Should loyalty efforts begin earlier in the process?
By Keith Smith, Co-Founder and CEO, BigDoor
SEPTEMBER 30, 2014
Through a special arrangement, presented here for discussion is a summary of a current article from LoyaltyTruth.com, a blog published by Hanifin Loyalty.
Many marketers believe that loyalty efforts should kick in at the retention stage.
After all, it's six to seven times more costly to attract a new customer than it is to retain an existing customer, acording to the White House Office of Consumer Affairs. And the probability of selling to an existing customer is 60 to 70 percent, according to Marketing Metrics, while the probability of selling to a new prospect is five to 20 percent.
I believe that this points out a narrow and out-of-date way of thinking about loyalty. Starting loyalty programs later in the customer acquisition and retention process deprives companies of legions of committed customers who are willing to engage in deeper relationships that result in greater — and earlier — support of a brand's products and services than we've previously acknowledged or seen.
There are five main factors helping to make sustained loyalty programs possible today, from the initial customer touch point onward:
1) Loyalty stigma diminishing: The stigma that loyalty programs bribe and buy-off customers just to get them to open their wallets and flash their credit cards is receding because an increasing number of loyalty options go beyond just being purchase-based. In fact, there is a growing comfort level with the notion of reciprocal, or two-way, loyalty between customers and companies.
2) Changing consumer behavior: Partly driven by mobile, behavior is changing significantly throughout the funnel — from discovery to comparison to decision and evaluation.
Beyond informing and educating in the discovery phase, we need to provide social proof of our loyalty to customers by providing up-front value in the form of, say, free resources or thought leadership. At the comparison phase, we need to reward customers for engagement, for example, by explaining what they get in the relationship beyond a mere product. Traditionally, at the decision point, we stressed pricing triggers; now, we need to help customers — especially Millennials — feel our products and services are cool, unique and worth the investment.
Beyond informing and educating in the discovery phase, we need to provide social proof of our loyalty to customers by providing up-front value in the form of, say, free resources or thought leadership. At the comparison phase, we need to reward customers for engagement, for example, by explaining what they get in the relationship beyond a mere product. Traditionally, at the decision point, we stressed pricing triggers; now, we need to help customers — especially Millennials — feel our products and services are cool, unique and worth the investment.
3) Word-of-mouth and referrals: Customer retention and acquisition efforts can be mutually supportive and even synergistic. In today's quicksilver-fast digital economy, the value of word-of-mouth spreads much earlier and much more rapidly.
4) Non-dollar-backed currency rewards becoming ubiquitous: For years, CFOs resisted loyalty programs, saying they were a cash drain on company coffers. With cost-effective non-dollar-backed currency, that's no longer the case.
5) Identifying prospects early: Thanks to social tools and tactics like Facebook, customer journey maps, customer personas and search analytics like Google Analytics, all make anonymity much more a thing of the past.
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