Going the Distance: Four Ways to Build a Better Customer Loyalty Program for Your Brand

It’s easy enough for a customer to join your loyalty program, especially when you’re offering an incentive such as discounts. All your customer has to do is give out some basic information, and voila! They’re in the fold, a brand new loyalty member with your company. From there, it’s happily ever after. You offer the perks; they stand solidly by you, bringing you their continued business. Simple. Or is it? In reality, just how many of those customers are act ively participating in your loyalty program? Do you know? Sure, loyalty program memberships are on the rise according to market research company eMarketer, having jumped 25 percent in the space of just two years. However, that figure may be a bit misleading. The truth is that, while loyalty program sign-ups may be more numerous, active participation in such programs is actually in decline. At the time of the study, the average US household had memberships in 29 loyalty programs; yet consumers were only active in 12 of those. That’s just 41 percent. And even that meager figure represents a drop of 2 percentage points per year over each of the preceding four years, according to a study by loyalty-marketing research company COLLOQUY.

When discounts just aren’t enough

So what’s a brand to do? How can you make your loyalty program worth your customer’s while—as well as your own? After all, gaining a new loyalty member doesn’t mean much if your customer isn’t actively participating in your program. Consider this: Does your customer loyalty program offer members anything different from what your competitors are offering? Chances are your program includes discounts. That’s a given. And what customer doesn’t appreciate a good discount? But when every other company out there is providing this staple benefit in comparable amounts, it becomes less and less likely that customers will remain loyal to any one particular brand. Frankly, it’s all too easy for customers to get lost in a sea of loyalty member discounts. They’re everywhere. In fact, just under half of internet users perceive that all rewards programs are alike, according to a 2015 eMarketer survey. The key to success, then, is to differentiate your business from the crowd. If you can offer your customers something unique and valuable beyond the usual discount, chances are they’ll be more likely to stick with your brand. Here’s some inspiration from companies who get it.

Virgin: Reward more purchases with more benefits.

That’s not to say you need to get rid of discounts entirely. In fact, nothing could be further from the truth. Customers still love a good discount. The goal is to be creative in terms of the loyalty perks you offer. Take the Virgin Atlantic Flying Club, for example. As part of its loyalty program, the airline allows members to earn miles and tier points. Members are inducted at the Club Red tier, from which they can move up to Club Silver and then Club Gold. Here, it’s not just a discount. It’s status. And people respond to feeling important, elite. Still, even where the rewards themselves are concerned, Virgin is motivating loyalty customers with some pretty attractive offers. At the Club Red tier, members earn flight miles and receive discounts on rental cars, airport parking, hotels and holiday flights. But as members rise in tiers, they get even more. At the Club Silver tier, members earn 50 percent more points on flights, access to expedited check-in, and priority standby seating. And once they reach the top, Club Gold members receive double miles, priority boarding and access to exclusive clubhouses where they can get a drink or a massage before their flight. Now that’s some serious incentive to keep coming back for more. Discounts are still part of the equation – but they are designed with innovation and personal value in mind, elevating them to more than just savings.

Amazon Prime: Pay upfront and become a VIP.

What if your customers only had to pay a one-time upfront fee to get a year’s worth of substantial benefits? It may not sound like the smartest business idea at first glance. But take a closer look. Amazon Prime users pay a nominal $99 a year to gain free, two-day shipping on millions of products with no minimum purchase. And that’s just one benefit of going Prime. It’s true that Amazon loses $1-2 billion a year on Prime. This comes as no surprise given the incredible value the program offers. But get this: Amazon makes up for its losses in markedly higher transaction frequency. Specifically, Prime members spend an average of $1,500 a year on Amazon.com, compared with $625 spent by non-Prime users, a ccording to a 2015 report from Consumer Intelligence Research Partners.

Patagonia: Cater to customer values.

