Loyalty program that can be sold. Loyalty programs: types and examples. Natural loyalty programs

In today's competitive environment, it is becoming increasingly difficult to acquire and retain clients. Sometimes a business spends tens of times more when attracting a new client than when selling a service or product to an existing one. But, after all, existing clients (loyal) spend 50-70% more than those new ones who were recently attracted. What to do to ensure that clients return to you? If you are ideologically like the majority of marketers, then you have probably already managed to implement a loyalty system.

But does it work that well? Thanks to a survey conducted in 2011 by Colloquy, a third of the miles and bonus points that were issued to customers as a result of the loyalty system were not claimed. It turns out that companies lost money and time to attract customers who never received that added value despite their “loyalty.”

How can you influence this segment of a third of customers and add real value to the loyalty program so that customers return to you? I won't torment you. Here are some ideas you can use to improve your current or develop a new loyalty program that will help your business.

Use a simple point system

This is the most common methodology for loyalty programs. Frequent customers earn points, which are then converted into all kinds of gifts. This could be a service upgrade, a small gift, a discount, a baseball cap, or something else that your client is focused on and collects his points for. It’s quite strange why many companies fail in this component and cannot properly explain to their client exactly how and how many points he gains and what he can then spend them on. I believe that for some loyalty programs you can introduce separate calculators (which, by the way, many companies not named in the article are already doing) to calculate your benefits. Descriptions like: “You will receive 3 points for every hundred rubles spent, and after spending 2000 rubles you will receive a 30% discount next month!” I don’t even want to read, much less think about how best to spend it in order to extract this benefit... if you please. This is not a loyalty system, much less it is not a reward, it is a headache. If you are planning to use points in your loyalty system, think about how your request will be perceived - it should be simple and intuitive, like the program itself!

As an option for a simple system, tie points to rubles (hryvnia, dollars, euros...) after calculating in advance the benefits for the client and the return on investment for the company. Then tie the gifts to a certain amount and your client will always know that for the conventionally spent 1000 rubles, he will receive a (certain) service (or product) for free. Or, let’s say, for every “thousand” he will receive a gift worth one hundred rubles. And one more thing - don’t be shy to speak with the consumer in his own language, leave the marketing jargon in your office, and it’s even better if you get rid of it and start speaking and thinking like your consumer.

Although this type of loyalty system is the most common, it may not be applicable to every type of business - it is rather more suitable for companies that want frequent, small purchases from customers. For example, you can hardly sell cars like that.

Enter a grading system

Finding a balance between achievable and desired rewards is a major issue for many companies when developing loyalty programs. One way to overcome this problem is a level system. Offer small rewards to start with as a base for those who have just become part of the program and motivate them to take repeated action (purchase) by increasing the reward as the customer moves up the ladder of your loyalty program. This will also help solve problems with members forgetting about their points and never using them due to the wait time between purchase and reward.

For example, take Virgin Airlines. Virgin's loyalty system accepts members of its program into the Red tier, then moves them up to Silver and eventually Gold as they progress. Thus, at the red level, clients have access to a discount on car rentals and hotel bookings, and they also earn miles. At the Silver level, they earn 50% more points on flights and related expenses. Gold members earn double miles, priority boarding, and access to exclusive amenities like a massage or a pre-flight glass of beer. The key of the program is that all these “delights” are necessarily presented to the client at the moment of initial contact in order to make him think about coming back again. When the client realizes that “gold” status is achievable along with all its benefits, he usually returns.

The difference between the points and the level system is quite obvious. In the first case, they derive short-term benefits, while in the second, more strategic and long-term benefits. As a rule, a loyalty system with a level system is used in highly profitable businesses with expensive services such as airlines, hotels or insurance companies.

Set the entrance fee for the VIP service

What's wrong with that? Loyalty programs are designed, at their core, to break the barrier between the client and the company. In many cases, a one-time payment (an annual subscription) that allows customers to overcome a common barrier is quite a big advantage for both the company and the customer. Having identified the factors that can make a client leave you, you can develop a loyalty program based on a one-time payment for the “capricious” of this world and allow them to overcome the barrier that prevents them from taking advantage of all the delights of the program.

In 2011, the percentage of people abandoning their cart during e-shopping exceeded a record 70% and this figure is still rising. This is largely due to the shock buyers feel when they see the price after shipping and taxes are added. Amazon has found its way to solve this problem, and it is through its loyalty program called Prime. For $79 annually, in addition to all the other benefits of this program, participants have the opportunity to receive any item from millions within two days. And it doesn’t matter how much you paid for this product!

This program is truly innovative. Analysts estimate that Amazon annually loses about $11 per Prime user, but earns quite a lot on the high frequency of transactions that would not have taken place without this program and its remarkable capabilities.

This system is good for businesses that require frequent and repeat purchases. In just a minute, with a one-time payment, your clients gain access to the entire richness of the program. It can also be well suited in the B2B sector for companies that deal, for example, with delivery.

