Why loyalty programs matter – your fast track to customer data and retention

Why loyalty programs matter – your fast track to customer data and retention

A good loyalty program can boost your marketing efficiency, generate more sales and increase your customer retention – there’s a lot to win. In this post, we’ll quickly highlight the benefits of loyalty programs, give tips on getting started and showcase a couple of the best loyalty programs out there.

Make loyalty program your strategic advantage

Many merchants think that having a customer make a first purchase at your store is the big win - the customer will surely return in the future, too. However, in reality things are not that simple. Building customer loyalty requires nurturing the relationship. And that’s where loyalty programs come in.

Loyalty programs come with many benefits for merchants. In short, loyalty programs help you understand your customers better. When a customer shows up at the counter and flashes their loyalty card, whether digital or physical, you accumulate data that links the purchases to an individual customer.

And, if the customer does not happen to have her loyalty card with her, that's not a problem: you can also ask the customer for her email, phone number, name or address, for example.

When you accumulate data on an individual customer level, you start to learn about your customers’ habits, needs and preferences.

Once you know your customer, you can start targeted and personalised marketing, which eventually leads to increased sales and better return on marketing investments.

What’s more, a loyalty program can help you do just what it says on the tin – increase your customer loyalty. Building on the retention of your existing customers is much more effective than solely focusing on new customer acquisition.

To learn more about this topic, check out our previous post on the importance of customer identification.

Focus on customer benefits

If you want your customers to sign up and continuously use your loyalty program, it has to offer attractive, tangible benefits for the customers. So, put the customer front and centre in your program.

What exactly these benefits could be depends on your business, customers and how engaged they are with your brand.

Things like electronic receipts, membership discounts, extended warranties, free trial periods and early bird access to new products are likely to appeal to almost all customers. To tap into even bigger benefits, your customers could start earning points or advancing to bronze/silver/gold levels with their purchases.

Depending on your product, you could provide your customers with a continuous stream of interesting content: how-to tips, feature articles or product reviews through a regular newsletter or a customer magazine.

What if you start building your own tribe and invite your customers to events, factory visits, or meet & greets with your team? Once your customers are really engaged with your brand, your options become limitless!

Customers also benefit from personalised communications: who wouldn’t want to be the first to know when their favorite artist puts out a new album or when a loved item is back in stock. For the merchant, personal communication is likely to result in better conversion and customer satisfaction.

Some of the best loyalty programs in 2021

Suomalainen Kirjakauppa, the leading book retailer in Finland, runs a customer loyalty program called Pöllöklubi, with over 700,000 active members. For a country of just over 5,5 million people, that’s a huge number. The retailer uses the club to understand and segment their customers better – they base their marketing strategies and campaigns on this data.

Suomalainen kirjakauppa Polloklubi

The club members, in turn, benefit from personalised communications and SMS alerts when a book by their favorite author first arrives at the store. According to the book retailer, the personalised communication has a direct effect on sales.

Read more on how Suomalainen Kirjakauppa utilises their loyalty program.

Ruohonjuuri is a Finnish retail chain focusing on environmentally responsible, organic and fair trade products. Their loyalty program matches the brand values in a fun way: instead of collecting points, the customers collect pine cones - just like squirrels who stock up for the winter. Customers earn pine cones for a variety of actions: purchase of 1 Euro earns them 1 pine cone, rating a product gives 20 cones, following the brand in Instagram gives 10 cones, and so on. This really promotes interaction with the brand in many different ways. Finally, the customer can use his accumulated cones to pay for purchases - perfect!

On top of this, Ruohonjuuri’s loyalty card gives discounts also in selected partners’ stores - an excellent way to make a single card more relevant for the customer. To top it all off, while the company promotes digital loyalty cards, the customer can also opt for a physical card - one made out of actual wood instead of plastic.

Check out Ruohonjuuri’s loyalty club.

Getting started with your loyalty program

Start by planning your loyalty program concept and considering these topics:

  • What kind of value can you provide to your customers and how could you build long-term engagement?
  • How does the program fit your marketing and sales strategy?
  • How can you promote your new program to your customers online, in stores and on social media, to onboard as many customers as possible – and keep the flow of new members going?
  • How do your customers interact with the program: do you want a physical loyalty card, a mobile card, a mix of both or some other way to identify the customer?
  • After the initial launch, how could the loyalty program evolve in the future?

Put special attention to your communication plan. You should be able to communicate the concept and benefits to your customers clearly and attractively. Giving your program a fun name that fits your brand won’t hurt, either. Internal communication is essential: make sure your personnel really understand your program and why the customers should join: if they can’t tell the story to the customers convincingly, who can?

So, what customer data should you collect? Again, make it easy for your customers – it’s perfectly OK to start with just a name, email address and maybe phone number, especially if they join your program while visiting your physical store. You can always ask for more details later.

Note that when you start collecting customer data, your register becomes subject to consumer privacy legislation, such as GDPR requirements. So, make sure your loyalty program software supports these, too.

Do you want a head start with your loyalty program? Check out how Custobar can provide you with an easy mobile loyalty card.