Although we already know that it is easier and more profitable to retain existing customers, the clear trend is to get new ones. Indeed, there are products or services in which repeat purchases are medium-long term or the probability of a second purchase tends to zero.
But what about other companies? Why aren't there great experts and investments in customer loyalty (compared to the efforts made in attracting new customers)?
Of course, there are great examples uk telegram number of loyalty programs that work and are even a fundamental pillar of the business. But what about the majority of companies?
The pandemic has made loyalty a necessity
When we talk about this type of loyalty programs or clubs, we immediately think of cards that accumulate points for purchases. Is this a way of building loyalty or of driving sales through discounts? They are similar, but they are not the same. What will happen when the discounts are not attractive or we stop giving them?
Some time ago I was reflecting on loyalty clubs based on points cards and on proposals to improve them and I think that things have not changed too much in terms of strategies.
Let's see if COVID and its consequences make companies react. If we go by the data, I think they would be missing a great opportunity.
As a headline to start us thinking, I take this data from McKinsey:
75% of consumers have changed their purchasing habits since the start of the pandemic, and even more relevant to loyalty, 39% have changed brands or stores
These are figures from the United States, but they can be easily extrapolated to most countries.
Given this situation, how do we approach loyalty strategies so that they are successful? Once again, I rely on an article from McKinsey to reflect on the subject.
Keys to maximizing loyalty program results
1. Optimize the elasticity in the value of point redemption
The first point of analysis of the article focuses on the acceleration of sales, playing with the value of points when redeeming them for services or products. And to do so, it uses the real case of an airline.
For strategic reasons (because of the damage they can cause to the company in the medium and long term), I am against the indiscriminate use of discounts as a lever to boost sales. It is a race that leads to the devaluation of the brand, to minimal sales margins and to a major crisis.
It is obvious that a good customer experience at a reduced price is a way of attracting them to make a subsequent purchase. But to what extent is their brand loyalty based on these one-off discounts? (That is where the risk lies). How easy/difficult is it for them to be attracted by another offer and change brands? If this happens, how do we get them back? With more discounts?
But what if we use them intelligently and rely on data to try to eliminate risks to the business? Can we make it work?
If we look at the data from the case presented in the article, we see how some reductions in the points needed to get a round-trip flight achieve significant peaks in demand (see products 8 and 9).
Mckinsey price and sales elasticity in loyalty programs
2. Reactivate dormant loyalty club members
Continuing with the approach of measurement and segmentation (the foundations of any good marketing strategy), why don't we try to activate or reactivate customers who have not redeemed their points and/or participated in any of the proposed activities?
If we do an in-depth analysis of these customers' profiles, it is very possible that we will find high-value profiles that for some reason are not active. They may very well have problems redeeming points, they may not know they are in a loyalty program, the rewards are not attractive to them, etc. Ultimately, all of these cases represent lost opportunities that we can take advantage of.
3. Strengthen the loyalty club by seeking alliances that complement it
From my point of view, one of the best ways to achieve results in a loyalty strategy is to attend to the real needs of our customers; we need to make them feel really special. If we base our strategy on the mere redemption of points to achieve more sales, it is not so much loyalty as upselling .
A good way to do this is through alliances that allow us to complement our offering and therefore the satisfaction of our customers.