Create a non-monetary program around the client's values

If you think you know your client well, consider whether you really know his value system and sense of benefit. After all, depending on the industry, your client may find more value in non-monetary or discounted rewards. Every company can offer coupons and discount codes, but not every company can offer something different, not subject to the ruble and at the same time uniting with the audience.

Such programs may concern the environment, animal welfare, clean streets - in short, everything that can be called corporate social responsibility. Therefore, before launching your loyalty program, make sure to research your client and create a portrait of the consumer with whom you can then work.

Join a coalition

Strategic partnerships for a loyalty program, also known as a “coalition” program, can be quite effective in customer retention and company growth. In this case, as above (point 4), you need to know the psychology of your client. Knowing the portrait of the consumer, you can understand what exactly he consumes in addition to your products, what services he uses, and make a truly attractive offer.

American Express has an extensive partner base around the world. Their recent Twitter campaign rewarded members who tweeted about them. Companies such as Whole Foods, Staples, and Zappos participated in the program. According to Visibli, Amex cardholders have received over $2,000,000 in rewards.

What kind of coalitions can you create personally? If you are producing food for dogs, it would be a good idea to think about cooperation with a veterinary clinic or an animal (dog) grooming center. The target audience obviously loves and owns a dog, or maybe more than one. Moreover, it is likely that they know other dog owners. In this case, you can create an excellent loyalty package that goes beyond the usual scope of promotions and discounts offered by your company, and also expands your network due to the fact that you also gain access to your partner’s clients.

Make a game out of it

Who doesn't love to play, right? By turning your loyalty program into a game, you will encourage customers to return after their first purchase and, depending on the type of game, strengthen your brand image.

Entertain the audience, but if you make gifts available during the game, do not forget that the chances of winning should be at least 25%, and even more so you should not set “unrealistic” barriers! A well-thought-out and implemented program can bring success to almost any type of business. This approach will make the buying process more interesting and attractive.

Abandon the program completely...

Just think how many marketers offer loyalty programs? How many of them have already been launched? We're not talking about efficiency, no, we're talking about how clouded the buyer's mind is. Build loyalty by offering exceptional benefits to first-time customers or first-time customers. Take their hearts hostage, and then continue to offer these benefits with every purchase.

The concept sounds simple enough, but one of the most innovative companies on the planet is taking full advantage of the program. This is Apple. Even Apple's most loyal customers don't get special discounts or discounts... because they don't. nobody! Has the number of fans decreased due to this? Judge for yourself. We can only say that in the case of Apple, customer loyalty awakens quite naturally.

This minimalistic approach works best for companies whose products or services are unique or different from others. It's not about price, quality or convenience - it's about redefining the category. You can call it whatever you like - creating a new market, the “Blue Ocean” strategy when an old product is introduced to a new market, or a new product is introduced to a new market, when the company acts as a pioneer in the industry and receives recognition from society, because the product is really needed, a loyalty program may not be necessary.

How to measure the effectiveness of implementing a loyalty system?

Yes, as you already understood (and most likely you already knew) after introducing a loyalty system, there is a need to measure the results of its work. Otherwise, how can you evaluate effectiveness? There are several methods for measuring the effectiveness of a loyalty program and they have nothing to do with what “a friend said” or “a neighbor was happy.” There are many ways to measure, and in fact, each program is unique and the measurement should be “adapted” to its definition. But here are a few of the most common ones:

Customer Retention Rate (CRR): This metric is a measure of how long customers stay with you. If a loyalty program is successful, this number should increase over time and as the number of program members increases. To measure, you can perform A/B testing on those who are not program participants and those who are, thus finding out the overall effectiveness of the initiative. According to Fred Reschelda, author of The Loyalty Effect, a 5% increase in customer retention can result in a 25-100% increase in profits for a company.

Negative Churn: Churn is the rate at which customers leave your company; Negative churn is therefore a measurement of customers who do the opposite - upgrade or purchase an additional service. They help offset the natural churn that occurs in most companies. Depending on the nature of your business and loyalty program, especially if you choose a complex multi-level loyalty program, this is an important metric to track.

Net Promoter Score: NPS is customer satisfaction and is scored on a scale of 1-10. The scale is in its own way the degree to which a person will recommend your company to others.

NPS is calculated by subtracting the percentage of detractors (customers who would not recommend your product) from the percentage of promoters (customers who would recommend you). The fewer ill-wishers, the better. Improving NPS is one way to establish criteria for measuring customer loyalty and, over time, calculating the effectiveness of your loyalty program. A good NPS level is considered to be over 70% – and a loyalty program can help you achieve this!

Customer Effort Score (CES): CES measures how much effort it took to resolve a problem with a company. Some firms prefer this metric over NPS because it measures actual customer experience rather than emotional satisfaction. A Harvard Business Review study found that 48% of customers who had a negative experience with a company told 10 or more people about it. Thus, customer service influences both the acquisition of new customers and the retention of customers.

