How to Create Enticing Loyalty Offers Based on the Customer Life CycleGuides • August 9, 2016
Focusing on keeping your existing customers instead of requiring new ones is more beneficial in the long run. This good ol’ stat also confirms it: it costs 3-10 times less to sell something to a customer who already knows you than it is to sell to a total stranger on the Internet. That’s why customer retention is so important, and to help you craft the best strategy for it, I will show you how customer lifecycle marketing, aligned with the right loyalty offers, can maximize the results of your efforts. But first…
What is customer lifecycle marketing (CLM)?
Which metrics define your ecommerce store’s success the most? The conversion rate (CR), the generated revenue per visit (RPV) or customer lifetime value (CLV)?
Many experts, including Edward Gotham, the founder of Black Jamm, say CLV – aka the total revenue you receive during the total lifetime of a customer – is what should you focus on. And in order to optimize CLV, you should invest in customer lifecycle marketing, because that is how you can maximize revenue and fulfill your specific goals in each of your customers’ buying stages.
What are the customer buying stages?
They are the important stages that customers should go through during their life cycle, more precisely: “The customer life cycle describes the points in the continuum where you:
1) Claim someone’s attention.
2) Bring them into your sphere of influence.
3) Turn them into a registered and/or paying customer.
4) Keep them as a customer.
5) Turn them into a company advocate.”
This is how Sterne and Cutler, authors of Business Metrics For The New Economy, defined customer life cycle. (If you want to dig deeper, then I recommend you to read MailMunch’s CEO, Martin Zhel’s post, too.) However, life cycle marketing does not end with creating brand advocates for your store. A 6th point should be included here, which we can call a reactivation stage where you should create incentives to win back customers who are slipping away.
We visualized Sterne and Cutler’s customer life cycle definition on this diagram and completed their concept with a reactivation stage.
So the formula is simple: by coming up with different marketing strategies for each of your customers’ buying stages, you aim to move customers to the next stage at the lowest cost. But how can a loyalty program be involved here? Let see in the next point.
How a loyalty program can help in your customer lifecycle marketing
Remember when I mentioned how important it is to focus on customers that are slipping away from your store? Now, what do you think the main reason is for this churn?
Let’s cut out the guesswork: because you’re not offering real value to them.
Okay, now you may say, “But what if I have a great product? And excellent customer support? If I’m doing everything to gain my customers’ trust?” Yes, these count here, but honestly they’re not enough to maintain customer loyalty in the long run. Just read what Yan Wang, the founder of XYZ Impression said recently: “Often times, people are purchasing more for the label than for the actual product.”
This is where branding comes into play. More precisely, the brand’s story and values. How effectively are you communicating these to your customers? And on the other side of this concept: how well do you treat your current customers? Do you recognize and reward them for their loyalty?
Making customers realize that you care about them is essential throughout their lifecycles, and this may be the value that your store is lacking when it comes to keeping them engaged. But luckily a loyalty program is the perfect tool to showcase how precious your customers are to you. Just take a look at some examples of these three stages:
Onboarding stage: Show browsers that you value paying customers
In this phase prospects are just browsing your site, and have not yet made a purchase. Did you know that 69% of customers say the chance of earning loyalty points influences where they shop? So highlighting your loyalty program in your site’s menu bar and showing how many points customers can earn if they purchase next to each product on product pages can really make a difference. It communicates the fact that it’s worth doing business with you. That’s because, besides the product, customers can gain a special status, points or get closer to redeeming exclusive rewards. In short, you’re clearly showing that you recognize how valuable customers are if they decide to shop at your store. Let’s see how a Japanese store, Tokyo Otaku Mode does it:
Tokyo Otaku Mode showcases how many loyalty points I can earn with each of my purchases.
Did you notice? This blue dress is a new product at their store, so instead of the usual $0.38 cash back value in loyalty points, they give $3.89 in points for a limited time period. Smart! This way the social rule of reciprocity works in the best way! Because even spending my money on this dress, seems like I’m gaining more than losing, since the shop is compensating with this great offer. (Later I will write about more tactics like this, so keep reading, because these are good incentives for retaining existing customers, too!)
Retaining stage: Trigger repeat purchases from your existing customers
Bond reported that 70% of customers change where or when to shop so they can get more loyalty points. Get more loyalty points. See? These are key findings right here. Of course customers want more points when they know they can redeem them for irresistible rewards. Coupons, awesome contest entries, early-access to new product lines or free shipping opportunities, personal shoppers, experiential rewards… the list goes on… These are among the top incentives – the kind that can make your customer base go wild. Needless to say, you can spice up things with a double points event, when customers can earn more points by shopping in your store, which helps them get even closer to the rewards they desire. The only thing you need to know is what rewards excite your audience the most, then set up opportunities for them to earn points.
