The data says that we must apply customer loyalty strategies in our business.
As we saw in the customer loyalty article, increasing customer loyalty by 5% increases profits in the range of 25% to 95% and keeping a customer is 6-7 times cheaper than getting a new one.
With this information in hand, there is only one question left to ask:
What are the best customer loyalty strategies?
To begin with, we have to differentiate between strategies and tactics.
These two terms are often confused in the business world, so it is worth differentiating between them:
- Strategy has to do with the direction we are going to take as a company to achieve a specific objective.
- Tactics are the concrete and detailed actions we are going to take to carry out that strategy.
It is worth making this differentiation because, in this article, we are not going to talk at any time about tactics, only about strategy.
We are going to focus on the 3 best customer loyalty strategies that exist:
- Offering a product that is well above average.
- Offering a deal that is well above average.
- Loyalty programmes based on gifts and promotions.
Strategy 1: Offering a product well above average
The main example of this is Apple.
But don’t think about the phone (which also), think about the iPod.
Today it is hard to imagine the leap in quality that it represented, but I will try to put it into figures.
At the beginning of the 1980s, walkmans began to become popular, which were little pieces of equipment larger than your hand, weighing about half a kilo from now on and in which, in order to be able to listen to music, you had to carry tapes or discs, which could hold about 12 songs.
20 years later, when this was still a market standard, Apple took out of its sleeve a device that weighed 120 grams, had a beautiful design and could store 1000 songs inside.
The product was absurdly better than any of its competitors.
Apple swept the market and created a legion of loyal customers.
Later on, it carried out the same process again, revolutionising the world of telephony with its iPhone.
Since then, no matter what product and what price Apple brings out, it has legions of completely loyal fans who buy everything.
Strategy 2: Offer a deal well above average
I don’t like coffee very much, but the first time I walked into a Nespresso shop I wanted to take hundreds of capsules home.
I was accompanying a friend, and the first thing they told us as soon as we entered was if we wanted to have a coffee. It was on the house.
But, besides giving you an excellent treatment, they give you one of their products (the coffee machine) for the purchase of another of their products, the capsules.
After the revolution that the brand and its advertisements with George Clooney brought about, imitators have appeared everywhere, but having an experience like this in a coffee shop was something unimaginable when they started to roll out their shops around the world in the 90s.
Since then, millions of people around the world drink Nespresso and Nespresso-only coffee, both when they are at home and when they can get close to one of his more than 400 shops.
Strategy 3: Loyalty programmes based on gifts and promotions
Do you remember when, after shopping at the supermarket, you were given points for a set of pans or a set of dishes, or the classic “after 10 dinners, we’ll give you the 11th” stamped card?
Even more famous, do you remember the famous Nescafé salary for a lifetime?
All these strategies are to build customer loyalty and always follow the same pattern: I give you gifts and benefits if you buy enough of my products.
These strategies are the most famous and most common because they have 2 advantages:
They are easy to implement.
Even so, it can bring enormous benefits.
I don’t know how many people around me have spent their lives collecting Nescafé labels to see if they would get paid.
Even the brand made advertisements where, instead of announcing the coffee, it announced the pay!
In fact, having a Nescafé salary has become a catch-phrase for anyone who lives off the rents. A real treat.
If you want to know more about this topic, you can do it here: All about customer loyalty programmes.
Which of these customer loyalty strategies is best for you?
Although I have talked about 3 different loyalty strategies, the truth is that there are really only 2, because both the product-based strategy and the treatment-based strategy can be grouped into one:
The most complete customer loyalty strategy: Exceeding expectations
When we think about acquiring a product or service we have expectations based on our previous experiences with companies in that sector.
People listening to music on a Walkman had a number of expectations based on these devices:
- They were heavy.
- They did not fit well in a pocket.
- I had to carry records with me.
- I couldn’t listen to more than 12 songs without changing the record.
When the iPod came on the market it far exceeded the expectations of anyone listening to music with a Walkman.
The same thing happened with the people who went to buy soluble coffee at the supermarket and suddenly found a shop where they gave him the coffee machine, invited him to drink one every time he visited them and recommended him among many styles of coffee based on his preferences.
When Nespresso came on the market, it far exceeded the expectations of anyone who had to buy coffee.
Expectation management can be explained brilliantly with a graph:
With your experiences, you create average expectations.
If the experience is much worse, you cross out the brand and never buy from them again.
If your experience is much better, the magic of loyalty begins to work.
This loyalty strategy is incredible and the most recommended for you if you are able to offer a product or a deal that is well above the average in the sector.
And when to employ promotion-based customer loyalty strategies?
Simply when you are not able to apply a strategy based on expectations.
Strategies based on promotions have the advantages we mentioned earlier and also two major problems:
- They force you to sell low cost products or products that are perceived as low cost.
- The type of clients they attract are usually mercenaries.
With these two characteristics, it is relatively easy for a brand to overcome your strategy and steal your loyal customers simply with lower prices or more aggressive promotions and prizes.
What are you inviting your customers to the 11th dinner?
The restaurant next door can do it at dinner number 9.
That the Nescafé salary is €2,000?
The competition’s coffee can invent one of €2,500.
And so on.
You can create a loyal audience with this strategy, but a strategy based on expectations is simply more powerful.
Can I work on an expectation-based strategy without a CRM?
If you want to focus on giving an incredible and personalised service, the truth is that you can’t.
Following the example of Nespresso: The reason they identify you when you enter is so that they can recommend new coffees based on your preferences.
And they know this because they have all the information centralized in a CRM.
Without such a tool, the experience in a Nespresso shop would simply be much weaker.
If you also want to replicate it, the first step is to have a proper CRM strategy.
And Efficy CRM is the best way to do this.
Do you want to try it out?
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