Loyalty programs are a business driver!

Loyalty programs have taken the world by storm. Companies are launching customer incentive programs en masse. And this makes economic sense. According to Rosetta Consulting research, loyal members make purchases 90% more often and spend 2-3 times more than non-members. There's a reason Amazon invests billions of dollars in loyalty programs. In a world where the customer rules the roost, a high level of customer focus is an essential element of a sales strategy. Regular customers are the main source of income for the company. In the early 2000s, researchers obtained a phenomenal result - an increase in customer loyalty by 5% leads to an increase in company profits by 25-95%!

Launching a loyalty program is an investment in the long-term development of the company. Its impact on brand satisfaction is even greater than price and perceived value. Thanks to recommendations from loyal customers, companies attract new customers and reduce marketing costs for acquisition.

Damn loyalty programs!

A study by Boston Consulting Group notes that loyalty programs often don't pay for themselves. The company calculated that in order to compensate for the costs of incentives and operational management of the program in the amount of 3% of revenues, sales would need to increase by 10%.

All over the world, traditional methods of stimulating customers through discounts and bonuses are becoming less and less effective. There are a number of explanations for this.

The number of loyalty programs is growing exponentially every year. The buyers' wallet no longer holds all the cards; some of them have moved to mobile applications, but this does not change the essence. In the United States, on average, there are 29 loyalty programs per customer, of which he actively uses no more than 12. In Russia, the indicators are not much better. According to RBC Research, 58% of loyalty cards remain virtually unclaimed.

Decreased activity of participants. As a consequence of the increase in the number of programs, the average engagement of participants is constantly falling. Clients are fed up with the same type of classic discount or bonus programs. To attract the attention of buyers, you need to increase the attractiveness of the reward. But this cannot be done without reducing the profitability of the program.

McKinsey conducted a study among 55 of the world's largest retailers on the effectiveness of loyalty programs. The results of the study are sobering - revenue growth in companies that invested in loyalty programs was similar or even slightly worse compared to companies that did not make such investments.

Are loyalty programs an effective investment or a waste of company resources?

Both positions are sides of the same coin. The loyalty program is one of the tools for building relationships with customers. Those companies that use it skillfully achieve impressive results. “On average for a hospital,” loyalty programs do not always live up to expectations. The problems lie not in the tool, but in how it is used. The decline in customer interest is associated not only and not so much with external factors. The main reasons lie in the low quality of implementation and subsequent management.

Key mistakes when implementing a loyalty program

Waste economy

Most of the problems associated with the incentive model arise at the design stage. Sometimes companies think that developing a loyalty program is easy and simple. I added it there and wrote it off here. Business then! The main thing is to buy the right software. Alas, this is far from the case. Behind the apparent simplicity lies a carefully thought-out mechanism. A well-designed program is mathematical models, consumer psychology and trade marketing rolled into one.

Giving out discounts without understanding how a company will recoup such investments is an attraction of generosity that is bad for its financial performance. The launch of the program does not automatically lead to an increase in sales from the first months, but it certainly reduces the profitability of the business in the short term due to the budget for rewards and operation of the program.

The most active participants are loyal customers who already regularly consume the company's products and are unlikely to spend more. Their share of wallet (the share of purchases from the total demand in the category) is close to 100%. Customers who rarely make purchases receive few bonuses, which means that the loyalty program has a rather weak effect on them. What happens? Margins for regular customers increase slightly or even fall due to spending on bonuses, and those customers who could potentially increase consumption do not receive the necessary incentives.

A well-designed program is a combination of mathematical models, consumer psychology and trade marketing.

You can improve the economics of the program and at the same time increase its attractiveness for various categories of consumers using a system of levels and targeted campaigns to “grow” regular customers.

Cut seven times, measured once

The design stage lays the foundation, but the main work begins after the program is launched. Analysis, testing, optimization, evaluation - these are regular tasks that need to be performed day after day. Which customer segments are most sensitive to bonuses, what is the correlation between the size of the reward and the customer’s consumer activity. This information is the basis for optimizing the incentive model.

A team of specialists is needed to manage the program. Many companies cannot afford to have a separate staff for this, or do not see the need for it. This leads to the fact that the results of the program are not measured, and there is no comprehensive approach to assessing indicators. And as the saying goes: “You can’t manage what you can’t measure.” Decisions are made on a whim through trial and error. As a result, the loyalty program, instead of retaining customers, on the contrary, becomes a cause of consumer outflow.

One size fits all

Behind the abstract participants there are people - unique and contradictory. They have different needs, decision-making patterns and consumption habits. The main driving force of the loyalty program is customer centricity, which is formed based on a deep understanding of the behavior of various consumer segments.

Imagine if you offer your clients not bonuses, but shoes as a gift. Moreover, only elegant shoes of size 38 or sports sneakers of size 45 are available. Now estimate what proportion of clients the gift will be in size.

