Two customers A and B walk into a grocery store. Customer A visits the store every first week of the month, and shops with an organized list. They stick to previously used brands or opts for a product with the most discounted price. Meanwhile, Customer B is a frequent visitor and chooses products based on desires and facts that they learnt about a particular brand. Psychology categorizes Customer A as a rational consumer and Customer B as an emotional consumer, and marketers need to take note that these days, consumers are increasingly shopping like Customer B.
When the pandemic began, the immediate customer trends showed a major dip in consumption. However, in the second half of 2020, a part of the overall spending bounced back, and studies showed that this uptick can be explained by consumers’ motivation to seek an external stimuli’. This helped them to feel better during lockdown restrictions. Another report by the Zeno group shows how Malaysians, amongst other Asians, did a lot of emotional consumption during the pandemic year. Consumption was driven by how much the customer agreed with a brand’s values. The survey also found that almost 91% of Malaysian consumers stopped buying from brands they disagree with.
With evidence of ‘cancel culture’ (practice of withdrawing support to a brand) and comfort buying during pandemic, it certainly seems like this is a crucial time for brands to appeal to customers through emotional loyalty.
Elements of emotional loyalty
Emotional loyalty aims to bring consumers closer to the brand by creating trust and belief in the brand’s vision. It involves understanding what the customer feels to create a personalized interaction with them – right from advertising up to the purchase of the product. Researchby Forrester suggests that making customers feel appreciated that encourages them to spend more with a brand and recommend it to friends and family. This clearly shows that emotional loyalty is the easiest way to foster loyalty and retain customers through thick and thin. The Data and Marketing Association describesthe ‘3Ps’ approach to achieve the best of emotional loyalty.
Partnerships: Brands must seek to create a partnership with the customer, to exchange valuable information with them. Examples of a good partnership includes rewarding certain behavior such as advocating for the brand, sharing feedback and product reviews.
Purpose: Loyalty programs must be connected to issues that resonate with the customers values. In recent pandemic times, health and sustainability have been important topics that concern a majority of the population. Initiatives related to these topics would play a role in capturing consumer attention.
Personalization: All loyalty programs would be incomplete without the element of personalization and emotional loyalty is no exception. Personalized communication and offers can make the customer feel special and included, and can lead to more repeat sales.
Why Malaysians are rooting for emotional loyalty
Let’s take a look at recent customer trends in Malaysia, which demonstrates how buyers warm up to brands that understand and share similar views with them. What does an average Malaysian consumer look for in their brands, apart from the product or service itself?
In Malaysia, there has been a year-on-year increase in Google searches like ’metal straw’, ’eco shop’ and ’hybrid car’, proving that consumers are very conscious about the environmental issues faced across the world and they want to do their part by choosing products that are sustainable and don’t harm the environment. Experts say that incorporating sustainable business strategies is an inevitable step towards the future, and it is best that retailers start planning for this as soon as possible. Brands can create an incredible journey towards sustainability and get customers to follow them along the way, and therefore building the buyer’s confidence in the products.
Halal versions of products
With 60% of its population practicing Islam, Malaysia is a major producer of halal goods in Asia. Halal is an Arabic word that means permitted by the Islamic law and it is commonly applied to food, pharmaceuticals and cosmetics. Therefore it is not a surprise that there was a 550% year-on-year growth for searches like ‘Toblerone halal and ‘Ovaltine halal‘. There is also major demand for halal cosmetics. This is a clear indicator that brands must respect religious beliefs, making consumers feel understood.
Much like all other countries, Malaysia has seen a lot of suffering during the pandemic, and people are looking for experiences that spark joy. In a non-pandemic scenario as well, positive experiences created by brands inspire trust and advocacy among customers. Buyers remember the brand for positive and optimistic marketing messages and they’re more likely to recommend products friends and family.
For example, KFC Malaysia launched the #KepciKitchen campaign in early 2020 to creatively engage customers. The brand encouraged customers to share photos of how they eat KFC chicken by giving them a chance to win delivery vouchers.
Expert views also suggest that familiar things make customers feel better, at a time of crisis. Therefore, making personalized recommendations and introducing localized goods can be favorable strategies to boost sales.
Adding on to the positive brand messaging, brands need to create meaningful contributions to causes that customers are involved in. The pandemic situation has brought the entire community together, and it’s an essential time for the brand to show up for the cause.
During the pandemic, popular home improvement store MR.DIY ran a donation campaign called ‘You Share, We Donate’. In this campaign, the brand aimed to encourage customers to share the company’s social media posts for a good cause – for every Facebook share of their short film, the company donated RM1 to the Malaysian Relief Agency.
There are many such examples from various brands, ranging from small stores to large conglomerates who have managed to build an optimistic brand image during tough times.
People buy emotions, not things
In the book ‘How Customers Think: Essential Insights into the Mind of the Market‘, author Gerald Zaltman demonstratesthat 95% of purchasing decisions are made through unconscious urges. Therefore, all evidence is pointing to emotional loyalty being the fastest way to carve a niche in the consumer’s heart. As customer priorities in Malaysia shift, it is more important than ever for brands to leverage emotions in their rewards program. Find out how you can include emotional loyalty in your campaigns / brand emotional connection and loyalty campaigns by talking to anexpert.
Customer loyalty is a behavioral characteristic related to the brand preference of a shopper. When a customer repeatedly purchases from your brand despite having an option to opt for products from your competitors, they are said to exhibit customer loyalty. You build this loyalty over a period on the foundation of positive, memorable experiences that the customer shares with your brand. The more delightful the customer’s experience with your brand, the more they are likely to continue purchasing from your brand.
Customer loyalty programs are customer marketing strategies that focus on influencing the loyalty of existing customers. Such programs typically reward customers for specific, explicit behavior such as making a purchase or engaging with the brand consistently and positively. The rewards offered as part of loyalty programs are usually in the form of discounts on subsequent purchases, giveaways or complimentary products, or special privileges such as exclusive access to newly launched variants or limited-edition products.
As consumer purchase journeys became increasingly complex and non-linear, brands are increasingly leveraging loyalty programs as a linchpin to orchestrate and create memorable brand experiences for every touchpoint.
For instance, Tata Group, a global conglomerate with a diverse product portfolio spread across FMCG, Fashion Retail, Hospitality, Consumer Durables, Automotive, etc. is designing a super app-centered, lifecycle-based loyalty program to offer a connected and unified customer experience for every stage in the customer purchase journey.
The Changing Loyalty Marketing Landscape
Over the last few decades, loyalty marketing practices have evolved to remain relevant to the changing customer behavior, time spent on digital platforms, and the 21st-century lifestyle. These changes led to :
Rapidly declining customer attention span due to the surge in digital platforms and content overload
Customers expecting the same benchmark for easy experiences set by tech-driven consumer companies like Amazon, Uber, Apple, etc.
The COVID-19 triggered lockdowns, and the subsequent market conditions further disrupted the consumer landscape, by forcing people to stick to the familiar and the readily available options for their survival needs. Not surprisingly, walking in step with these tendencies, about 30% of the marketers have reallocated their budgets from acquisition to retention efforts.