Sometimes, the draw for consumers isn’t saving money or getting a great deal. The eco-friendly outdoor clothing company Patagonia figured this out back in 2011, when it partnered with eBay to launch its Common Threads Initiative: a program that allows customers to resell their used Patagonia clothing via the company’s website. Why is this program important to customers? And how does it benefit Patagonia? The company’s brand embraces environmental and social responsibility, so it was only fitting that they create a platform for essentially recycling old clothing rather than merely throwing it away. The Common Threads Initiative helps Patagonia build a memorable brand and fierce loyalty by offering its customers a cause that aligns with deep personal values. OK, so their customers get to make a little money, too. Everybody wins.

American Airlines: Gamify your loyalty program.

If you’re going to offer your customers a loyalty program, why not make it f un? After all, engagement is key to building a strong relationship with your customer. And what better way to achieve that goal than making a game of it. American Airlines had this very thing in mind when it created its AAdvantage Passport Challenge following its merger with USAirways. The goal: find a new way to engage customers as big changes were underway. Using a custom Facebook application, American Airlines created a virtual passport to increase brand awareness while offering members a chance to earn bonus points. Customers earned these rewards through a variety of game-like activities, from answering trivia questions to tracking travel through a personalized dashboard. In the end, participants earned more than 70 percent more stamps than expected – and the airline saw a ROI of more than 500 percent. The takeaway: people like games.

Stand out from the crowd.

Your approach to your customer loyalty program should align with your overall marketing approach. Effective branding is about standing out, not blending it. Being memorable is key. To this end, keep in mind that loyalty programs are no longer a novelty. That means that yesterday’s strategies won’t work moving forward, so look for ways to rise above the noise, setting yourself apart from the cloying drone of countless other cookie-cutter programs.

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Should There Be an App for That?

Getting into your customers’ pockets is no easy task.

With the tablet wars heating up and smartphone sales skyrocketing, at some point, the thought is bound to cross your mind: Is it time to create an app? The lure of being with your customers everywhere they go and being readily accessible with the tap of a finger is certainly hard to resist. And with over 350,000 iOS apps in Apple's App Store and over 200,0000 apps in Google's Android Market, it’s clear that many companies have eagerly climbed aboard the app development bandwagon. Thanks to a proliferation of DIY app templates, the barriers to entry in the app marketplace are not as steep as they once were. But you can't simply judge the merits of creating an app as you would would any other marketing tactic. Instead, you should look at your potential app as a product in and of itself. You wouldn't put time and money into developing a product without a reasonable amount of confidence that a market exists for it. Same goes for an app. You can build it. You can get it into the app store. But if it's not something people want, your efforts will be for naught.

Your app must meet these eight basic criteria, or else it's not worth the investment:

1. It must be designed around business growth objectives.

To justify the necessary investment, your app must be aimed at promoting the growth of your business, whether it does so by making it easier for your customers to buy from you or keeping your brand at the forefront of their awareness. Sure, plenty of big names have created vanity apps that don’t serve a business growth function, but that’s not a luxury the average company can afford. For example, Mercedes offers an iPad game called SLS AMG HD that allows users to put their driving skills to the test through a series of tunnel challenges. Sure, it’s a slick-looking gimmick. But is it actually doing anything to improve the company’s bottom line? Does anyone who is inclined to buy a Mercedes really need an iPad racing game to tip them over the edge? An app in and of itself is not a marketing campaign. If your goal is to boost the visibility of your brand, creating an app is a very indirect and costly means to reach your desired end. Remember that you'll be competing with hundreds of thousands of other apps to be discovered by smartphone users. Your chances of creating something so new, so different and so out-of-the box that it will go viral and jump to the top of the download charts are slim to none. What's more, even the number of downloads your app gets is no guarantee of ongoing exposure to your customers. According to a recent study, as many as twenty-six percent of apps are opened only once after download. With odds like that, if your sole purpose is elevating the visibility of your brand, there are no shortage of other tactics – from SEO to pay-per-click advertising to social media-based PR campaigns – that will likely deliver a better ROI.

