Merriam-Webster defines being loyal as being “unswerving in allegiance”.
We think that having a customer that is unswerving in allegiance sounds like something brands would want. But many spend a lot of their budgets on marketing, SEO, Facebook, Google and Instagram advertising, and influencer marketing — acquiring new customers, if you will.
Nearly half (44%) of companies have a greater focus on customer acquisition, while 18% give greater focus to retention (loyalty). But is that the best way?
Below, we share our guide to customer loyalty and how to turn your own customers into nano influencers for your brand.
Why Invest in Customer Loyalty?
Data and statistics don’t lie.
You have 60 to 70% chance of selling to an existing customer and a 5 to 20% chance of selling to a new one.
Also, it costs 5-25x more to acquire a new customer than to retain a customer you already have.
Loyal customers will keep spending with you.
Unloyal ones will go to your competitors. Get the picture?
Your main strategy and budget should focus on keeping them for the long term.
Loyal customers create brand communities, which reduce support costs and fuel the loyalty circle.
Your loyal customers will also bring the customer referrals you need to grow the community. And when they become nano influencers for your brand, that’s when everyone starts winning.
Why Nano Influencers
You’ve probably already heard of influencers. Those people who have millions of followers on Instagram and who make tons of money off of brand sponsorships.
But there are different kinds of influencers: celebrities/mega influencers, macro influencers, micro influencers, and nano influencers. At Spitche, we believe nano influencers are the most powerful of all.
They tend to have far greater engagement with their audience than the other kinds. Nano influencers are just people you know. It’s a friend, a family member. They might have 1,000 to 5,000 followers instead of millions. According to the New York Times, “their lack of fame is what makes them approachable”.
That’s why you should gear your loyalty program toward turning your customers into nano influencers, and below we’ll explain how.
Recipe for Loyalty: Strategy, Approach, Tools
To keep your customers loyal you need to think of your strategy (what you want to do), your approach (how you plan to do it) and your tools (what do you plan to do it with).
You need all three together to achieve the strategy.
As an example, your strategy + approach + tool statement could be the following: “We will strengthen the brand community with loyal customers (strategy) by rewarding customers who engage the most with the brand (approach) using a gamified loyalty program like Spitche (tool).”
The best approach would be to use a combination of strategies to reach optimal loyalty. On top of using loyalty programs, it’s important to focus on the customer experience, content, and customer service. And you also need to measure your loyalty to make sure your strategies are working.
What is a Loyalty Program and Kinds of Loyalty Programs
A customer loyalty program is one that rewards customers for their loyalty, which can be demonstrated in many ways.
There are a few kinds of rewards programs:
- Points-based: Give customers points for the action you want to encourage. In our case, it’s engagement in the community or on social media. By engagement we mean sharing the post on social media or starting a discussion on it. Points should be easily translatable into rewards (discounts, free products, cash, whatever’s clever!).
- Tier-based: Divide loyalty into tiers, and as customers become more loyal (with more purchases or higher engagement), they pass into higher tiers, where they get even more rewards or discounts.
- Premium, VIP model: Have customers pay a one-off annual or monthly payment for benefits, rewards and access to an exclusive community in return. Communities can be created in a Facebook group, an online forum, or even a slack channel.
Choose one or combine their features for a program that suits your brand, niche and customers best.
When you set up your loyalty program, we suggest rewarding engagement over purchases.
Reward Engagement Instead of Purchases
Most loyalty programs reward loyal customers for more purchases. But then their entire budget goes purely into customer retention. What if you could build the same kind of loyalty, and use the same budget/effort to acquire new customers?
Let us break it down: you probably already spend tons on Facebook advertising. Getting organic reach on Facebook can be a snake pit for brands today. If your own customers share your content on social media, they are doing your marketing for you.
And it’s not any marketing. It’s the best kind. 92% of consumers trust peer recommendations over advertising.
As you build loyalty, turn your customers into marketers and nano influencers by rewarding them for engagement.
Customer Experience (CX)
On top of loyalty programs, customer experience is extremely important in keeping your customers loyal. Customer experience is best defined as how customers perceive interactions with your company.
Meaning, every time you interact with your customers, how do they feel after?
Monetary rewards are not the only things that keep customer satisfaction (and ultimately, loyalty) high.
Brands that work on superior customer experience have customers that are 19.5% more likely to recommend them, 18.4% more likely to buy more, and 19.2% less likely to switch (source).
So make sure you meet their needs and expectations and are easy and pleasant to do business with. One way to do this is to assign a customer success manager to the customer, so they’ll have a single point of contact for any queries, complaints or questions.
That way, the customer will create a solid relationship with one person who knows the customer and their needs. This will help build trust and demonstrate transparency.
Regular and Useful Content
Content is a very important part of keeping your customers loyal.
Yes, content can come in the form of a blog post and infographics, but it’s also much more than that.
Content is, well, just what it sounds like. It’s video, photos, quizzes, guides, tutorials, guides. It’s anything that is useful to customers and can help them and inform them. It should improve your customer’s understanding of your product or help them solve problems.