Thus, we see a shift from transactional loyalty programs towards engagement-based and emotional loyalty programs. We also see gamification, omnichannel approaches, and the use of Artificial Intelligence and Big Data.
Let us look at some of these trends.
Engagement-based and Emotional Loyalty
As consumers become more aware and participative in the categories they shop, brands need to go beyond the spend-to-get rewards model and allow for experiential and emotional engagements with shoppers. So, the idea is to let them ‘do things’ with you, ‘be a part of some cause’ with you, ‘guide and be useful to another shopper,’ ‘co-create branded content,’ ‘voice their product experiences publicly,’ and so on. These are great ways to make your customers feel cared for, worthy, and not merely someone with a wallet. These are also great ways to enhance customer loyalty and to keep your customers engaged between purchases.
A great implementation of emotional and engagement-based loyalty is by Health Promotion Board (HPB)* of Singapore’s flagship program – Health Insights Singapore (hiSG).
The objective of the program is to understand the behaviors and lifestyles of Singaporeans and use the insights to encourage a healthy lifestyle. Participants are offered a free Fitbit Ionic smartwatch that collects lifestyle and behavioral data across various health topics such as physical activity, nutrition, and mental wellbeing.
Members can download the Healthy 365 mobile app and earn HPB Healthpoints for various challenges and tasks like National Steps Challenge, Eat/Drink/Shop Healthy, Healthy Challenge, etc. Participants can redeem the points for shopping and dining vouchers, as well for EZ-link top-ups.
Another good example of emotional loyalty use-case is Sephora. The brand complements their member discounts with offers like ‘facials from skin-care-gurus,’ behind-the-scenes access to their product formulations, and point multiplier events. They are also enabling their customers to use points to donate to charities like National Black Justice Coalition (involved with the Black LGBTQ+ community) and Project Glimmer (working for at-risk girls).
Similarly, the folks at 100% Pure, as part of their loyalty program, Purist Perks, offer their customers loyalty points every time they donate a hand-sanitizer. It leaves their customers with a favorable perception of the brand and makes them more likely to shop from 100% Pure over time because they care for a meaningful cause and do their bit for it. In a nutshell, “members are craving value more than ever.”
*Capillary is proud to support HPB for this initiative.
Gamification of Loyalty Programs
We live in the age of distractions and an insane number of choices. This means loyalty programs have to encourage engagement and ‘stickiness’ to stay relevant. By stickiness, we mean the ability to hold your customers’ attention and interest long enough for it to be valuable to you and them! That’s why Gamification is increasingly being layered within loyalty programs. The idea is to make it addictive to customers and to keep them engaged with the program.
Today, more than two-thirds of the world’s top 2,000 companies have embraced gamification in some way or the other. And research tells us that gamification of customer engagement programs leads to a 20% rise in brand loyalty.
Let’s quickly look at the five essential ingredients of a well-gamified loyalty program. First comes the alignment of the gamified design with the exact behavior the brand is aiming to inspire. Say it is ‘referrals,’ then they would be winning something every time they bring a new customer to you. Second is the program’s simplicity – it should be easy to understand and play at every subsequent step! The third is measurability – ensure that your customers can check how far they stand from the end goal and what they need to do to get there (think progress bars). Fourthly, the joy of participating in your loyalty program must be shareable with peers through fun posts or tweets. Lastly, it should be mobile-first and should allow customers to engage with it on-the-go.
For instance, Bakmi GM*, a famed noodle restaurant chain in Indonesia leverages gamification-based loyalty initiatives like Spin and Win, Pick and Win to improve customer engagement and time spent on its mobile app.
Starbucks is another brand that has managed to blend several gamification aspects into a loyalty app. For instance, customers can earn Bonus Stars for 4,5 and 6 consecutive store visits within a specific time period.
The brand also sends push notifications to keep customers informed of their program status, tells them exactly what to do and how to redeem the rewards.
*Capillary is proud to partner with Bakmi GM for this initiative
Omnichannel Loyalty Programs
Today, customers don’t pay heed to the channel they use to engage with your brand. And they expect the flow of customer data to be seamless across different modes of shopping and engaging with your brand. These could be website eCommerce, mobile app, brick-and-mortar stores, Instagram, or Facebook. Your loyalty program’s effectiveness hugely depends on the comprehensiveness of the customer profile, purchase patterns, and accrued rewards that were stitched together from multiple channels and brand interactions. You may have gathered these data from multiple channels and will continue to do so. But it’s important to connect the dots in real-time, build a Single View of the Customer, and personalize your shoppers’ experience at every touchpoint they use to interact with you.
Dyson* leverages the massive reach of WeChat to create a seamless omnichannel journey for its Chinese customers. It works like this: the consumer sees Dyson’s ad in the offline world, scans the QR code, and starts following the brand’s WeChat account.
He/she receives Welcome Bonus points for following the brand’s WeChat account. Based on the user’s demographic & location, the brand sends a personalized promotion to the customer. Once a consumer makes a purchase, they can scan the product code to earn additional points and rewards which can be redeemed for online transactions and in-store transactions.
Malaysia’s leading pharmacy chain, CARiNG* offers a fully omnichannel, app-based loyalty program that offers the latest news updates, health screening packages, free checkups, workshop invites, shopping, and management of vouchers all in one place. Members can use the app virtually as well as in-store – for instance, redeem digital vouchers in the store through barcode scanning, etc.
Bata* is another brand that has unified different sources of customer information into a unified whole. The brand achieved 57X ROI through precision targeting, by connecting CRM and Loyalty insights with its Facebook marketing efforts. The brand wanted to reach their customers across all channels. And that naturally included social media, where customers today spend the bulk of their time.
The strategy helped them glean vital social media insights about customers which were used to further enhance their personalization efforts. Such dynamic and cross-channel data brings you information that lives and breathes every moment — not merely when the customer exhibits an actual purchase activity.
The 7-Eleven chain in Thailand, comprising of 11,000+ stores (managed by CP Group*) consolidated siloed data of its customers and launched a personalized marketing automation solution across traditional channels and the LINE messenger using the LINE MINI App. The program is currently integrated across the brand’s POS terminals and allows the brand to personalize its customer engagement at scale to improve repeat sales, conversions, and store visits.
*Capillary is proud to partner with Dyson, Bata, CP Group & CARiNG Pharmacy for these initiatives
Use of Artificial Intelligence (AI) and Big Data in Loyalty Programs
The ubiquitous nature of Artificial Intelligence has made it a necessity in your customer marketing and loyalty programs if you want to stay ahead of the curve. After all, it makes life simpler for both the brands and their customers. AI helps brands to analyze large volumes of data points from different sources, track customer purchase and behavioral trends, and uncover profitable co-relations to accurately predict the right product and promotions to showcase to a customer segment, at the right time, and through the right channel.
