How to Build True Customer Loyalty
Consumers love discounts, so we should give them what they expect to stay competitive in the market. This is a widespread belief among marketers, entrepreneurs, and business executives. But is it true? What if, in fact, consumers are more concerned about product/service quality and positive emotional interaction with the brand? What if there are better ways to attract and retain customers? Luckily, there are great ways to drive loyalty and engagement without the necessity of “killing the check” by giving discounts.
In my role as Head of Customer Success at LoyaltyPlant, I’ve helped many brands, both well-recognized and emerging, build their marketing strategies centered around personalized and meaningful marketing communications with their consumers while sticking with a no-discount approach.
In the food tech industry, it is quite challenging to implement that approach. And it is even more challenging in certain regions where particular “game rules” were settled years ago — the EMEA region in particular.
As a company, we operate globally, so I’ve had the unique experience of interacting with businesses and their consumers everywhere in the world. I’ve learned that the EMEA region is demanding of discounts.
Papa Johns UAE, one of our key customers, is a franchise of a well-recognized US brand that operates in Dubai. We partnered with them not long before Covid19 hit the world. Our main goal, with the help of our tech solutions and expertise, was to help them stand out from the competition and move away from broad discount-based campaigns.
It’s a fascinating journey we’ve started together, and I’m happy to say that our success was recognized by The Loyalty360, the most coveted awards in customer loyalty. Our case received a Silver Award in the “Customer Insights and Metrics” category; and a Platinum Award at MarCom competition.
Why implement a loyalty program?
Loyalty programs of all kinds ultimately drive customer retention, which can help organizations generate revenue, increase referrals, and achieve overall growth. Some typical goals organizations pursue when thinking about implementing a loyalty program include:
- Moving away from discounts
- Standing out from competition
- Retaining existing customers
- Increasing Customer Lifetime Value
- Involving customers in communication with the brand
- Creating brand advocates.
Obviously, there are numerous ways and variations of loyalty programs that can help achieve the above-mentioned goals.
Based on my experience, the most efficient loyalty programs are reward-based, as they are aimed at creating an emotional bond with consumers.
Imagine: How would you feel if you got a beautifully wrapped gift box for your birthday from one person and a gift voucher from the other? Both presents are wonderful to receive. However, in the first case, you’d probably be excited to open the box and find out what’s inside. A gift voucher is also a nice present, but there’s not as much emotion involved due to the lack of a surprise factor.
I often give this example when talking about reward-based loyalty programs vs discounts. The positive emotions that your brand engenders by excellent customer service/ products, and a loyalty program, for that matter, will not be forgotten. And this will eventually motivate consumers to come back.
How do I implement a loyalty program?
To begin with, you obviously need to figure out the concept of the loyalty program and what technology you need for execution.
In our case, with Papa Johns UAE we’ve launched a mobile app with great UX, online ordering, and a reward-based loyalty program built in.
First, it’s important that customers recognize the value of becoming loyalty members in the brand’s mobile ordering app, particularly when they’ve become accustomed to using third party aggregators and delivery services. We’ve been able to accelerate participation by understanding how customers interact with the brand after becoming members, by refining our messaging, and by appealing to customer preferences.
The next key focus is moving customers away from a “discount-seeking” mindset, one that is particularly prevalent in the market. A big part of our customer insights strategy was to use our deep understanding of customers to reach them with messaging that appeals to their specific preferences. We could then make personalized offers. When customers’ individual tastes are catered to, they become more loyal and visit more often, even without discounts.
In order to successfully execute this strategy, and to measure the meaningful impact on business results over time, we’ve followed a methodical approach to gather, analyze, and experiment with the information received via our mobile marketing platform.
Papa Johns UAE A/B testing: discounts vs complimentary items
As previously mentioned, our marketing concept has been transitioning from discount-based to reward-based, along with personalized marketing communication. This approach essentially translates into loyalty and true engagement with customers.
Multiple studies demonstrate the key benefits of going with a rewards system instead of discount offers, which in the long run are simply unsustainable marketing methods. Some of the key benefits of following reward-based marketing:
- An emotional connection with your brand
- A great way to showcase your superior product/service
- You can keep your price competitive
Today’s marketing, and basically all business decisions are reliant on data. Being a tech company we’re no exception, so we were looking for some validated proof of our confidence in the efficiency of reward-based marketing.
It is typical for marketing activities to undergo A/B testing to find out what strategy actually works best. Together with the Papa Johns UAE marketing team, we’ve also run some A/B testing when launching our marketing campaigns.
We hypothesized that giving customers a complimentary item leads to better results in terms of number of orders and marginal profits. To test this theory, we launched two campaigns:
Campaign A, 50% off discount, no targeting. Campaign B (launched right after Campaign A), complimentary item based on purchase history. We analyzed the results from both campaigns. Campaign B was much more profitable.
The key takeaway from our experiment: In order to increase sales from a particular cohort, it is ~2x times more profitable to give them a complimentary item based on purchase history instead of a 50% discount.
Why Papa Johns UAE has become an exemplary case of a successful loyalty program transformation
Most importantly, we’ve successfully transitioned from a discount-oriented promotion strategy to targeted complimentary offers. Customers are now more engaged and emotionally loyal to the brand, viewing it as a food experience rather than a cheap eating option. This has helped the brand stand out in a market that continues to rely heavily on discount-based offers.
We focus on the emotional and psychological aspects of loyalty instead of the purely transactional, and thus we see how bonus points combined with gamification have boosted excitement around the brand in ways that discounting never could.
A link to the original source – Medium.