on introductory promotions to win new business, while neglecting their loyal customers. Unless your sales strategy offers incentives to existing customers, their value may diminish over time or you may lose them to a competitor. If you build a customer loyalty programme into your sales strategy, you will encourage customers to return and remain loyal.

By including a well-structured loyalty programme in your sales strategy, you encourage repeat business from existing customers. Eighty percent of Americans that participate in a loyalty programme reported that their purchasing decisions were influenced by their participation in the programme, according to a study by Maritz Loyalty Marketing. In a study by the Food Marketing Institute, retailers offering customer loyalty programmes reported that up to 95 percent of their sales go to loyalty programme members.

So how do you introduce a Customer Loyalty Programme  into your sales strategy?  Follow these 6 simple steps.

1. Define the Objectives of Your Sales Strategy

For your customer loyalty programme to be successful, you need to decide how it will fit into your existing sales strategy and identify your objectives for the programme. A key benefit for most retailers is the ability to collect customer data, which enables them to identify, reward, and retain their most profitable customers. Ultimately, the primary objective of any loyalty programme must be to increase your profitability.

2. Identify Which Customers You Want to Retain

As part of your overall sales strategy, you should regularly analyse your customer base to identify which customers are most profitable for your business. On average, 80 percent of a companies’ profit will come from 20 percent of its customers. Your loyalty programme does not need to treat every customer in the same way. For example, you could introduce a three-tier program with bronze, silver, and gold membership. Offer your most profitable customers the top-level gold membership, which will attract the best incentives. Less profitable customers will only be eligible for the basic bronze membership.

3. Decide on Programme Benefits

When deciding on the benefits to offer as part of your loyalty scheme, bear in mind the perceived value of the rewards and how they fit with your sales strategy. You can offer immediate discounts, rebates earned over time, or points that can be accrued and set against future purchases or rewards. Interestingly, customers tend to regard points-per-dollar/pound offers as having greater value than monetary discounts, even if they have the same actual value. Customers prefer to redeem points against luxury items rather than basic essentials. Surprise rewards or recognition of special occasions, such as birthdays and anniversaries, inspire customer loyalty.

4. Tailor Your Sales Strategy Based on Customer Preferences

Using data from your loyalty programme, you can tailor your sales strategy and offer customers products and services based on their preferences. In doing so, you can build a one-to-one relationship with your customer, who will feel that their custom is valued and respected.

5. Analyse the Costs of the Programme

As with all elements of your sales strategy, take time to calculate the return on investment (ROI) generated by your customer loyalty programme. Costs of the programme include set up, advertising, programme benefits, administration, and staff training. Costs will be offset against the income generated. Measure the ROI from your customer loyalty programme regularly to ensure that it is rewarding profitable behavior. Ideally, your customer loyalty program should break even after the first year and deliver improving returns from year two onwards as customers become more engaged and membership increases.

6. Test the Programme

Before you launch a full-blown customer loyalty programme, test out the concept with a number of existing customers. Test your communication, benefits, and delivery vehicle. Tweak your programme based on the feedback you receive to ensure that you make maximum impact when you go live. Your customer loyalty programme will soon establish itself as a profitable part of your sales strategy.

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Omar Kattan is Chief Strategy Officer at Sandstorm Digital, the MENA region's first specialist content marketing agency headquartered in Dubai. His experience includes 10 years in traditional marketing and advertising in the Middle East and a further 10 years at two of the largest media agencies in the UK. Follow Omar on Twitter for updates on the latest in digital, branding, advertising and marketing.

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