Apart from personalization, another key use-case for AI in loyalty programs in Churn Forecasting – the system can essentially predict the likelihood of a customer switching to a competitor by analyzing several factors like NPS scores, purchase patterns, latency, and transaction values.
Brands can leverage these insights to create a re-engagement communications plan that remains personally relevant to each customer’s purchase journey and genuinely customized to their needs and preferences.
B2B Loyalty & Influencer Loyalty
Loyalty programs have been the staple of B2C marketing, however, of late it has become a critical channel marketing and relationship management engine for certain sectors like construction, automotive service, pharmaceuticals, manufacturing, etc. where the end-customer is not the primary decision-maker. Manufacturers are increasingly using app-based loyalty programs to identify key influencers like carpenters, painters, electricians, mechanics, etc., communicate product launches/new promotions, and reward the best performing ones.
For instance, Jotun Paints*, a Norwegian chemical company dealing mainly in decorative paints and performance coatings runs a painter influencer loyalty program across 16 countries across Asia and the Middle East. The program is designed around a mobile loyalty app with a QR scanning module. After the painter purchases paint from a dealer, an invoice is generated. The painter opens the app, inputs the dealer name, transaction amount, and scans the QR code on the paint tub.
Both the painter and dealer are offered points for the transaction. This dual-incentivization resulted in a higher repeat purchase rate for Jotun Paints.
*Capillary is proud to partner with Jotun Paints for this initiative
Unified and Coalition Loyalty Programs
Also known as a ‘group loyalty program’, coalition loyalty is a type of “unified loyalty program” where a group of unrelated brands bands together to offer a joint loyalty program. They are becoming increasingly popular amongst customers since it offers them greater flexibility and choice in earning and redeeming points.
For instance, the multi-brand loyalty program TAPTAP by VIG Group* connects more than 32 F&B and Entertainment brands like Jump Arena, Otoke Chicken, Chewy Chewy, The Pizza Company, etc and reaches 30% of Vietnamese customers.
The mobile-based group loyalty program unifies 600+ stores and ecommerce sites to offer a fully omnichannel loyalty experience for its customers.
From a brand’s perspective, the coalition loyalty program increases brand reach by giving them access to a wider customer pool and also unify customer data to build 360-degree views (shopping preferences across different categories, product preferences within each category, overall purchase lifecycle, etc.). This makes business sense for large conglomerates that handle multiple brand portfolios.
However, retailers intending to join or create a group loyalty program need to be aware of a few key pointers. First, the rewards structure should be such that it incentives customers to shop broadly across multiple partners or brands within the group rather than focus on a single brand. Second, the program manager must be able to take into account the prices of individual firms when setting the value of rewards. And finally, the brands joining a coalition must be able to negotiate the share of program costs they will carry based on their value contribution; for instance brands with greater market/brand pull will bear a lower share of program costs.
*Capillary is proud to partner with the VIG Group for this initiative
How Loyalty Program Impacts Customer Behaviour and Benefits Brands
Loyalty programs are growing in popularity for a reason. They make customers feel valued. And when that happens, their purchase values, frequency, and engagement rates see a significant uplift.
Much of it is rooted in behavioral psychology theories and is validated by multiple data-driven research and studies, and it indeed has a real influence on what customers do. Let us look at the many ways in which a loyalty program impacts customer behavior.
Increases Purchase Value
Brands that incorporate loyalty programs in their marketing strategy see a direct positive impact on their revenues. A loyalty program provides brands with rich customer data that can be used to influence purchase behavior and create high impact cross-sell/up-sell opportunities.
For instance, brands can leverage customer insights to generate real-time, rule-based dynamic vouchers during checkout. Each coupon will be unique and highly personalized based on multiple factors like customer’s purchase patterns, product preferences, store location, etc.
Dynamic Vouchers helped a leading hypermarket chain to generate $8.8 million in incremental sales with 3X higher redemptions (compared to text messages). As per research by Frederick Reichheld of Bain & Company (the guys who invented the Net Promoter Score!), increasing customer retention by 5% increases profits by a minimum of 25% to a whopping maximum of 95%.
Customers Trust You with Their Data More Easily
A great loyalty program experience is an opportunity for brands to showcase true brand value and offer customers relevant product suggestions, discounts, and other experiences in exchange for data. Consider the case of ‘personalization.’ Millennials know personalization makes their world more fun, and statistics reveal that more and more millennials expect brands to personalize their communication and messages. The loyalty program plays a vital role in bringing the customer on the same side as you, in curating these personalized interactions. It makes your customers more open about sharing demographic, psychographic, or behavioral insights. For example, they will more readily fill out profiles as part of your research initiatives. Brands can take it to the next level by letting customers participate in product sampling and creating focus groups.
Turns Your Customers into Brand Advocates
Your loyalty program automatically encourages your existing customers to speak well of you among their peers. Happy customers who shop from your brand time and again quite naturally talk about their shopping choices and the benefits they receive to other customers and thereby attract new shoppers to your store. If you gamify the loyalty program and reward non-transactional behavior like referrals, reviews, and social shares, you can easily strike a goldmine.
Here’s a classic example of advocacy accelerating customer acquisition.
Loyalty programs also often have an element of pride associated with the higher tiers of membership. It offers a sense of privilege and gives your customers some bragging points. These then entice new customers to join in and participate in the exclusive experience that your brand designs for its premium clients. It works on a social-proof model and brings you more and more new customers, while you focus on keeping the existing ones happy.
Elicits Honest Feedback for Improvement
With a robust loyalty program, your brand creates a direct and intimate communication line with your customers. It makes members eager to provide useful tips, suggestions, ideas, etc. that can help increase brand equity. Loyal customers who have been members for years and have first-hand experience of what it means to be a part of your world are in the best position to offer genuine and relevant feedback. Thus, your loyalty program can make the ‘voice of your customers’ louder and more authentic! You and they are ‘in it together’ and this way, your customers get to extend their influence over what you do, the products and services you offer, and so on. These can lead to new product developments, service design revamps, and even exploration of new retail and commerce channels.
Multiplies Participation in Omnichannel Campaigns
Your loyalty program also adds jazz to your activation events, digital marketing campaigns, product launches, seasonal offers, etc. Having a reliable database of active and emotionally connected customers gives you access to a pool of people who are many times more likely to respond positively to your communications, campaigns, contests, and more. This display of camaraderie and belonging in a public environment, whether on social media or in the real world, makes for a high conversion marketing cohort. For example, Harley Davidson is known for the ‘fierce’ loyalty it inspires among the ‘Harley Owners Group (HOG)’ – so much so that customers not only purchase and ride Harley bikes but also buy branded accessories and clothing.
Engages Customers as Brand Custodians
When your loyalty program succeeds in making your customers feel a sense of camaraderie with your brand, they naturally become your brand custodians – living, breathing people who defend a negative perspective about your brand.
Today, marketing in a digitally connected world is highly competitive, and prospective customers spend hours researching your brand and reading product reviews. Sites like Amazon, Facebook, and Google Reviews have become extremely relevant, and customers tend to trust them blindly.