Same with loyalty programs. By offering a single incentive model for participants, the company a priori loses a significant part of the target audience. It is either extremely difficult for clients to accumulate bonuses, or the rewards are not attractive. Capgemini Consulting found that 44% of conversations on social media revolve around irrelevant incentive models and unattractive rewards.

How to Create the Next Generation Loyalty Program

Stop spending, start investing

As mentioned above, a common problem with loyalty programs is the lack of a clear strategy for working with different customer segments. The program becomes profitable when the company understands who, how and for what they receive bonuses. Imagine that for each client a profitability rate is set, on the basis of which an individual package of offers is formed. Segmental goals should be reflected in the program management operating model.

The right customer incentive model begins with assessing the customer's potential for the company.

The right customer incentive model begins with assessing how promising the customer is for the company. CLV is a guiding star that indicates what level of rewards is acceptable for a particular participant. CLV is not just an indicator, but an ideology of working with clients, which is based on a total analysis of all interactions between the consumer and the company. To understand the value of a client, it is not enough to measure financial indicators; consumption patterns, preferences and life interests are important. According to research by Nielsen and McKinsey, the use of a value approach leads to increased consumption among the most profitable and loyal consumers and a reduction in inappropriate spending on stimulating unprofitable and disloyal customers.

Personalize your participation in the program

Geolocation and transactional data, responses to promotions, activity on social networks, analysis of requests to the support service - these are grains of information that together create the digital genome of the buyer. Data is the new fuel for loyalty programs. The current level of technology development makes it possible to implement individual trajectories of client participation in the program based on the analysis of many factors - from purchase history to analytics from CCTV cameras.

Data from various information sources form the digital genome of the consumer.

Bond found that 2/3 of programs do not analyze the relevance of rewards for participants. Nothing kills interest in a program more than uninteresting prizes. Personalization of the reward system influences the activity and satisfaction of participants without increasing the cost of incentives. For example, some customers do not use bonuses, their consumer behavior does not change after joining the program. This may be due to the unattractiveness of the rewards, or the method of motivation does not meet the needs. In this case, other mechanics are tested - special conditions of service or instruments of non-material motivation - participation in a socially significant initiative or charity event.

Combine different types of customer motivation

Unfortunately, the vast majority of loyalty programs affect rational customer loyalty, built only on stimulating purchases and completely ignoring the emotional component. The result is dull and repetitive programs that do not arouse any enthusiasm among consumers. They encourage brand tolerance instead of truly building long-term loyalty. Emotional involvement of participants is not a one-time creative, but a strategy thought out with engineering precision to retain customer attention and stimulate the required consumption model. Gamification, sweepstakes, initiatives not directly related to purchases, educational projects, surprises and instant prizes, competitions, etc. The ingredients are known, all that remains is to cook and serve correctly.

Emotional involvement of participants is not a one-time creative, but a strategy thought out with engineering precision to retain customer attention and stimulate the required consumption model.

The sole purpose of most programs is to stimulate transactions, and other aspects of the consumer's interaction with the company are overlooked. Encouraging any activity around the company, including reviews, participation in promotions, publishing posts, creates an additional emotional connection between the brand and the buyer. It is important to understand that this kind of activity cannot be stimulated by material bonuses; this corrupts customers and attracts prize hunters.

Foster an omnichannel model of interaction with the company

Foster an omnichannel model of interaction with the company Point of sale, website, mobile application, social networks, chatbots - this is not a complete list of ways to communicate with customers. The combination of different interaction channels increases audience reach, since the customer experience is not limited by the buyer’s geographic location or time of day. The omnichannel consumption model is advancing by leaps and bounds around the world following the spread of mobile devices.

A loyalty program is an excellent tool for creating new habits and consumption patterns. Let's give an example. Traditionally, offline retail has one channel of interaction with the buyer - the point of sale. If a person installs an application in which you can create a shopping list in a store, then their customer experience will expand beyond the point of sale. Why not stimulate this consumption model with the help of a loyalty program - make a list, buy, receive increased bonuses.

Obviously, the loyalty program should be available through the channel that is currently available to the client. Some people prefer a nice card in their wallet, while others find it more convenient to use a mobile app or just give their phone number. Having a presence across multiple channels allows you to collect customer information and use it to optimize future interaction scenarios.

Actively manage your customer experience

Surprisingly, but true - traditional loyalty programs do not work with customer complaints and problems. Moreover, loyalty programs are on the balance sheet of marketers, and complaints and suggestions are received by the service and/or sales departments. According to statistics, 71% of clients part with a company due to poor service. The question is, why does a client need bonuses if the level of service is categorically not satisfactory? Every company has problems. But leaders know how to accept requests from clients in a timely manner and smooth out complaints. A description of approaches to dealing with negative customer experiences can be found in.

