Gaining a customer’s loyalty is essential for expanding brand visibility and increasing sales. From discounts on new purchases to accumulated travel miles, loyalty programs have evolved over 200 years to offer memorable and high-value benefits. How can digital strategies bring users closer and transform them into recurring buyers?
Loyalty programs are essential when it comes to sustaining and strengthening customer relationships. These strategies allow organizations to increase Customer Lifetime Value (CLV), which translates into increasing the value of their existing customers.
Why is it important to invest in customer loyalty?
While delivering an excellent service or offering a high-quality product is fundamental, it is equally important to offer supplementary services or added benefits to differentiate and excel in the face of competition.
Going above and beyond to exceed customer expectations is key to winning loyalty and standing out from competitors. By providing an exceptional experience that surpasses what they anticipate, we leave a lasting impression on customers and strengthen their connection with our brand, pulling them further away from the competition. Furthermore, investing in customer loyalty has the added benefit of expanding the CLV curve.
There are concrete reasons for companies to consider customer loyalty as a central part of their strategy. Among the main reasons are:
- Greater propensity to buy. Customers loyal to a brand are 7 times more likely to repurchase additional products or services from a company than new customers. It is 12 times easier to sell something new to an existing customer than to a new one.
- Reduction in customer acquisition costs. Acquiring a new customer can cost up to 5 times more than retaining an existing one, so fostering loyalty among current users is more cost-effective and profitable.
- Growth through referrals and recommendations. Loyal customers are 5 times more likely to recommend their favorite products or services to friends and family. This is fundamental, as word-of-mouth marketing accounts for $6 trillion in consumer expenditure annually and is estimated to represent 13% of total sales.
How have loyalty programs evolved?
Loyalty strategies are not new. There are documented cases from the 1800s of companies providing gifts or other benefits to customers who showed consistent purchasing behavior.
These strategies have evolved. For instance, in the past, customers would receive a stamp with each purchase, and these collected stamps could later be exchanged for products or gifts.
Over more than 200 years, loyalty programs have evolved to become more personalized, accessible, interactive, and emotionally engaging. Companies strive to establish stronger and lasting customer relationships by offering relational value beyond commercial transactions.
American Airlines, pioneers in loyalty programs
From 1981 onwards, loyalty programs began incorporating technology. The first company to do so was American Airlines with Air Miles. It was a pioneering mileage program that other companies in the travel industry subsequently replicated.
As the adoption of this loyalty method grew, American Airlines found the need to develop a new strategy that offered more advantages: AAdvantage. This “Privileged Customer Club” relies on its CRM’s information regarding each customer’s behavior. This evolution provides company-specific benefits like access to VIP zones and expedited boarding and includes benefits from partner companies. Other companies also imitated this concept.
Content and Communication: the 3rd Stage of Loyalty
Recently, loyalty programs have shifted their focus toward information and content.
The content does not necessarily have to be directly related to promoting the brand’s products or services, but rather providing advice and information to help the target audience learn and stay informed. By receiving these “tips” and valuable information, audiences increase their trust in the brand and recognize them as industry experts.
In this regard, the following cases stand out:
- Nestlé Baby & Me, Intended for mothers, provides health, nutrition, childbirth, and care content. Moreover, it provides assistance to help individuals address common questions and dispel doubts;
- Pharmaceutical company Bayer, through “Club Bayer,” aims to foster a stronger relationship with pharmacists by providing them with content related to business management, marketing, and human resources for their establishments.
The Era of Building Loyalty through Digital Experiences
Although these strategies are relatively new, the latest innovation revolves around fostering loyalty through the Digital Experience.
- Repsol, a Spanish multinational energy company and one of the world’s largest integrated oil and gas companies, introduced Waylet. This application combines the benefits program, the points program, and user payment preferences into a single platform. It could combine everything in one digital platform by consolidating various marketing actions and usability features. Through the use of technology, the user experience significantly improved, becoming easier, more intuitive, and seamless for their customers.
- Alnylam Pharmaceuticals, a company specializing in the detection and treatment of rare diseases, also embraced the digital experience. The company developed a mobile application that enables doctors to diagnose potential diseases based on specific patient parameters. Using technology and Artificial Intelligence, they can establish the likelihood percentage of a disease and the urgency with which it should be treated. This new digital approach provides not only for patient treatment but also strengthens the relationship between doctors and the brand.
- Lastly, Starbucks, whose core business is coffee and pastries, also embraced digital experiences for its customers. The company integrated the Odyssey program into its loyalty app, where users can play and earn a digital asset as an NFT (Non-Fungible Token) as a prize, which can then be traded within the app’s marketplace. In doing so, Starbucks creates an immersive digital experience for its customers, emphasizing entertainment, fostering relationships, and delivering an emotionally resonant encounter that transcends the conventional transactional dynamics associated with the world of coffee.
As we’ve observed, investing in customer relationships and relevant digital experiences is key to gaining a competitive edge and maintaining a prominent position in customers’ minds. Are you delivering exceptional value? If you want to learn how to create the best Loyalty strategies, we invite you to contact Gerardo Sama, Loyalty Services Director.