Having a reliable and loyal customer base helps you stay ahead of the curve in trying times. Happy customers often answer frequently asked questions on your behalf, pitch in to help a fellow user or shopper out, and offer their two cents wherever they can make a difference. That’s why rewarding customers for non-transactional behavior like writing reviews, sharing social posts, and referrals goes a long way in expanding your reach as a brand.
Brings a Higher Return on Marketing Spends
We all know that acquiring new customers can be too costly, many times more than retaining existing customers. This is where loyalty programs wield their magic wands and multiply your return on every marketing cent invested. Loyalty programs act in a dualistic way to improve your marketing ROI: by giving you access to critical insights (interests, preferences, purchase lifecycle, etc.) on a deeply engaged cohort with reduced purchase friction and through referrals/advocacy etc. As the loyalty program matures, it turns into a self-sustaining and self-managed system (with the use of technology and effective management, of course!), that increases revenue and sales from existing customers while helping you acquire new customers at a reduced cost. The exhibited loyalty also results in a bigger market share and a more stable stock market performance. In short, the loyalty program helps you create wealth for your organization, your customers, and your shareholders.
Cushions you During the Rough Times
COVID-19 has exemplified how vulnerable the world of brand-consumer interactions are to global socio-economic factors. It has also shown that we live in a world where structural changes can happen faster than we can imagine. In this context, the relevance of brand loyalty has increased tremendously. At the same time, the grounds of loyalty have become shakier. Brands with a loyal customer base have indeed found it easier to engage, empathize, allay fears, and go out of their way to offer support. Loyalty programs bless brands with access to real-time, relevant customer data, and insights(decline in-store visits, reduction in average purchase value, shifts in product segments, etc.). It has helped brands leverage cross-channel communication through emails, social media, and WhatsApp to spark relevant conversations with their customers and maintain brand recall. Brands with limited access to customer insights will find it extremely difficult to revive themselves, reconnect with their shoppers, and identify them when they return to normal shopping behavior post the crisis.
How to Create a Loyalty Program?
Since loyalty programs are central to a brand’s operations, they need dedicated resources, time, management, and energy from your organization, especially during the initial stages of charting out the structure and the design specifics of the program. Far too many brands follow a fire-and-forget approach to deploying a loyalty program which results in them becoming liabilities instead of profit centers.
To be successful and have a positive impact on topline sales, loyalty programs need to be synced into the overall organizational strategy, specific business goals, and customer aspirations. Let us look at the main steps in creating a successful loyalty program.
Defining the goals and objectives
Start from your overarching business goals and identify where the loyalty program fits in. Narrow down on the critical business objectives you want to fulfill from the loyalty program. And then, evaluate the financial return on investment you would expect from your loyalty program. Going through this process can feel a bit like going back to your business basics, but that’s the intention here. It sets you free from biases and outside influences and lets you focus on how and why a loyalty program matters to your business at this point in time. Once you have these broader questions sorted, you will have the wherewithal to build a business case and refine it according to your budgets, resources, technological readiness, and customer needs.
Designing the route to loyalty
Once you have the rationale and your business case ready, you can get your creative juices flowing. This is where you can involve different perspectives both within and outside your company. Thinking about the ‘customer’s journey and experience’ is the most critical piece here. Put yourself in customer’s shoes or even better, get them involved in the program design through surveys, focus groups, or in-depth interviews. Insights gathered here will tell you a lot about customer motivations, preferences, behavioral traits, shopping tendencies, etc. Also vital is insights gathered from internal stakeholders across the organization – from store staff to Marketing Managers to Customer Service to the C Suite. These will help you discover what your customers want to achieve and how your brand can be a part of those aspirations. For instance, Amazon Prime was conceived around a key insight: customers hated paying shipping fees. Once you crack this for your brand, you will be able to figure out the protocols on which your loyalty program will work – i.e., the exact behaviors you want to influence, how to control them, and the value your customers will derive from participating in the program.
Analyzing your technological readiness
For a long time, loyalty programs remained fairly simplistic and were isolated to a single platform. But as they grew in complexity and functionality, loyalty programs became a centerpiece of the entire customer experience. New-age loyalty programs are extremely cross-functional and require close integrations with multiple systems like CDPs, Marketing Automation, Analytics, POS systems, in-store analytics, CRMs, and ecommerce platforms. The most important thing to ensure before launching your loyalty program is that you have the capability to process and make sense of the mountains of data that it will inevitably generate. Having the technology piece figured out is half the battle won.
Planning the program launch and promotions
Launching your loyalty program is a lot like launching a new product or campaign. You must know what to say, to who, and through which channels. For instance, you might have a segment of existing customers who will be more inclined to join the program and a segment that is likely to contribute the highest revenues. Try to find the overlap between these two segments. Also, at this point, you must have a sense of the marketing/promotional budget along with the expected signups/membership target. Let’s look at these aspects individually.
Knowing what you are aiming to achieve with your loyalty program launch is very important to : keep you, and your team focused, assess your launch’s performance, and tweak your variables midway if required. The key performance indicators could be the awareness generated, conversations triggered, word-of-mouth reach, and enrollment.
Exposing your entire customer base to the program at one go is not a good idea, simply because you would have left no scope for testing different versions of the same. We suggest that you create a small subset of customers with diverse purchase patterns, product preferences, engagement levels, and channel behaviors to test out the program in terms of engagement, customer benefits, and return-on-investment. This will surface your Ideal Customer Profile for the program and also give you and your team enough bandwidth to manage the program since it would be easier to deal with the expectations of a smaller customer base.
Everyone in your company should be thoroughly familiar with your loyalty program and the way it will change your customer engagement dynamics. All your employees must know what your loyalty program is all about, how it works, and how it fits into the broader business goals. These include your in-store associates, your customer support executives, your customer experience specialists as well your marketing and customer communications teams. The last thing you want is for your customers to feel your employees do not know what’s going on.
Your loyalty program launch communication should be easy to spot, simple to understand, and tempting enough to drive your customers to enroll or act upon the same. Tell them what’s in it for them and what they need to do to derive the benefits. It is also essential to use the right channels for promoting your program. Since a major selling point of a loyalty program is the exclusivity and ‘Inner Circle’ aspect of it, it’s important to make your customers feel special while communicating the program specifics. One-to-one communication channels such as Emails, SMSs, messaging apps like WhatsApp are a great way to capture customers’ attention and engage them better. If the program content and benefits is personalized to a customer’s age, location, purchase history, and product preferences, that’s even better!
Continuous program improvement
Once your loyalty program is in motion, it’s important to keep a close eye on how it performs. This, of course, requires having access to data reports and dashboards that give you a detailed and summarized view of program-driven ROI, contribution to the topline, customer engagement trends, location wise and season wise patterns, and more. These insights give you the necessary inputs to modify and optimize your loyalty program, and transform it into a self-sustaining virtuous cycle of rewards and revenue-creating a win-win scenario for both your brand and your customers.