The new generation loyalty program is aimed at creating a positive customer experience and smoothing out difficult situations (complaints, operational failures, bad customer mood). Another direction in the evolution of loyalty programs is increasing the value of a product or service. The program should create tangible benefits and solve the buyer’s problem. A great example is Amazon's program. Program members do not pay for delivery each time they place an order.

Conclusion

The loyalty program is a company asset and an additional competitive advantage. At the same time, it is no longer enough to distribute bonuses to clients. Classic discount and bonus mechanics are being replaced by complex new generation programs that solve a wider range of problems than just incentives for repeat purchases.

Managing Director NGM Mikhail Fokin

According to a 2015 Colloquy Customer Loyalty Census study, on average, Americans are enrolled in 29 different loyalty programs. But only 12 of them actually use - accumulate or spend points throughout the year. It turns out that companies often waste money on organizing and maintaining loyalty programs: sales growth is not stimulated, and customers do not receive any benefits.

Marketing software developer HubSpot published a list of 7 loyalty program models that actually work on its blog. We present to your attention an adapted version of this material.

Simple point system

The most common loyalty program model is for customers who make frequent purchases to earn points that can be converted into some kind of reward. This could be a discount, a free product, special features that are not available to other customers - the main thing is that to receive a reward you need to collect a certain number of points.

While it sounds simple enough, the reality is that creating links between virtual points and real rewards is not a painless process.

As a result, you can often see schemes like “14 points equal a dollar, and twenty “dollars” is a 50% discount on your next purchase in April,” which are extremely difficult to understand.

In order for customers to actually use a loyalty program, it is necessary to make the connections between points and rewards as simple and intuitive as possible. It must be remembered that this loyalty program format is only suitable for businesses that sell everyday goods that can be purchased frequently.

Example: Boloco restaurant maps

The American restaurant chain Boloco, famous for its burritos, issues customers special cards with which they can track all purchases. Every $50 spent earns you a free meal. It makes no difference what the visitor wants - a huge burrito or a small smoothie. This, and the fact that points are real dollars, makes it easier to understand the program, which is in significant demand.

Multi-level system to stimulate repeat purchases

Finding a balance between rewards that are realistically achievable and desirable for the client is not an easy task. To solve this problem, multi-level loyalty systems are used to encourage customers to make more purchases.

It works like this - at the beginning, for joining the program, the client is entitled to a small gift, subsequent purchases allow him to move to the next level, where the value of the prizes increases. This avoids a situation where users forget about accumulated points and do not use them because the time between the first purchase and the opportunity to receive a reward is too long.

The main difference with a regular points system here is the ability to extract short-term benefits from the loyalty program. This model works better for companies that do not sell the cheapest goods and services - for example, airlines, hotel chains or insurance companies.

Example: Virgin Atlantic Passenger Club

In addition to earning miles as usual, being a member of the Virgin Atlantic Flying Club allows members to earn special points. After joining the club, the user is assigned Club Red status, which can then be changed to Club Silver and Club Gold.

• Club Red - users earn miles on flights and receive discounts on car rentals, airport parking, and hotel stays.
• Club Silver - at this level, users are awarded 30% miles on flights, and also enjoy expedited check-in and priority boarding.
• Club Gold - holders of this status receive double miles on flights (60%), priority boarding and access to the airline's exclusive business lounges, where you can have a snack, drink and even get a massage before your flight.

It doesn’t look as simple as in the first case, so the company has developed a special table that makes it easy to figure out what benefits you can get from moving to the next level.

The whole point of a loyalty program is to offer something tangible early on, and then entice the customer with the prospect of a bigger reward. When the client returns and moves to the next level, he will understand that gold status is within reach and is worth working for, given the benefits offered.

Advance payment for VIP privileges

In some cases, charging an up-front fee for access to benefits may be worthwhile, but to do so, buyers must clearly understand what benefits it will give them. The company can study the main difficulties that clients face when working with it and offer to solve them for a fee.

Such loyalty systems are well suited for companies that want to encourage regular purchases.

Example: Amazon Prime Free Shipping

How to evaluate the effectiveness of a loyalty program

Various approaches are used to evaluate the effectiveness of loyalty programs, but there are a number of general metrics that help in the assessment.

Customer Return Rate

This indicator allows you to understand how long customers stay with the company. Implementing a successful loyalty program should help increase these numbers - the more loyalty program members there are, the higher the average should be. According to the author of the book “Loyalty Effect” Fred Reichheld, a 5% increase in the return rate results in a 25-100% increase in company profits.

Negative churn

Churn rate tells you how many customers a company has lost. In turn, negative churn is a metric that describes customers who, on the contrary, purchased additional goods and services or switched to a more expensive tariff plan.

These figures help to understand the real state of affairs and compensate for natural churn, which cannot be avoided in any business. This metric is important for assessing the effectiveness of multi-tier loyalty programs.

