Reap as you sow – the secret to customer loyalty boiled down to four words.
Now for the slightly longer explanation.
2020 has not been easy for a lot of companies across the globe. In a rush attempt to cut costs, companies have been laying off employees. As a result, nearly half of the global workforce are now struggling to keep hold of their jobs.
Any business in it for the long-haul is bound to face some form of crisis or another at some point, whether that be from a pandemic or some other factor. However, one thing has remained stable amid these daunting times.
The north star that guides businesses to the other side. The jury that passes on the verdict of whether your business can survive or die. The secret to how global brands keep their boats steady even in tumultuous waters.
Why Customer Loyalty is the Ultimate Gold Standard
When business is booming, companies usually tend to deprioritise loyalty for short-term quick wins.
However, as the wallet gets thinner, we humans resort to our emergency funds. Customer loyalty is much like that forgotten bank account that comes into rescue. Think of loyalty as an investment that begins to pay dividends in the long run when you need it the most.
Frederick Reichheld showed that increasing customer loyalty by as much as 5% can boost your revenue by a whopping 25-95%. Conversely, it takes 20-25 times more resources to acquire a new customer than retaining your existing one.
To provide a simpler perspective: a 2% increase in customer retention bears the same effect on revenue as a 10% decrease in operating costs.
You probably used to keep a seat for your best friend at school every day, and so did they. However, if either of you didn’t turn up on the rare occasion, only then would you give up the seat.
This is loyalty stripped to its bare bones.
It’s true that people now care more about availability than the brand name in these dire times. However, given that a tech company manages to keep its supply stable, a loyal consumer will rationally choose the branded product.
A sense of belonging
As expected, Apple’s profits experienced a 2% decline from that of last year. The managers, however, braced for an even harder impact since the analysts had predicted a 6% decline in revenue. If you happen to be an Apple user, you already know where this is headed.
87% of Apple users are hardcore loyal. Thus, even after a pandemic struck, and a recession is looming, the customers still chose to go back to the stores to buy rather expensive gadgets, and all because they had a good experience in the past.
In other words, people still tend to root for their favourite players even in the last minute of the game.
The bottom line is that hardcore loyal customers are likely to:
- spend more,
- try your new products,
- condone occasional mistakes.
The Curious Case of Airbnb
Airbnb lies a testament as to how valuable customer loyalty can be to any organisation.
The tourism industry may have borne the brunt of COVID the most. To give you a perspective: within five months since the pandemic hit, the industry lost USD 320 billion in international receipts, three times the loss faced during the global economic crisis of 2009.
Naturally, Airbnb also fell face-first into the rough terrains. By April, the company had undergone a 54% downfall in revenue.
However, in May, as summer road trips and crowd-free stays became popular, Airbnb’s revenue started bouncing back.
Moreover, Airbnb reported that the total number of bookings in the USA between May and June exceeded that of the previous year.
What’s perhaps most amazing was that despite a long hiatus of more than 4-5 months, and absolutely zero brand visibility, Airbnb somehow managed to stay on top of its customers’ minds in the travel and tourism category.
Its 9-year long referral and loyalty programme finally came to fruition.
So what are some of the trends we can learn from and steal for our own scaleup growth?
Top 3 Customer Loyalty Trends in 2020
Traditional loyalty programmes were one fit for all. With fixed transactions completed, you get fixed rewards. However, the transaction-based model limited a brand’s ability to deliver a personalised and emotional experience.
Hence, more and more companies are shifting to behavioural loyalty programme that offer customers:
- personalised experiences
- reward for micro-engagements
- a seamless customer journey
Amazon Prime is an archetype of such a model. In fact, the loyalty programme offered by Amazon was so well-executed that the customers were willing to pay only to be a part of it.
With the rise of sales channels complemented by the increasing number of connected devices, ensuring a consistent brand experience is getting increasingly difficult (difficult is an understatement).