Content is a long journey that requires patience, but has a huge pay off. Just like the customer experience and most areas of loyalty, you won’t be seeing instant results, but you will be building a solid relationship between you and your customers.
Being a brand that helps your customers at all times is fundamental to building loyalty.
Measuring Effectiveness — Key Metrics
So you’ve implemented all of the above strategies and used the right approaches and tools. How do you know if you’ve succeeded?
Successful loyalty can mean different things to different brands. And you need to know if your loyalty initiatives have met your own and your customers’ expectations. Are your efforts truly increasing loyalty?
Without measuring your customers’ loyalty, you won’t be able to compare, set targets, or improve. Below are some key loyalty metrics to stay on top of:
1.Customer Retention Rate
The customer retention rate (CRR) is the percentage of customers that stay with you compared to the number you had at the start of a given period. In short, this is a pretty straightforward figure of which customers have stayed loyal.
It can be measured monthly, quarterly, or yearly. You need to define a specific period to calculate this.
You take the number of customers at the end of the given period, subtract new customers acquired during that period, and divide by the number of customers you had at the start of the period. That’s how many stayed with you over the period!
2. Customer Churn Rate
Customer Churn Rate (CCR) is essentially the opposite of CRR. Customer churn is when people stop doing business with your company (when they decide to go elsewhere).
Please note that customer churn is not the same thing as revenue churn.
It’s a bit tricky to calculate churn rate for ecommerce, as you need to define what you consider a ‘churn’. For that, you need to know how your average customer behaves. For example, if they normally repurchase after 60 days, and that hasn’t happened, you can consider that a churn.
So at the end of a given period, you can calculate what percentage of customers behaved in a way you have identified as a churn, and you’ll have your rate.
3. Repeat Purchase Rate
Loyal customers buy from you more than once. So another metric to follow would be the Repeat Purchase Rate (RPR), which is the proportion of your customers that have purchased more than once from your store.
It’s a very good measure of loyalty and is a great way to measure performance.
It’s measured on a shorter time scale than the CRR and both should be calculated. The formula is simple:
Divide the number of customers who have shopped more than once by the number of customers. And voila! You have your RPR.
4. Average Order Value
Strong customer loyalty usually increases your Average Order Value (AOV). This value is the the average dollar amount spent every time a customer makes a purchase on your website.
If you can increase AOV among your loyal customers, that’s even less money you need to spend on acquiring new ones.
If you do it right, you can increase your RPR and customer loyalty. You can try increasing this by offering free shipping after a certain spending thresholding or upselling items that go well with the product they want to purchase.
The AOV is calculated by dividing your revenue by number of orders. Simple!
5. Net Promoter Score
The Net Promoter Score (NPS) is a score measured simply by asking your customers a simple question:
“How likely is it that you would recommend us to a friend or colleague?”
The customer answers on a scale from 0-10. Those who answer 9 and 10 are promoters (or in your case, soon-to-be nano influencers?), and those who answer 0-6 are unhappy customers who could hurt your brand.
Everyone in between are satisfied but unenthusiastic customers.
Subtract the percentage of detractors from the percentage of promoters (this can range from -100 to 100), and you have your NPS.
Not sure if your NPS is good? Anything above 0 is considered good, +50 is excellent and over 70 is world class.
6. Customer Lifetime Value
Your Customer Lifetime Value (CLV) is the total amount of money a customer will spend with you from the moment you acquire them until they churn or your relationship ends with them.
This metric is fundamental to the success of your business and is also a fantastic metric for measuring customer loyalty: The higher your CLV, the higher your loyalty.
If your CLV is $1000 and your customer acquisition costs are over $1000, you are losing money unless you can lower acquisition costs (or increase loyalty!).
The CLV is a bit more complicated to calculate than the above metrics. You need:
- AOV (see above)
- Purchase frequency (f) — number of orders in a year/unique customers in a year
- Multiply the above two to get the Customer Value (CV)
- Take the customer’s average lifespan (t) — experts say it’s about 1 to 3 years.Then you only need to multiply your CV by the customer’s average lifespan, and you have your CLV.
7. Social Media Engagement
Another thing you can measure is the engagement on your social media content. As you work with nano influencers, these numbers should grow significantly.
The simplest social media engagement metric to measure are likes and shares. You can get an instant idea of how people engage with your content.
You can also check if you’ve gained any followers since starting your nano influencer loyalty campaign.
Another very important metric — to see if your campaign is fulfilling its purpose — is the Click Per Post rate. How many times has the post in question actually been clicked on?
To Wrap It Up
With this guide, you should be able to start a successful customer loyalty strategy that turns your customers into nano influencers. Every brand wants customers who are unswerving in allegiance to their products.
And if you take the right steps, you could have a brand community that is fiercely loyal to you. And why not use what you’ve invested in loyalty and push the results toward marketing? Your loyal customers are happy — or even proud — to do your marketing for you.
Was this guide helpful to you? Are there any more points that feel unclear? Please let us know in the comments below!