NPS consumer loyalty index

NPS shows the level of user satisfaction on a scale from 1 to 10 - this is the degree of likelihood that a person will recommend the company to someone else. The index is calculated by subtracting the percentage of brand critics (detractors - those who would not recommend the company) from the percentage of supporters (promoters - people who are willing to recommend it).

The fewer critics, the better. Figures over 70% are considered a good NPS indicator.

Customer Effort Evaluation

The CES (Customer Effort Score) indicator allows you to understand how difficult it was for them to solve their problem with the help of the company. Some believe that this metric is preferable to NPS because it is based on real customer experience rather than emotional assessments.

Everyone views marketing as attracting customers. Something like an advertisement. Marketing = advertising. They attracted customers and they bought.

Everyone is happy: the head of the company, the clients themselves. The only thing is that it has long been proven that selling to a regular customer is 5 times cheaper than selling to a new one. And this is the problem with most managers.

They don’t think about how to retain a client, although there are simple and unobtrusive marketing tools for this. For example, a customer loyalty program.

Marketing and discounts

Although no, I'm wrong. Managers and marketers think like . But usually, the most they can come up with is discounts.

Those same banal discounts and, moreover, the larger the discount in their opinion, the higher the likelihood of retaining the client.

There is definitely truth in this. But they forget what discounts mean in business and how much it impacts their margins. And all this, as a result, is very far from a working customer retention system.

And how to keep it here...

As an example, let's imagine a classic situation in any business, when a client asks you to give a discount and at the same time subtly hints that if you do not give, the consequences may be irreversible.

Bad option:

- Will you give me a discount?
- We don't have discounts.
– Then I’ll go buy from competitors!
– Okay, I’ll give you my personal discount of 5%, but don’t tell anyone about it.

A good option :

- Will you give me a discount?
– Yes, when purchasing over 10,000 rubles you receive a 5% discount.
- Okay, then I'll buy it.

The best option :

- Will you give me a discount?
- Certainly. Moreover, the more you buy from us, the greater the discount you get. For a purchase of 10,000 rubles you will receive a 5% discount, and for a purchase of 20,000 rubles you will receive a 10% discount.

- Well, okay, then give me this coat for 22,000, then it turns out it will cost me 19,800.
- Yes that's right.

I think you have now learned the model of a customer loyalty program, according to which more than half of small businesses in Russia operate. And now is the time to change your business and stop being like 99% of your competitors.

If you don’t have a customer loyalty program, it’s time to break the system and start one immediately after reading the article, especially since you will learn the tricks and life hacks that work in modern realities in Russia.

And even more so, if yours is exactly as I described in the examples, fix it urgently!

And if you are lucky and this is not the case, I congratulate you, but I still strongly recommend reading the article to understand what to add/improve to your loyalty system.

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Three tasks - one road

So. What is a customer loyalty program? Briefly, this is a way to motivate your clients with three main tasks that most managers forget about when developing it:

1. To retain customers (Will you go to buy from organization B if you have the maximum discount from organization A?!);
2. To increase sales (Will you buy just 2,000 more rubles to get an 8% discount?);
3. To (Remember before everyone went to Letual or Ile De Beaute with someone else's cards in order to buy at the maximum discount?).

And in fact, all customer loyalty programs revolve around two simple actions (I would even say arithmetic operations) - write off or accrue, that is, plus or minus, that is, a discount or savings program.

It is these that we will now look at and get to the point “What is better – a discount or bonuses?” If you don’t want to read the rest of the article, watch the video:

In general, there are more than 4 loyalty programs, but today we will study only these 4. And yet, get ready that while reading the article you will have thoughts of changing the old one that works well/badly for a new one, which you will learn literally within 3 minutes.

Discount loyalty program

As I wrote earlier, this is the most widespread of loyalty programs, not only in Russia, but also in the world in general.

Expressed either as a one-time or cumulative discount. As a rule, this is a discount card that gives a certain percentage discount on a purchase. Why a certain one?

Because discount cards come with either a fixed or cumulative discount.

The cumulative discount is due to the following function - when purchasing at certain price thresholds, the client receives an increase in percentage as a reward for loyalty to the company.

Some are sophisticated and come up with conditions that if the client does not appear with them, for example, once a month, then she is demoted to a lower level and so on until he comes to his senses and comes again.

Pros :

• Customers love discounts. Especially in Russia. It’s very special under the conditions of this time.
• Such a program is simple and straightforward, so it is easy to organize and control.

Minuses :

• Nowadays, any person usually has at least 2-3 discount cards from companies in the same field.

  And usually the discount amount is the same everywhere. Therefore, in competitive areas, one might say, “loyalty” is more like a word than a really working tool;

• As soon as the client stops growing in the process of winning the maximum discount, his interest in progressing in purchases also begins to fade;
• The main disadvantage of discounts is that they are given from net profit (example below).

Let's give an example about the loss of money from net profit due to discounts. Let's say you sell some product for 9,000 rubles. Your markup is 30% Discount is 5% or 450 rubles. It seems like a little, BUT!