Thus, it is only rational that global tech brands are pooling all available customer data i.e. in-store, app, social media, website, etc. to create omnichannel loyalty programme.
Apps and Partner Programmes
The objective of a mobile loyalty app is simple. To integrate one channel that no loyalty programme could ever be a part of— daily life.
No other channel except mobile loyalty apps has access to the user’s exact location to deliver real-time deals and offers.
In fact, 73% of customers are willing to share their personal data, provided that the brand offers a hyper-personalised customer experience.
Partner loyalty programmes are simply what the name suggests. Two or more brands collude to offer a single loyalty programme. The Airpoints™ programme is arguably the best example so far.
To bare eyes, Airpoints™ seems to have its own currency. The customers can essentially redeem points at other popular online retail brands.
The success of the model depends on understanding your brand personas and deciding on whom to partner up with. The rest depends on sheer brilliance and perfect execution.
5 Steps to Building True Customer Loyalty
Craft a Resonating Value Proposition
It all starts with creating a compelling value proposition that in turn, sets the right expectations for customers.
Firstly, do thorough competitive research to find a unique angle for your business. Next, identify who you are writing for. Instead of focusing on a generic population, close in on well-defined buyer personas.
Customers will resonate with your brand if and only if, you start to see through their eyes. Understanding the specific needs, pain points, and motivation thus sets the bedrock for future loyal customers.
Pro-tip: You can conduct an A/B test to assess which value proposition resonates with your customers the most.
Harness the Power of Communities
Leveraging social media to build an engaged community can boost your business in unimaginable ways.
Just imagine if you could reach millions of customers every day with a rather negligible marketing budget.
Here’s an example of 10-Minute School, a booming EdTech.
6 years since its origin, the company has built 10 massive Facebook communities. The largest of them has 1.5 million members. These groups became the breeding ground for positive word-of-mouth and customer engagement.
The company also used social media contests and olympiad to generate user content and offer rewards to its most loyal customers.
The goal is to tell your story using different media i.e. posts, blogs, podcasts, videos, etc. to a concentrated target segment that is likely to convert.
Customer Service translates to Customer Loyalty
This is a no-brainer. Satisfactory service on a consistent basis is bound to breed trust and in turn, loyalty. In this age of instant gratification and the resulting impatience, customers expect brands to respond in less than hours.
So that people can maintain communication with your brand 24/7— make sure you have your contact information placed where your customers expect to find it the most.
You can also add chatbots to your social communication. Chatbots reassure customers that the brand is indeed listening, and will respond in a while, thus reinforcing customer satisfaction.
Empathy is Key
“Ask your customers to be part of the solution and don’t view them as part of the problem.” Alan Weiss
Your customers know your product the best. Why? Because they use it. So, make them a part of the solution.
For instance, while finalising your next big plan, take a moment to ask your customers if they really want it. You can even create a public poll to assess customer reaction.
Make sure you’re considering the data gathered from your website, app, or even social listening tools in your business plans. You can even send questionnaires and surveys through email.
The bottom line is to show your customers that you’re listening and ready to act upon the findings because you care for them.
Transparency breeds Trust
Remember what we said about 73% of customers willing to share data in exchange for a personalised experience? Well here’s a caveat:
The brand must have transparent user policies.
Customers are now more informed than ever. Everything you do communicates in a fraction of seconds. In fact, customers keep a close eye on how responsible their favourite brands are.
Here are some great ways to embrace transparency:
- Be ready to admit your mistakes and take full responsibility.
- Show that you have the best industry practices.
- Explore ways to incorporate your business in social movements.
- Make sure that your employees at every touchpoint are ready to deliver the transparency your brand promises.
A Few Last Words
Companies have begun to realise that meaningful relationships matter, in some cases, the most.
Hence, business objectives have undergone a metamorphosis in recent decades. Since profit maximisation policies plague customer experience, companies have instead shifted to long-term strategies, the most important of which is customer loyalty.
The name of the game is patience. So what’s your strategy?