It is here that investing in a holistic loyalty program management platform reaps enormous benefits. You can consolidate all your customer data in one platform, gain omnichannel insights into how customer interactions and shopping behaviors have been influenced by the program, and get real-time insights for the very critical seasonal sales and promotional campaigns.
5 Ways to Increase Brand Loyalty
Now that you are familiar with the hottest trends in loyalty programs and customer retention strategies, here are some of the best practices to increase brand loyalty amongst your customers.
Birds of the same feather flock together! If your customers feel you are ‘like’ them and that your values, priorities, and motives are similar to theirs, then they naturally get attracted to your brand. You can build brand affinity by associating with an influencer who fits in with your ethos and is respected and admired by your customers. You can also build affinity by spearheading a social cause, for instance, leveraging your loyalty program to minimize the negative impact on the environment or some unmet needs of a certain unprivileged section of the society. For instance, Shell* helps its customers minimize the impact of their carbon emissions by offsetting their fuel purchases using the Shell Go+ app.
The brand uses fuel purchase data to calculate the total carbon emission per customer and offsets their carbon emission by supporting groups and communities involved with preventing deforestation in regions like Peru and Indonesia.
*Shell has an active engagement with Capillary
Unique convenience aspects of your program create additional engagement and brand stickiness. Use-cases include access to online shopping channels, discounts within a partner ecosystem, value-addition (access to experts, workshops, exclusive events, etc.), fast shipping, or hassle-free returns. Analyzing the customer experience in its entirety will make it easy for you to understand how the program will benefit the customer at every stage of the purchase journey.
HBR research revealed that the top 10 most empathetic companies increased their financial value more than twice the bottom 100. Empathy and compassion here relate to day-to-day relationship micro-moments with customers rather than a ‘big act.’ Human-to-human interactions – such as between your staff and customers, at any of your stores, online, over email, or phone – are opportunities to make a positive difference. This, however, requires empowering your staff to act in the best interest of the customer.
When Nintendo launched Pokemon Go, 800 million people downloaded the app, raising Nintendo’s share value by 86% in the first week alone. Nostalgia has a strong pull-effect. It strikes a chord with customers across age groups, geographies, and ethnicities. Brands can find ways to resurface old memories and times lived, through advertising, digital campaigns, or merely one-to-one, personalized emails, and intelligently crafted messages based on the person’s profile and interests. This builds an association between memories and the brand. Paperboat, the Hector Beverages owned food and drinks brand leveraged this effectively in their mass campaigns and brand communications. The brand posted a 62% surge in revenue for FY19.
Otherwise known as ‘premium’ or ‘paid’ loyalty, customers pay a fee to earn special loyalty privileges in this type of program. Although subscription loyalty need not wholly replace a freemium version of your loyalty program, it can certainly complement it. The benefit of a paid model is that you can offer instant rewards to customers – right from sign up – without impacting your bottom line. It also nullifies the typical program lag between earning points and redeeming rewards. Members within a subscription loyalty program usually contribute significantly higher sales and revenue due to the loss aversion mindset.
How to Measure the Success of your Rewards Program
Once you have launched your rewards program, you need to monitor its performance continually and observe the trends and changes in your customer behavior, sales, and customer satisfaction metrics.
Certain specific key performance indicators (KPIs) help to measure your loyalty program’s success.
Repeat Purchase Rate (RPR)
The repeat purchase rate is a ratio of your repeat customers versus your total buying customers. It gives you an assessment of the pull factor and brand affinity. To calculate this metric, run a report on your total number of customers, followed by your total number of repeat customers. Divide the number of repeat customers by the number of total customers. Next, multiply that number by 100 to get a percentage (i.e., 0.01 is 10%).
Each industry has a different benchmark for Repeat Purchase Rates (RPR) and each store will have a different RPR depending on the inventory mix and which customer segments you’re targeting. Generally, a 20-40% RPR is considered a good range. A dip in RPR is indicative of an ineffective customer engagement/ marketing strategy and/or loyalty program architecture. Try executing personalized (demographic, purchase lifecycle, product preferences) cross-channel marketing for your target segment, along with Bonus Point promotions, Win Back offers, etc.
Customer Retention Rate (CRR)
You are converting visitors into buyers but are you able to keep them engaged for months or do they switch to a competitor after the first transaction? The answer lies in your Customer Retention Rate.
Also shortened as CRR, the Customer Retention Rate is another way of measuring the extent to which your brand and loyalty strategy is able to retain your customers over a period. You can calculate it as per the below formula:
The customer retention rate reveals the percentage of customers returning to your brand within a specific period. It thus removes new customers added during the period to give you the ratio. Your loyalty program will have a significant influence on the Customer Retention Rate (CRR) and a dip in CRR requires reassessing your program structure like reward catalog, earn/burn rules, tier upgrade rules, and ease of redemption. There are several ways to boost your CRR: optimizing your loyalty program architecture and increasing engagement and brand recall through cross-channel marketing, personalizing promotions to a micro-segmented audience, and utilizing customer feedback and surveys to enhance products and services.
Loyalty Redemption Rate (LRR)
This metric is a good measure of your loyalty program’s engagement value as it reveals how participative your customers have been. Loyalty Redemption Rates (LRR) is critical to the effectiveness of your loyalty program since it has a direct impact on your loyalty-driven topline sales. The redemption rate depends on your loyalty program’s simplicity, attractiveness, and popularity among your customers. It is a ratio of the total points redeemed by customers versus the total points issued by you over a period.
The loyalty redemption rate helps determine the relative success and ease of utilizing different loyalty initiatives, types of loyalty points, and earning and redeeming methods.
A low Redemption Rate indicates that your customers are not actively engaging with the program, either due to complex program structure, steep redemption rules, lower value Per Point (VPP) or a restricted reward catalog.
Customer Lifetime Value (CLV)
CLV, or Customer Lifetime Value, is a master metric that analyzes a customer’s value across the brand relationship cycle. It calculates the value customers have already brought to your brand and also predicts the future value they could add. CLV is the difference between total revenues (earned plus expected) and the total costs of acquiring the customers (incurred plus forecasted).
At a glance, CLTV tells you how much a customer is worth to your brand and gives you insight into their overall value. From there, you’ll have better clarity of how much you should be investing in customer retention going forward. This is a great way to segment your highest-value customers, giving you a chance to target them with personalized campaigns intended to increase engagement and loyalty —and their overall spend. A CDP integrated loyalty platform like Loyalty+ is an excellent tool for calculating CLV, since it aggregates all the key data components in one place.
Increasing Customer Lifetime Value is usually the topmost KPI for brand managers and marketing heads. In a retail scenario, CLV boosts can be achieved by increasing the Average Order Value and Purchase Frequency through personalized, time-bound Dynamic Vouchers, Celebratory Campaigns (Birthdays/Anniversary etc.), Bonus Point Campaigns, cross channel marketing etc.
