Picture this: your successful ecommerce store attracts new leads through targeted digital marketing. Your website features clear calls to action and enticing promotions, while your active social media presence showcases your products and brand story. By optimizing lead generation and conversion rates, you aim to maximize sales from new customers.

While effective, this approach overlooks a crucial aspect: existing customers. A truly sustainable marketing strategy incorporates loyalty marketing to cultivate lasting relationships with your current customer base.

This guide delves into the world of loyalty marketing, exploring its significance, effectiveness, and implementation for sustained business growth.

What constitutes loyalty marketing?

Loyalty marketing aims to encourage repeat business by incentivizing purchases and fostering customer loyalty through various strategies.

Why prioritize loyalty marketing?

Loyalty marketing focuses on retaining existing customers through initiatives and incentives, proving more beneficial for your business for several reasons.

Customer acquisition: a costly endeavor

How expensive, you ask? Forrester Research reveals that acquiring new customers costs five times more than retaining existing ones! Forrest Research echoes this finding, highlighting the significantly higher expense of acquiring new customers compared to retaining current ones (learn how to lower your customer acquisition costs here!). Consider the customer journey: raising brand awareness, communicating your value proposition, convincing potential customers to visit your website, and finally, providing a seamless user experience that encourages purchases. Now, contrast this with encouraging repeat purchases from existing customers. You can bypass the initial brand education steps, focusing directly on offering enticing deals, as they already know and trust your products. Comparing the customer acquisition cost (CAC) of new versus existing customers clearly demonstrates the financial advantage of prioritizing existing customers—making customer engagement and loyalty paramount to any growth marketing strategy. While relying solely on existing customers is unsustainable, neglecting a robust customer loyalty strategy is detrimental.

Selling new products to existing customers: a smoother path

Engaging existing customers is not only cost-effective but also simpler. Their familiarity with your brand makes them more receptive to your offerings. Data confirms this: According to Marketing Metrics, companies have a 60-70% probability of selling to existing customers, compared to a mere 5-20% for new customers. Global research firm Gartner Group reports that 80% of your future revenue will stem from just 20% of your existing customers. These statistics underscore the vital role of customer retention strategies in ensuring your company’s long-term profitability.

Leveraging customer loyalty for brand growth

Customer loyalty is fickle; customers can easily switch brands for various reasons. However, effective loyalty marketing strategies can maximize customer retention.

1. Actively seek customer feedback

Customer churn is inevitable, but minimizing it is crucial. Before implementing retention strategies, understand why customers leave and, conversely, why current customers stay. Several strategies can help gather this invaluable feedback.

Establish feedback channels through social media

Customers readily share their opinions about your products. Provide accessible channels, like social media, for them to voice these opinions, which can offer insights into potential pain points and areas for improvement. Nike exemplifies this approach by using a dedicated Twitter handle (Team Nike) for customer support, ensuring quick, professional responses that mitigate customer frustration and encourage others to reach out.

Image via Twitter Team Nike’s accessibility and responsiveness are commendable.

Image via Twitter Actively listening to customer feedback is invaluable for product improvement. Customers, as end-users, offer unique and practical insights. Most customers only provide feedback when dissatisfied, so value those who proactively share their thoughts. Their suggestions might hold the key to your next successful product!

Utilize customer satisfaction surveys

While social media offers a reactive feedback channel, proactively seeking feedback through customer satisfaction surveys provides deeper insights. Sending surveys at opportune times (e.g., after delivery or service commencement) ensures higher response rates. Airbnb requests feedback through a concise three-minute survey after each booking.

Similarly, Mailchimp uses a brief one-question survey upon email unsubscription to understand customer reasons for leaving. loyalty-marketing-customer-satisfaction-survey-unsubscribe The key to effective surveys is brevity and simplicity. Limit the number of questions, use multiple-choice formats, and minimize customer effort.

Encourage reviews (especially for mobile apps)

Requesting customer reviews after transactions provides valuable social proof for potential customers. While negative reviews might seem detrimental, embracing criticism and maintaining neutrality when requesting reviews builds trust. Censoring negative reviews only raises red flags. Some companies incentivize reviews, but prioritize genuine feedback over incentivized five-star ratings. Apple, for instance, prohibits incentivized app reviews to prevent manipulation.

Mobile game Blackbox effectively used incentives and engaging copy to encourage iOS user reviews. While they removed incentives following Apple’s stance, it highlights the importance of timing review requests. Allow sufficient time for product familiarization and avoid interrupting crucial user interactions.

2. Celebrate your loyal customers on social media

After providing feedback channels, make customers feel valued for their support by celebrating them on social media. Platforms like Instagram and Twitter offer avenues for identity expression and user-generated content (UGC). Social media contests and giveaways further encourage interaction and brand promotion. Australian skincare brand Frank Body leverages Instagram to engage and celebrate its users, encouraging them to share photos using their products for a chance to be featured on the official account. Frequent contests and giveaways incentivize participation and reward brand advocates.

Image via Instagram Besides winning contests, being featured on a beloved brand’s official Instagram page holds significant social currency. Celebrating contest and giveaway winners amplifies their loyalty and encourages them to spread the word.

3. Implement reward programs to incentivize repeat business

Customer loyalty is fluid; offering continuous incentives beyond new products is crucial for retaining customers. Loyalty reward programs effectively encourage repeat business. Sephora’s Beauty Insider program exemplifies a successful loyalty program, driving 80% of their transactions, according to Bridget Dolan, VP of Interactive Media at Sephora. Several factors contribute to its effectiveness: Firstly, the tiered structure offers increasing rewards based on spending, motivating customers to maintain their loyalty.

Secondly, it fosters a sense of exclusivity through personalized birthday promotions, free makeovers, and free shipping for higher tiers, further incentivizing customer engagement. The personalized product recommendation quiz adds another layer of personalization.

This feature, particularly helpful for navigating Sephora’s extensive product catalog, enhances the customer experience and fosters a feeling of exclusivity. Finally, free makeup classes provide valuable skills, social interaction, and a sense of reciprocal appreciation. Effective loyalty programs prioritize making customers feel valued through birthday deals, exclusive promotions, or free classes, fostering a strong emotional connection and minimizing churn rate.

4. Encourage loyal customers to spread the word with referral programs

While often conflated, loyalty and referral programs serve distinct purposes. Loyalty programs encourage repeat purchases, while referral programs incentivize customer advocacy by rewarding both the advocate and the referred friend, bridging customer retention and acquisition. Baby sleeping toy company Riff Raff & Co. exemplifies how referral programs achieve both objectives. By offering a free core product for five successful referrals, they leverage parents’ natural inclination to share product experiences and recommendations, particularly for products that improve their children’s sleep. loyalty-marketing-referral-programs While Riff Raff & Co. rewards after five referrals, you can customize the mechanics and rewards (cash, discounts, etc.) to align with your business goals.

Loyalty marketing: a testament to customer appreciation

Ultimately, customer loyalty transcends social media engagement, loyalty points, or referral rewards. It’s about recognizing your customers’ value and expressing genuine appreciation for their support. The examples and tips discussed foster authentic customer interactions. When customers perceive your genuine appreciation and prioritization of their needs over profit, their respect and support for your brand will naturally flourish.