2. Its utility must be customer-driven.

No matter what, your app development process shouldn't be an exercise in ego-stroking. Forget what you think is cool or cutting-edge and look at your app through your customers' eyes. For your app to be successful, it needs to offer something people want, whether that's in the form of utility, convenience, content or all of the above. For the most part, your customers use their mobile devices for one of two purposes: productivity or entertainment. If you want to create an app that entertains, be prepared to bring the big guns because you're competing in a space with the heavy-hitters, from Facebook, Twitter and YouTube to a slew of professional game developers. The productivity space is easier to enter, but conquering it is still no easy feat. A useful productivity-oriented app must make it easy for your customers to accomplish the types of tasks they commonly perform while on-the-go. If your app is content-driven, it needs to be encyclopedia-worthy to warrant a spot on the reference shelf of your customer’s mobile device. It must be comprehensive and updated frequently, and its interface must be ultra-searchable and scannable. Whole Foods offers a great content-based app. Users can search its extensive library of recipes by keyword, input ingredients they have on-hand to get suggestions and create shopping lists on-the-fly. Search results are even classified by dietary preference, such as gluten-free or low-fat. This type of utility aligns squarely with Whole Foods’ target market. Undoubtedly, their app is the go-to resource for many health-conscious, time-strapped working parents who leave the office with no idea of what they’re going to make for dinner when they get home.

3. It must offer an optimal balance of usefulness and simplicity.

Your app should not attempt to be all things to all potential users, or it will be doomed to failure. Likewise, it also shouldn't simply be a mirror of your website's features. If that's your plan, you'll be better served by optimizing your existing site for mobile browsers. Generally speaking, the more features you try to cram into an app, the less intuitive it becomes to use. And as hard as it may be to imagine, app users are even less patient and more fickle than Web surfers. If your app is difficult to figure out or frustrating to use, they'll wipe you from their phone with nary a second thought. Therefore, it’s critical that your app’s purpose is clearly defined and that its functionality is streamlined. The FedEx Mobile for iPhone app is a perfect example of this balance of utility and simplicity. FedEx is a massive global corporation that offers a broad array of services to a highly diverse customer base. Its app, however, is limited to four main functions: obtaining a quote, creating a shipping label, tracking a package and finding a location – exactly the type of time-sensitive features you need at the ready when you’re trying to get that all-important document out in tonight’s shipment or awaiting an important delivery.

4. It must be mobility-oriented.

There are some tasks people like to do on their phones and some they do not. Any task that involves too many steps and is not urgent in nature is not going to be something your customers would choose to do on their phone rather than just waiting until they are in front of their computer screen again.

5. It must take advantage of the mobile device’s unique features.

Mobile devices have a number of built-in features that even many laptops don’t necessarily have, such as GPS, the ability to deliver push notifications, a camera and video camera. If you don’t plan to tie the utility of your app to any of these functions, it’s hard to justify creating a dedicated mobile app rather than just enhancing your current site to provide an optimal experience for mobile users. Amazon's Price Check is a great example of an app that takes advantage of the phone's camera function to allow users to scan barcodes and compare prices on-the-go. GPS is a little more tricky to use wisely. A lot of branded apps – from Gap's StyleMixer to USPS Mobile – use GPS to allow users to find their closest brick-and-mortar location. As an auxiliary feature it's a nice convenience for users who are already plugged into the app, but this type of function is not enough to justify the existence of an app in and of itself, as there are plenty of other mapping and searching apps that can deliver the same information with broader utility. Also, you should weigh the pros and cons of integrating push notifications carefully. If you can provide legitimate value to your customers with timely alerts, that's fine. But if you cross the line into intrusiveness, you're just asking to get deleted.

6. It must be applicable to a broad customer base.

The Chipotle Mobile Ordering app lets users place a completely customized order and pay directly from their phone in advance of arriving at the store. For a national chain with thousands of time-starved customers who have little patience for waiting in line, the app represents the perfect marriage of utility and marketing savvy. But apps like this require a certain scale to make sense. If you're a mom-and-pop bakery, you could theoretically develop an app that would let your customers design their own cupcakes and place their order right from their phone. While it would surely be a fun gimmick, it doesn't fulfill a broad-based need, and the app's ability to generate additional revenue would probably never offset the cost to create and maintain it.