Loyalty marketing is quickly evolving beyond the confines of being just a retention program and into a critical entity within the Customer Experience flywheel. As a result, loyalty programs have become complex engines with many moving parts that – when managed well – can significantly accelerate the company’s growth and revenues. A well-run loyalty program can dramatically increase the economic value of an organization by means of continuous investment in the right customer acquisition channels and marketing strategies to improve profitability. And most importantly, they are a key factor in crafting those micro-moments of delight throughout the purchase journey; and transforming casual shoppers into staunch brand advocates.
Except for supermarkets and convenience stores, most retailers see a customer an average of 5-6 times a year. The ongoing digital explosion will likely reduce the frequency to 2-3 in the coming days.
Unfortunately, traditional loyalty paradigms are built around the number of transactions and repeat purchases. To make it worse, even as customers’ behaviour and purchase journeys have become increasingly complex and non-linear, retailers are still stuck with a one-dimensional view of customer loyalty.
Rethinking Loyalty Program Paradigms
In the last few decades, customer loyalty got heavily tied to discounts, points and promotional offers – basically a purely transactional or functional form of loyalty. The biggest reason for this is sheer convenience – it’s easier to nail down the rational aspects like repeat sales, basket size, and customer lifetime value (CLV). However, this only provides a one-sided view of loyalty – for instance, a customer might detest a brand but continue purchasing their products due to lack of choice (Comcast?).
There are critical downsides to measuring customer loyalty from a purely transactional standpoint. And these downsides are becoming increasingly accentuated in the digital world.
Today’s ever-connected customers have hundreds if not thousands of choices at any given point. And as humans typically do when presented with a lot of choices – they rely on several factors like brand experience, emotional connect, convenience, price and reviews from friends and families to guide their choice. With so many variables on the table, how do brands begin to predict customer behaviour?
The answer lies in seeing customer loyalty with a dualistic mindset: one with an emotional as well as a transactional nature. And with each passing day, it’s becoming imperative for brands to view customer loyalty from this new vantage point.
What is Emotional Loyalty
Rather than give you a long-winded and boring definition, we’ll try to explain it with an example. Imagine a tourist exploring a new city. After a long day of sightseeing, he feels drained and craves a coffee and sights:
Phew, I badly need a coffee, is there a Starbucks nearby?
That sums up emotional loyalty – it’s a fast and almost instantaneous positive preference for a brand with zero rational or logical deliberations. Unsurprisingly, Starbucks also has one of the best loyalty programs in the F&B space.
Components of Emotional Loyalty
A customer feels an affinity for a brand when they deliver great goods and the branding matches their lifestyle. It’s important not to confuse ‘Affinity’ with ‘Loyalty’ . A customer might feel an affinity for a brand but it doesn’t mean he/she will be loyal to it. In a sense, ‘Affinity’ lies closer to ‘Preference’ or ‘Liking’. For instance, customers who only have an affinity for a brand will easily switch to a competitor with a better product or lower price.
As the name implies, ‘Attachment’ implies a connection to a brand. A large part of attachment is tied to how a company engages with customers. Make the effort to build meaningful connections through highly personalized communications that are relevant and useful to the customer to strengthen this aspect of emotional loyalty. Another great way to improve the brand attachment quotient is by rewarding engagement, in addition to transactions, and recognizing premium customers with exclusive benefits and acknowledging their status in every communication.
Trust is the most important element in the emotional loyalty construct. It’s essentially the framework on which Affinity and Attachment are built upon. Brand communication and customer engagement are critical in establishing trust. To create a sense of trust, offer authenticity, great support, timely communications, respect for customer privacy and ability to provide feedback.
How to Measure Emotional Loyalty
Marketers typically track behavioural loyalty metrics like conversion rates, customer value, basket size to gauge the effectiveness of a loyalty program. However, it’s equally important to analyze emotional loyalty metrics that gauge intent, sentiment, perceptions, and customer experience :
Net Promoter Score (NPS) :
Envisioned by Fred Reichheld of Bain & Company and Satmetrix Systems, NPS measures customer responses to the famed single question: “How likely is it that you would recommend our company/product/service to a friend or colleague?”. It is a highly popular framework due to its simplistic nature and how the score calculations are clearly defined. However, that simplicity can often hide the root of the problem. For instance, brands with very dissimilar distribution of Detractors, Passives & Promoters could arrive at the same NPS score. Therefore, NPS scores should always be used in conjunction with other Customer Experience metrics and business results.
Customer Satisfaction Levels :
Tracking customer satisfaction levels through simple surveys can offer brands a sense of how customers perceive the brand. These informal surveys allow marketers greater freedom in tackling specific issues and reporting them. Granted that they might not offer the clear metrics and apples-to-apples comparison NPS offers but they can reveal abstract and often hidden insights. For instance, when Expedia aligned Customer Satisfaction with other loyalty metrics, it discovered a key insight: customers are frustrated when offered two one-way flights at a lower price than a roundtrip due to the hassles with changing flights. This helped Expedia to streamline the booking process thereby elevating customer satisfaction.
Sentiment Scores :
Sentiment Scores are a good way to unearth the overall brand perception and customer intent. The common way to do this is through text analysis of internal and external customer feedback (blog comments, surveys, call center transcripts and social media data). Sentiment analysis generates a word cloud that uncovers what’s working well and what are the most painful aspects of the customer journey. A word of caution: Sentiment Scores are perceptions and might not directly translate to action so it’s important to overlay them behavioural metrics like repeat sales, churn rate etc.
How to Nurture Emotional Loyalty
Building emotional loyalty requires an integrated and dynamic mix of activities and interactions between your brand and customers that will drive personalized engagement at every touchpoint. Here’s how successful loyalty programs build affinity, attachment, and trust among customers:
Create unique, personalized experiences
From premium rankings to exclusive event passes, customers expect unique, personalized rewards and experiences that make them feel special and appreciated. Ensure your loyalty program offers these one-of-a-kind rewards by leveraging loyalty data to understand customer preferences and interests. Alternatively, offer early access to sales or limited-edition rewards to make customers feel good and build a greater emotional attachment to the brand.
Anticipate your customer’s needs
Just as customers expect a more personalized experience, they also expect brands will leverage customer data to predict their next likely action with a brand. Brands can add value for customers by demonstrating they understand their needs and are committed to creating a better brand experience for them. Enterprise loyalty program platform like Loyalty+ offers predictive modelling capabilities which capture customers’ contextual and behavioural data and leverages it to predict next-best-action in the customer’s journey.
Prioritize data security
Make data security a top priority— invest in loyalty management best practices that protect customers against fraud and spam. Doing so ensures great customer experiences while driving greater trust with brand advocates who know their data and privacy are respected.
Encourage two-way communication
A strong emotional relationship requires honest communication. The same holds true for emotional loyalty. Allow customers to connect with you to provide their feedback and opinions. This creates a sense of being valued, appreciated, and respected; creating attachment and trust. Conduct VOC polls and surveys to validate your product concepts or messaging while generating data that can be used to create more relevant, targeted experiences that will resonate with your target audience.