You have the cost of a product/service that you will not spend anywhere, and accordingly you give a discount from your net profit.

Thus, you actually lose 450 rubles not from turnover, but from your net profit, which, for example, is 2,700. It turns out that at the end, taking into account the discount, you earn 2,250.

The total amount of the discount (if converted to pure money) is not 5% at all, but as much as 17.5%. And this, you see, is significant. Of course, this will not be so noticeable if your markup is 100-200 percent, but what if the discount is greater?

Bonus loyalty program

In this program, the client no longer receives discounts. They magically turn into bonuses. But the principle is the same.

When you make a purchase for a certain amount, you receive a certain percentage of bonuses from the transaction amount on your account/card, which you can spend when making your next purchase (even exchange for a free product).

The bonuses themselves can be in any form: points, stickers, rubles. Yes, at least the fictitious currency of the store (not the worst option, by the way).

Pros :

• If you mean repeat purchases, then the system can work for quite a long time and successfully without unnecessary problems;
• To accumulate a decent number of bonuses, the buyer must buy constantly or in large amounts, which is extremely beneficial for the business owner;
• Bonuses may tend to expire, which means this will be an additional incentive to come to you as soon as possible and spend them;
• Not all clients come to spend bonuses, so, one might say, you keep this money in your company and end up selling it without a discount at all.

Minuses :

• If the purchase is one-time or very expensive/rare, then such a loyalty program will not be suitable. The client simply has no interest in participating in it, since he will not come to you again;
• If you make tricky/complicated rules for a loyalty program, customers may get confused or not understand it at all, which will completely destroy the whole idea behind its creation;
• More difficult to control than discounts, so you may even need special software.

What's the second fastest way to increase profits in any company? Have you thought about the first one? Don't think - this is a price increase. The second is to switch from discounts to bonuses.

Remember our example about a product costing 9,000 rubles and a 5% discount? Let's apply it to bonuses. All the same.

You credited the client with 5% on his bonus card on his first purchase, which he can use on his next purchase. We count.

1st purchase – 9,000 rubles
2nd purchase (also) – 9,000 rubles
Bonus from the first purchase (located on his card) – 5% or 450 rubles.

Thus, 2700 (first purchase) + 2700 (second purchase) – 450 (bonuses written off from the first purchase) = 4,950 (your net profit minus the bonus discount). The total discount on your profit was 8.5% versus 17.5% in the first case.

Particularly attentive people should have noticed that from the second purchase the guest will still receive another 450 rubles into the account and it turns out that as a result we will give out the same 17.5 percent. And they will be right.

Only if we return to the advantages of this system, we must remember that half of the people will not come, half of the bonuses will be burned and these bonuses will stimulate the client to come again.

And also immediately answering your question: “What will happen if we cancel discounts and introduce bonuses, will all the clients run away?” Nothing will happen! Yes, some part will leave, but its departure will be compensated by an increase in your profit.

Oh, calm, just calm

In general, it is not dangerous. We checked repeatedly. And by the way, the part that will leave are the most unreliable and few clients who are ready to go to the other end of the city if they find a product/service 10 rubles cheaper. There is no need to focus on such people.

Although, of course, so as not to be to blame later for the fact that your company has ceased to make a profit, I will still make an amendment.

And I have a favor to ask of you. There is no need to ask customers: “What would you choose: discounts or bonuses?” The client will always respond with a discount.

This is how our psychology works – “Good now, bad later.” Therefore, take yourself for... willpower, cancel discounts (if any) and introduce bonuses.

Lifehack. If you want to get a ready-made loyalty program, I recommend ““. Very cool functionality and flexible settings. And with the promo code “INSCALE” you get a 10% discount.

Multi-tier loyalty programs

This is a fairly simple and at the same time complex system. The more money a person spends in your company, the more interesting group of clients he gets into and the more interesting bonuses he receives.

For example, these could be some additional free services (free shipping, extended warranty, etc.).

That is, by spending more money, the client increases his status. Often such loyalty programs are used in banking, insurance or airlines.

Pros :

• Such a program is built on pride, since the more a person spends, the more interesting the group he will be in, which has a positive effect on the client’s desire to spend more;
• Ideal for the VIP and Double-VIP segment of people.

Minuses :

• He is both a minus and a plus. Such a system is ideal only for expensive goods and services;
• We need very strong bonuses when reaching one or another level;
• Quite difficult to implement and track. Again, special software is needed.

Paid loyalty program

Or receiving some bonuses/privileges/perks for subscribing. That is, the client pays money (usually a fixed subscription fee) and as a result receives privileges.

This could be increased service, additional services, access to some closed resources, and the like.

Pros :

• Very easy to organize;
• Ideal for products that are purchased frequently;
• Clients buy access to such a loyalty program, but often do not use it (that is, “free money”);
• You can work out the cost of bonuses so that they are as profitable as possible for you in terms of money.

