Oct 12, 2016 | Customer Loyalty News

How to build true customer loyalty (hint: it takes more than just discounts)

by  Margaret Link — Marketing at Thanx

How do businesses build truly loyal customers? It's not just about installing a loyalty program — it's how you use it. Here's how to optimize the experience for your loyal customers so that they stay loyal for life.


Money right under your nose

Much like the romantic comedy trope where two people search far and wide for love, only to realize that what they wanted was in front of them the entire time... business operators invest time and money trying to attract new customers, ignoring the cash cow under their noses: their existing customer base. 

Loyal customers are a company’s best source of recurring revenue. According to a study by BIA/Kelsey, more than 50% of all revenue comes from repeat customers  — they spend 67% more than new customers, perceiving transactions as less “risky” than a first-time buyer, and are comfortable spending more. VIP customers in particular drive a disproportionate amount of revenue, in addition to accounting for 80-90% of all referrals

What does that mean for businesses? The power to drive more revenue lies with the customers you already have. Instead of searching far and wide for new customers, business operators should take a look at their existing customer base and invest in retaining the customers already in their network.

Ready? Here are the top ways to do exactly that:


1. Pulse check: survey for customer satisfaction

Make it possible — nay, make it easyfor customers to leave feedback in a hassle-free way.  Feedback is a crucial component of any holistic loyalty program — customers who give feedback and receive responses are about 15% more likely to return to your business than customers who don't. Make sure that you’re responding to feedback with haste and taking customer’s suggestions into consideration. 

Additionally, when feedback is tied to transactional data, merchants can quickly identify issues with service or product quality at specific locations, or take swift and impactful action when a complaint is lodged from an individual with a high lifetime value. For this reason, simply responding reactively to bad reviews on Yelp isn’t enough to engender those warm, fuzzy feelings of loyalty. 

How can restaurants make sure their customers feel heard? Right after customers complete a transaction, send a mobile survey at random asking customers to rate their experience. If customers do give feedback, respond! Because you know exactly which customers (spending an exact amount of money over an exact period of time) reviewed your business, responding becomes much more productive.



2. Recognize those superstar VIP customers

It's nearly impossible for most business operators to know exactly who their best customers are without accurate customer data. However, there’s a strong case for why you should start collecting this data: the top 25% of customers represent 2/3rds of a multi-location restaurant's revenue and the top 50% of customers represent more than 80% of total revenue. 


Given their enormous revenue potential, rewards, incentives, and benefits should go to the best customers to ensure that they solidify their commitment to your brand. VIP programs should reward good behavior — provide exclusive rewards, status, and experiences to the top customers. 

Even better, create experiential rewards that are exclusive to VIP customers – special events, first access new product... these guestures go a long way. That's why airlines, hotels, and brands like Nordstrom always recognize their top-tier spenders with a special Prioritize the experience of your loyal customers over everything.  Personalize communication as much as possible — send timely, specific messages to customers based on their buying behavior and their personal preferences. 


3. Make innovation a priority

No matter how amazing your business is, customers won’t stay loyal blindly; in fact, customers are increasingly fickle. Small lapses in terms of service, innovation, or even attention can cost you a customer; It doesn't take much for customers to churn for life. At the end of the day, a punch card "loyalty program" is not going to be the thing that prevents a customer from taking their business elsewhere. 

In order to stay competitive, brands must evolve their relationship with technology, while continuing to differentiate and elevate the experience they're offering customers. Internally, continue having conversations about how to improve both product offerings & customer experience. Create room within your company for innovation — promote a culture where employees can bring new ideas to the table and be heard. Whether it's toying with new food pairings, carrying a new line of clothing, or upgrading to a greener car wash solution, it's all about offering customers the best possible experience & keeping them delighted. 


The Formula for Loyalty

A loyalty program is so much more than a way to give away free stuff. It’s about elevating customer experience, communicating with guests even after they leave your business, and gathering data that helps improve the way you do business. Retaining customers absolutely does NOT require a "buy 10, get 1 free" scheme or similar, but it does require proactively managing relationships with your best customers. 

Your loyalty program should be the platform from which you can do these things — communicating with them regularly, soliciting feedback, offering them bonuses and rewards for their continued patronage, and catalyzing their affinity for your brand. A loyalty program is a centralized way to gather customer data and use it to improve service and communication. You should see it as a customer happiness platform, and use the data and functionality from your loyalty program as a tool to proactively delight and retain customers




Do you find consumer psychology fascinating? Want to build a loyalty program that outshines the rest? Check out this eBook for more best practices, tips, and tricks we've picked up from building hundreds of successful customer loyalty programs for brands all over the US: 

Get the eBook Now


 Check out our other blog posts, written by customer retention experts & merchants alike!

1. Checklist: Is your customer loyalty program working?

2. Learn about customer retention psychology and start using it today

3. See how your business can fix (and prevent!) bad Yelp reviews with this simple tactic



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