How many customer loyalty cards do you have in your wallet?
Loyal customers are the Holy Grail for most businesses. With customers having so many different options for goods and services, developing long-term, loyal customers is critical for brands and companies. Not only is it easier to sell more things to customers who already love you, but raving fans will tell other customers about your brand or company. When you factor in the expense of trying to reach new customers and the high lifetime value of each individual customer, loyalty needs to be a top priority for every business.
However, many companies have approached this effort in very much the wrong way and are stuck in old-school, ineffective loyalty approaches. It is critical for companies that want to develop long-lasting customers and raving fans to start coming around to what I call Loyalty 3.0.
With very few companies even coming near Loyalty 3.0, there are unprecedented opportunities for forward-thinking companies to become leaders in this movement and gain competitive advantages by forging rock-solid customer relationships.
Loyalty 1.0 – This is where companies believe that by rewarding the customers who spent the most with them, that they are creating loyalty. This comes in programs like points-per-dollar spent or “buy nine, get the 10th free” cards. This form of loyalty looks an awful lot like bribery.There are several problems with 1.0:It creates loyalty to the program, not the brand or company; you are only as effective as your offer.It creates another form of price competition. Buy nine and get one free is akin to a 10 percent discount across the board.It only rewards the “spenders” — customers are only considered as important as their last set of purchases.
Loyalty 2.0- This evolved in the form of social media. Brands realized that it was not just the spenders who were important, but also the influencers who indirectly accounted for sales through brand advocacy. This was an important realization for companies and brands.
Loyalty 3.0 – Some companies have been doing this for a long time, but they are in the minority.It is a holistic approach that can be led with product functionality (think Apple), customer service (think Nordstrom), creating an affinity group or lifestyle association (think Harley-Davidson), creating an experience (think Disney theme parks) or even by creating a bridge to the customer with ancillary products, services, content or experiences that are important to the customer (think food companies with time-saving recipes), depending on what is of most importance to customers.
True customer loyalty stems from making your customer feel important — but in whatever way resonates with him or her. This is tricky territory because not all customers have the same wants or needs.
It isn’t easy — if it were, everyone would be doing it already. However, it is incredibly worthwhile, as nothing is more important to your business than solid, loyal customer relationships.