7. It must be well-designed and thoroughly tested before launch.

The app marketplace is no place for experimentation. You have to get it right out of the gate. If you go live prematurely with an app that's underdeveloped, lacking utility or plagued with bugs, your bad reviews will haunt you for a long time. What's more, disenchanted users won't be likely to give you another shot even if you come out with something better later.

8. It must continue to evolve.

If you’re going to get into the app development game, you must be prepared to be in it for the long-haul. Once you launch your app, your job is only just beginning. App developers have raised the bar of user expectation for updates. You must monitor your feedback and respond with interface tweaks that provide a better experience. You should also add to and improve upon the functionality of your app regularly and keep it fresh with current data. If users see an app that has gone stale on the shelf, they're not going to be inclined to download it.

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Dos and Don'ts for a Successful Groupon Promotion

Do: Be aware that it’s not for everyone, and it may not be right for you.

With a subscriber base that has surpassed 85 million and shows no signs of slowing, the allure of Groupon is hard to resist. The basic premise seems fail-proof: create a discount offer that’s broadcast to thousands of potential new customers, sit back and watch the dollars roll in.

However, every business model is unique, and there are many variables that determine how well your company can respond to a sudden, short-term influx of traffic or a temporary drop in profit margin.

Running a promotion is particularly risky for companies in Groupon’s bread-and-butter categories like salons, spas and restaurants, where the frequency of offers dilutes their perceived value.

If your business falls into one of these categories, you must carefully weigh the chances of being able to convert first-timers into regular customers versus the likelihood that they’ll simply wait for the next Groupon to come along. If the odds don’t stack up in your favor, you may find that the sacrifices you must make to execute the promotion won’t ultimately deliver a long-term pay-off in the strength and size of your customer pool.

Don’t: Expect Groupon to boost your bottom line.

At least not right away. While there’s no upfront cost to run a promotion, Groupon requires you to discount your products or services by at least 50 percent, and they then typically take a cut of 50 percent of the final selling price, leaving you with only 25 percent of your normal revenue. While you’ll undoubtedly see a major bump in traffic, your margins on that traffic will be slim, if they exist at all.

Playing the Groupon game is less about building profit and more about gaining mass exposure.

Do: Crunch the numbers.

When deciding whether or not Groupon a good fit, you must weigh the ROI of your promotion according to the same metrics as you would any other marketing tactic.

Examine every scenario to determine what your promotion will ultimately cost. What if 100 people jump on your deal? What if it’s more like 1,000 or 10,000? Can the potential benefits justify that level of investment? Or would your money be better spent elsewhere, such as a pay-per-click advertising campaign?

Do: Be strategic in your offer.

If you do decide that Groupon is a good fit for your business, make sure to structure your promotion so that it’s a win for you and your new customers.

Be creative and find a way to build an offer that minimizes the losses you must absorb and maximizes your ability to fulfill a short-term spike in demand. Focus on the products or services where your overhead is lowest and your profit margin is highest.

For example, let’s say you’re a personal trainer. If you offer a Groupon discount on your consultation services, you’re limiting the number of hours you have available to clients who are willing to pay your regular rate. However, let’s say you’re a personal trainer who also sells subscriptions to an online video coaching series. You can absorb an almost unlimited amount of cut-rate subscriptions without compromising your primary revenue stream.

Or, let’s say you run a beachside bed and breakfast. Executing your promotion in the off-season is a great way to reel in new visitors. If your doors are open, your operating expenses are fixed. In terms of defraying those costs, it’s better to be filled to capacity at 25 percent of your standard rate than to have only one or two guests at full price.

Don’t: Be afraid to negotiate.

A lesser-known secret of playing the Groupon game is that you can negotiate. When it comes to shaping your promotion, nothing is written in stone.