For most of us, Covid-19 is the first time we have lived through a globally traumatic and emotion-inducing event, in real-time, with the whole world connected. From a brand’s perspective, Covid-19 has reminded us, rather dramatically, that emotions are a big part of our decision-making process and how fear, anxiety and panic can impact sales.
Based on our interactions with 400+ brands, Thought Leaders and Retail Experts, we’ve compiled some strategies focussed on enhancing engagement, maintaining top of mind recall and creating long-term emotional connect with your customers during these tough times.
Key Strategies to Build Emotional Connect
Lead with Empathy
One of the easiest ways to connect with your customers is to empathize with the challenges and struggles that they are undergoing due to the crisis. There has been a massive shift amongst consumers preferring socially conscious and sustainable brands in recent years and this is a good time to showcase your brand as socially responsible and empathic when the times are tough.
Campaign Ideas :
The core idea should be to replace sales-oriented marketing campaigns and promotions with human stories centred around your staff, your customers and the larger community. This positions the brand as someone who cares about what consumers truly value rather than what sells. And by creating content that evokes empathy, consumers are more likely to take action – sharing, responding, and even prompting change within their own communities.
First and foremost, remind your customers that you are there for them in any which way you can be.
Your customers are your community – let them know how you’re responding to the crisis, how you’re conducting business, and what health precautions you’re taking.
Ask your customers how you can support them during this time, and let them know how they can support your brand as well.
Share stories that reiterate your commitment towards your frontline staff like paying their salaries in advance or setting up an emergency fund through SMS and on social media. Most importantly, encourage your employees to comment and share these posts to ensure maximum reach.
Send a community wellness mailer on what your brand is doing for the community – for instance, opening up warehouses for providing refuge during quarantine, increase health care or basic pay for employees who are unable to make it to work etc.
Example: Store Closure Communication by Reformation
Sustainable fashion brand, Reformation, sent out this email to its customers that addressed how they’re responding to the crisis along with a note at the end asking them what they should be talking and posting about. By being candidly vulnerable about not being sure as to what they should talk about, they have been able to create empathy for themselves with their consumers. This small detail shows that they care about their consumers and are open to ideas (in the process elevating them to collaborators rather than just end users).
Align your message with ongoing health & safety protocols
Brands can echo or amplify government and health organization guidelines by serving as PSA disseminators during this crisis. By rallying your customers around a larger and pertinent cause, your brand gains a dual advantage – you cultivate the team spirit and tribe-like mindset amongst your brand audience, and more importantly, you position the brand as sensitive to the realities of life; thereby making it more humane and relatable.
Campaign Ideas :
These campaigns are great for apparel and sportswear brands where there is a strong brand preference and following amongst their customers. The key is to get the overlap between your brand story and the overarching PSA message right.
Explore ways to weave your brand story into the ongoing narrative around safety and hygiene
Use your Brand Heart (purpose, vision, mission, and values) as your North Star to remind yourself what your brand stands for, and how it relates to the current crisis
Build a community activity around this, fostering a feeling of “we all are in this together”, and hence a large extended family.
Example : ‘Play Inside’ by Nike
The apparel giant put out a great campaign that encouraged people to ‘play inside’ to comply with the ongoing social-distancing measures enforced by governments. With the campaign, Nike managed to stay true to its inspirational branding while communicating a timely and relevant message. The brand encouraged customers to share home workout and fitness snaps on Twitter and Instagram to maximize brand reach and foster a feeling of community- online challenges are a great way to drive the cohesive mantra.
Focus on value-driven content
With the majority of the world’s population being home-bound, digital content consumption is at an all time high during the crisis. This is a great opportunity for brands to build stronger emotional connect with their customers by going beyond the usual transaction-based promotions and communications. Research in behavioural science and consumer behaviour has proven that these non-transactional engagements serve as building blocks for long term brand loyalty.
Campaign Ideas :
These campaigns are heavily context and content-driven so don’t worry too much about getting the technicalities right. A simple video shot on a mobile phone will do the trick if the story and content is engaging. Just be mindful of toning down the sales pitch and instead, focus on delivering helpful content.
DIY videos and webinars are a great place to start – brands can communicate a range of useful and educational content around upcycling (Fashion & Apparel), repairs (Appliance & Electronics), recipes (QSR & Hypermarkets), beauty tutorials (Cosmetics) etc
Curate ideas on optimizing WFH schedules, staying fit and other styling advice
Gaming has also become a viable medium for brands to connect with their customers
Offer free home trials of products, or leverage immersive technologies like AR to help customers visualise a look once they enter their basic body size parameters like chest, waist etc.
Serve as a source of trustworthy information and even inspiration amid widespread uncertainties about public health and the pandemic’s economic consequences
Example : B Bounce by Burberry
Burberry has launched an engaging and playful game in which players race a deer-shaped character to the moon, using supercharged Thomas Burberry monogram puffer jackets. Players compete for special B Bounce prizes, and winners are awarded custom made GIFs and virtual Burberry puffer jackets edited onto a digital picture of their choice. With this campaign, the British fashion house intends to maximize digital share around its latest collection of down jackets.
Support a cause and provide an avenue for your consumers to engage with the community
Cause Marketing creates a win-win situation for the brand, the consumer and the charity. Across the world, consumers increasingly expect the companies they buy from to act responsibly and stand up for issues that matter. A survey by Havas found that meaningful brands that take a stand more than double the performance of stock indices on average.
Campaign Ideas :
If your finances permit, consider giving a percentage of each sale to an organization working to fight the Covid-19 crisis. This allows consumers to support the brand they love while also supporting those working to alleviate the impact of the epidemic. Here are some other ways to run a Covid-19 support campaign
Make donations shoppable – select a charity helping those affected by the virus, then add an option to ‘buy’ the donation in your catalog.
When customers “purchase” the donation, you can reward them with exclusive loyalty program perks
Allow customers to use their loyalty points/birthday vouchers to donate to a specific fundraiser with brand matching the donation amount
If financial contributions are not an option, consider letting out warehouses to host vulnerable sections of the society, or repurposing factories to produce hand sanitisers and face masks.
Example : Feed the Daily Wager by Zomato
Zomato launched the campaign to support the 450 million daily wage workers in India who have lost their livelihoods due to the lockdown. The brand has managed to raise USD 3 Million through donations and has distributed more than 100,000 ration kits. The campaign was widely circulated on various social media by Zomato employees and consumers and raked massive engagement in the digital universe. The Covid-19 clearly showed that customers prefer connecting with brands that go beyond their business model and work towards the larger good of the community. It’s notable to see that Zomato as a brand simply served as a platform for this campaign while all the donations have come from consumers and employees.
As you go about using these strategies, it’s important to remember that while business stability might be the primary focus for you, your customers are facing physical, emotional and financial strains during this time. In such troubled times, it is best to over-communicate rather than under-communicate. Much of the problem in the current crisis is uncertainty and the associated anxiety. Try to alleviate it by being in touch with your customers on social media and other communication channels. Send personalized messages to your customers to check in on them and share any uplifting or inspirational news about your brand as and when it happens.