Tokyo Otaku Mode (again) really does a great job when it comes to promoting loyalty program incentives. In this email they announce that they give double points to those loyalty members who refer new customers to their store.
In the example above, Tokyo Otaku Mode actually tailors their strategy to meet two main goals: 1) detecting/nurturing their brand advocates and 2) getting new customers with the help of their existing ones.
How did they promote this event?
They announced it on their homepage with big banners and also sent out newsletters to existing customers. To make this event even more special, they announced that referred friends will also receive $10 to spend on their first purchase, AND the shop drew a bonus prize among the referrers and their peers, a $15 value. Ah, so smart!
Reactivation stage: Win back lost customers
Research from Accenture revealed that 80% of customers who left a store felt that the company could have done something to retain them. We shouldn’t take this lightly! Customers can leave for any number of reasons, like finding a cheaper alternative or simply forgetting about you. In any case, it’s a nice gesture to express that you feel sorry that they’ve left – while mentioning some great opportunities that they’re missing out.
In case of a loyalty program these missed opportunities can be:
- Unspent loyalty points that are just waiting to be used by your customer.
- Alluring rewards or contest opportunities that the customer hasn’t redeemed their points for before.
- A higher loyalty member tier with exclusive benefits that the customer is close to unlocking.
Before doing anything, I suggest A/B testing these offers to find out which drives more results for you. But now comes the next question: when and where can you send these kind of incentives?
A loyalty program, like we’ve built at Antavo, has automated email capabilities for this scenario. We recommend sending a similar email after 90 days of inactivity. Naturally, this time period is influenced by the purchase frequency of your products and how quickly loyalty members can earn points and redeem them for rewards.
In this example one of our customers, Diono, sent out a “Missing you” email to inactive loyalty members, highlighting the special rewards they’ll miss out on if they come back soon.
Bonus tip at this stage: High-end brands typically use point expiration as a reactivation tactic, meaning that after a certain time period, i.e. after one year, the number of loyalty points in a customer’s balance automatically drops back to zero. This helps keep members from piling up tons of unspent loyalty points and also motivates them to spend their points in time. It may seem “mean” at first for customers, but it helps you keep your loyalty return healthy.
Interesting, right? And the story doesn’t end there. In the final part of this guide, let me show you how to THINK when it comes to matching certain business goals with the right loyalty incentive.
Loyalty offer examples for the customer retention stage
Let’s see how we can categorize the loyalty offers that you can use in your lifecycle marketing, and then let’s find out how to put some of them into action!
Loyalty offers that add value for customers
I have already spoken about this part briefly, but since practice makes perfect, let’s sum up what we’ve learned about loyalty programs and their value so far. First, a loyalty program entails monetary benefits for your customers, which can include:
- Free shipping
- Cash back based on spending
- Early-access to new products
But these incentives will only attract your customers’ penny-pinching side. To make sure that you offer more than monetary benefits and encourage customers to get emotionally attached to your brand, you should show that you value their feedback and want to help them. For this, incentivize your active loyalty members to do the following:
- Fill out customer surveys
- Write customer reviews
- Read content that supports their customer journey
For example, after a customer’s first purchase, you can reach out to them to review their purchased product in your store. Honoring their work with some extra loyalty points is what makes this action more enticing.
In this example a customer is notified that they can review a purchased product for extra loyalty points. At Antavo, with the help of APIs, webhooks and newsletter integration, you can generate emails like this for your store.
Loyalty offers that aid in cross-selling and up-selling
Now comes the best part! You have customer data, right? A loyalty program should be able to show your customers’ purchase history, not to mention behavioral data. Now, you can use this information to sell more! (Remember my first Tokyo Otaku Mode examples before? Now, here are some similar tactics!)
How, you may ask? Let me show you!
Remember, the point here is to generate urgency in your customers. So, here are some ideas how to set up these kind of offers:
- Customers’ salary: When customers typically receive their salary in your country, announce for that one whole week that they can earn double points. This way you can ensure that they have enough cash to do a bit of impulse shopping.
- Purchase/browsing history: If a customer has purchased or simply viewed an item before in your store, and now you have a newer version of it, then (similar to the previous example) offer double points for it, for a limited time.
- Getting rewards: If you offer a physical reward in your loyalty program that needs to be shipped to, then announce that this reward can be only shipped with their next purchase. That helps you save on shipping costs and incentivize a new purchase at the same time.
See? Coming up with the right incentives just means collecting the right customer data and knowing your audience’s behavior. Once you have the necessary information, you know how to encourage customers to move forward to the buying stages most beneficial to your business.
At Antavo, we’re solely focused on helping customers drive faster revenue growth with lifecycle loyalty offers. If you’d like to have Antavo’s world-class loyalty programs to power up your customer lifecycle marketing, then we invite you to request a demo here.