You can score a more favorable split on the take than 50/50. You can also cap how many discounts are available, which is a good way to safeguard your bottom line and make sure you don’t end up with more business than you can reasonably handle.

Groupon’s entire business model revolves around presenting great deals that people want to buy, so if you’ve got a good one, make them play ball. If they won’t agree to terms that work for you, either try another daily deals site, or pursue a different marketing strategy entirely. No amount of exposure is worth an arrangement that could potentially sink your business.

Do: Pay attention to the fine print.

Terms and restrictions can make or break your deal. Use the fine print to make sure your offer is one that your business can sustain.

Set an expiration date. Cite whether the offer includes tax and gratuity. Specify whether customers need to make an appointment or reservation in advance to use their Groupon. Determine which products or locations the Groupon applies to. Define whether the Groupon can be used in conjunction with other offers or specials. Limit how many offers can be used per customer and per visit.

Just be careful not to make the terms so restrictive that the promotion loses all value to your potential customers, or your Groupon will be a flop.

Do: Put your best foot forward.

When your Groupon lands in the inboxes of subscribers in your area, you’ll inevitably have an influx of potential new customers checking out your website, your Facebook page and your Twitter feed to find out more about you.

Make sure that your website is up to date and that it showcases the products or services being featured in your promotion in such a way that makes the decision to buy an easy one.

Make sure as well that your Facebook and Twitter streams are primed with interesting content and lively dialogue to boost your chances of scoring a like or a follow from these new visitors.

If you don’t have these critical elements in place before your Groupon hits, you won’t be making the most of the opportunity you have to be in front of hundreds or thousands of people who are in the market for what you have to offer.

Do: Understand that these are Groupon’s customers, not yours.

Due to privacy laws, Groupon cannot share the email addresses or personal information of those who have bought into your deal. So while you’ve gotten great exposure to these potential new customers, you have no built-in way to make a repeat appearance in their inbox.

Make sure that when these shoppers visit your website or come into your store, they have the opportunity (and incentive) to join your mailing list. If you don’t already have a list, now is the time to start building one.

Do: Bring your A-game.

The true value of a Groupon promotion isn’t getting a tidal wave of people through your doors. It’s the opportunity to convert those one-time deal-seekers into loyal customers and fans.

In order to do that, you must wow them. They may come in looking for a bargain, but if what they find is exceptional quality, value and customer service that go above and beyond their expectations, they’ll not only be more likely to come back and pay full price but also to spread the word about you as well.

Do: Make sure everyone’s on the same page.

One sure-fire way to guarantee that your Groupon customer will never come back is to make the process of redeeming their offer a hassle.

Hold special meetings or training sessions if necessary to make sure that everyone who’s on the front lines of your business understands the terms of the offer and how to handle any questions or complaints.

This is also a good opportunity to review your customer service standards and reinforce your expectations to ensure that everyone is prepared to do whatever’s necessary to convert, convert, convert.

Don’t: Alienate your loyal customers.

You know the old saying about new friends and old friends – one is silver and the other is gold. The same applies to customers.

In your efforts to bring new customers in the door, be mindful not to alienate those who’ve been happily paying full price all along.

If you’re going to Groupon, it’s an opportune time to simultaneously execute a customer appreciation promotion to reward these customers for their loyalty and show them that their business is always valued.

Don’t: Mistake Groupon for a marketing plan.

Let’s say you run your first Groupon promotion.Groupon is no substitute for a sustainable, long-term business growth plan. You get a huge response, so you stock up and staff up to meet the demand. The wave comes; the wave goes. Suddenly you’ve got a bunch of employees standing around staring at each other and more inventory than you know what to do with.

While running another promotion seems like the obvious solution to this problem, it’s no substitute for a sustainable, long-term, diversified growth and marketing plan.

You must realize that creating one Groupon offer after another will train old and new customers alike to expect never to pay full price and will ultimately devalue your products and services. You’ll end up caught in a cycle of dependency on discount shoppers and razor-thin margins that will make it next to impossible to ever actually grow your business. And isn’t that the point of running a Groupon to begin with?

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