Most of all, stay safe, and please feel free to reach out for anything.
In today’s world of infinite brand options and glocal markets, product differentiation is tough to keep up with, market domination is short-lived, and share of voice ever diminishing. So, how does a brand increase its sales? By transforming its relationship with its customers and making it worth their time and money to become lifetime loyalists.
The Changing Loyalty Scenario
Some time ago, customer loyalty was measured merely by transactional metrics, such as the share-of-wallet, and the value of lifetime purchases. That was an era of transaction-based loyalty marketing. Brands incentivized customers to spend more in less time through points-for-purchase programs, use-before-it-expires vouchers, and buy-two-get-three offers. It did help in fetching more revenue, but it lacked a holistic approach. Mostly, it saw customer value in the moments of purchase, which looked more like dots across the customer lifecycle and thereby missed the arc of engagement where multiple moments-of-truth existed, and if managed well, could lead to a virtuous cycle of wealth creation.
Today, the paradigm of customer loyalty marketing has shifted from one with a rational, transactional focus to one based on emotional engagement.
It has been necessitated in part by the new generation of ‘connected’ shoppers – those highly conscious and vocal about their persona and their ideologies concerning purchase decisions. These digitally connected shoppers have enormous power to influence new purchases – by posting a product review on Amazon, referring the brand to a friend over Messenger, or recommending it proudly through Instagram. And they exert this power not because they want to buy something but because they want to engage, express and emote feelings.
Thus, engagement-based brand loyalty programs that build emotional bonds with your consumers and nurture a relationship of trust and joy become far more relevant in today’s world where every consumer is a potential influencer.
Introduction to Emotional Brand Loyalty
When customers are emotionally loyal towards a brand, they keep coming back, to meet specific emotional needs (as opposed to merely transactional needs) – which may be ideological or social. Take the case of Dove’s ‘real beauty’ philosophy; it doesn’t only sell a bar of soap but reinforces the idea that ‘natural is beautiful.’ Thus it creates emotional bonds with women who ‘like to feel’ the same way. Or take the case of TOMS Shoes, which donates a pair to a child in need for every pair of shoes it sells. Customers who want to make a difference keep coming back to TOMS and ‘feel’ good about it!
There are three shades or ways of emotionally connecting with a brand, better known as the three components of emotional loyalty – Affinity, Attachment, and Trust.
Affinity means ‘I like the brand,’ and is the first step towards a deeper emotional connection. It doesn’t, however, guarantee brand loyalty when given cheaper, or more convenient options.
The second level of emotional loyalty is ‘Attachment.’ The customer feels cared for, and brand interaction is personalized and relevant. There may even be special privileges that keep the customer coming back.
The third and the most potent shade of emotional loyalty is ‘Trust.’ When the brand consistently fulfils its promise time and again, through every touchpoint, it earns emotional loyalty in the real sense.
Benefits of Engagement-Based Loyalty
According to Forrester Research, emotion is the #1 driver of loyalty. A study by Capgemini further reveals that ‘Consumers with high emotional engagement’ buy the brand 82% of the time whereas ‘Consumers with low emotional engagement’ buy it only 38% of the time. That’s interesting to know for marketers. But how is emotional brand engagement superior to transactional incentives in achieving brand loyalty? Let’s delve into the unique benefits of building engagement-based loyalty among your customers:
Encourage Positive Brand Conversations
By associating a reward for non-purchase actions by their customers, such as referrals, reviews, shares, or blogging, a brand can connect with many more customers as opposed to only those who end up making a repeat purchase. Thus, a brand can generate rich conversations around the product, which are long-lasting and serve as an asset for brand image.
Unearth Hidden Customer Insights
When a brand offers its customers a safe and comfortable space to emote and engage, irrespective of whether they ultimately buy a product, it can observe otherwise unknown facts about their behaviour, preferences, aspirations, and find interesting sweet spots for meeting customer needs that are ever-evolving.
Earn Friends, Not Just Customers
A friend in need is a friend indeed. Here we are talking about emotional needs. A customer may want to know more about an item from other users, may wish to speak to the brand representatives, or try a product for free. These behaviors may stem from a need to get assurance, feel secure, or allay any fears about using the product. An engagement-based loyalty program appreciates these needs and thus forges lasting friendships. And not surprisingly, purchases naturally follow, soon after.
Thus, engagement-based loyalty programs facilitate an emotional connection between the brand and its customers. They help you cultivate champions who wear your brand on their sleeve and make it a trusted name among their peers. Best Practices for Engagement-based Loyalty Programs
While emotional engagement is much more holistic than a transactional one, building a loyalty program based on customer engagement is also much more complicated. Brands have to think about the indirect bottom-line impact of the various ways in which customers may engage with them. It requires a smart approach with the ability to connect the dots between customer interactions and future purchase actions. Let’s discuss some best practices to adopt when formulating your engagement-based loyalty program!
Engagement-based loyalty programs are for the long haul. Hence, the program specifics and execution must fit in with the brand’s vision, long-term goals, and personality. Right from the start, even the timelines to measure the impact of these programs must be longer. A monthly sales target, for example, is a bad idea when assigning objectives to your emotional-loyalty marketing initiatives. Positive word-of-mouth, say over six months or a year, makes much better sense.
KEEP IT SPECIFIC AND MEASURABLE
It is vital to gauge the performance of engagement-based loyalty marketing to assess the effectiveness and fill any gaps. Each program must have specific goals attached to it – say for advocacy program, it could be the number of positive reviews and impressions received (for those reviews). Similarly, for referral programs, the goals could be ‘the number of referrals generated’ and ‘the monetary value of referral purchases’ that follow.
COMMUNICATE THE REWARDS CLEARLY
What’s in it for your customers? While yes, a happy customer would willingly engage with your brand, there is always a cost associated with that for every customer. Some may be hard-pressed for time; others may not have enough motivation. It is, therefore, essential to stimulate them to act by clearly telling them about what they stand to gain on engaging with the brand in specific, meaningful ways.
MAKE IT ACHIEVABLE BUT NOT TOO EASILY
Meeting the engagement criteria to be eligible for the rewards must require a healthy degree of effort from your customers. Something too easy to do may attract less than sufficiently motivated customers and something too complicated, may discourage most of them. Also, there must be different levels of engagement achievable gradually, i.e., over some time. It will ensure that your customers do not end up exhausting the various engagement options too soon, and will keep them interested for months if not years.
LIVE UP TO THE BRAND IDENTITY
Last but not least, your engagement loyalty program must have your brand DNA in it. Every customer touchpoint, when rolling out the plan, onboarding the customers, or rewarding them for positive and meaningful engagement, must reflect the promised brand personality, values, and philosophy. Together these will strengthen trust, which itself will further reinforce loyalty.
Together, the above principles will help you design a winning brand loyalty program that has a healthy mix of transactional and non-transactional components and treats your customers as people and not just wallets.
To conclude, as Philip Kotler says – satisfied customers do the best advertising.