Minuses :

• If the value (perception) of a paid subscription is lower than the price, then the entire program may fail.

Let's just say this is the coolest and strongest loyalty program. The one you get paid for, but let's be realistic.

For this to happen, you need to be a very popular company in your sales territory.

How to choose a customer loyalty program?

This is a very important point. Since a manager or marketer always perceives his business in a special way, so to speak, “with rose-colored glasses” (this is a fact that is also relevant for us), it is very difficult for them to understand what his client wants.

Yes, implement everything as in the popular proverb - “You can’t eat a fish without washing the frying pan.” So what should we do?

1. It's corny, but you have to put yourself in the buyer's shoes. Let's imagine that you have a wholesale organization.

   What do you think your favorite (for you) client wants? Accumulate bonuses to exchange them for something free? Or does he want (and is used to) to receive discounts here and now?

   Therefore, you take the side of the buyers, analyze your range of goods/services and find the answer to these questions.

2. Ask customers who are already buying something from you what they want (but remember the stop question: discounts or bonuses?). You can post the survey on your website, social networks, or in your office.

   As a rule, the answers will be from the “lower prices, higher discounts” series. But sometimes you will come across adequate people who can suggest interesting ideas, and this is the essence of this action.

3. Do a competitor analysis and determine one of two strategies:

   3.1 Go the other way. If the client gives a progressive discount, up to the maximum, then perhaps it is better to give up discounts altogether and switch to a bonus program, just with very interesting prizes.

   3.2 Model it and improve it. Just remember that things can be ambiguous.

   After all, maybe a competitor miscalculated, introduced a discount loyalty program, now earns nothing at all and grieves about it at night, but you didn’t analyze it and decided to copy it.

4. And the last step, when you have thought about everything except yourself, ask the same question as in the first point, only to yourself: “What do I want?” or “What benefits me?”

   Sometimes it is better to make a system with discounts, and sometimes with bonuses. As I wrote above, there is always a factor in the market that can change everything.

   Therefore, calculate under what scheme your company will grow in profit (or in your case, it may make sense to grow in turnover to capture market share now).

And finally, a few life hacks that will make your customer loyalty program even more interesting:

1. If you decide to switch to a discount loyalty program, then make it progressive.

   If you buy 10,000 rubles, you get a 5% discount, if you buy 20,000 rubles, you get a 7% discount, if you buy 50,000 rubles, you get a 10% discount.

   The more a customer buys, the greater the discount he receives. The only thing is that discounts should not be just crazy on an ongoing basis (from 20%), this can play a cruel joke and scare away buyers.

2. If you have a catering service or a store, and you count bonuses manually, then rather switch to ready-made solutions that do not cost a lot of money.

   For example, such as Plazius (for catering) or Bazaronline (for retail stores). They already have everything you need. You just need to connect them, calculate the amount of bonuses based on your margin, and put them into action.

Briefly about the main thing

Finally, a video showing how stupid the picture as a whole can look when you complicate it too much and stop understanding yourself :)

And a short summary of the article: if you just want to create a customer loyalty program because you need to quickly increase your profits, then... No, it won’t help you and you don’t need it.

A customer loyalty program is just one of the marketing tools that can get your customer (forgive the tautology) more often and more, but in the long term.

And one more parting word – don’t complicate things. I remember with one client in public catering we decided to introduce a bonus loyalty program.

We probably calculated it for about a month. Well, for a very, very long time. He constantly called me and offered me new mechanics. Confusing me, myself, and future guests of my establishment.

As a result, I gave up and introduced the following conditions: 20 percent of each check was accumulated for the next visit. Once the guests got used to the new system, we began to gradually complicate it.

Surely you know that attracting a new client costs 5-10 times more than retaining an existing one. And that’s not all: the average check for regular customers, according to statistics, is 67% higher than for new ones.

In modern commerce, retention and repeat sales are the main driver of growth. Most companies integrate loyalty programs to achieve these goals, but many of them don't think about what really matters to customers.

According to the Colloquy Customer Loyalty Census study, 13 out of 30 loyalty programs stop working within a year of launch. Companies waste time and money, and customers don't see the value in the "collect points and redeem them for a cap" offer.

To prevent your program from becoming a member of the “Looser-13” list, you should first familiarize yourself with the existing customer retention models on the market

Savings loyalty program

This is the most common model with very simple mechanics - regular customers accumulate points for subsequent exchange for material benefits (discount, free product, special offer, etc.)

Despite the apparent simplicity of this method, many companies manage to complicate the program so much that they themselves begin to get confused in it.

“14 points can be exchanged for 1 dollar, and twenty dollars accumulated is a 50% discount on your next purchase in April” - this is not a loyalty program, but a headache.

When implementing a savings system, remember that it should be simple and understandable. This model can be integrated into almost any B2C business, but it is best used where there is a high frequency of purchases.

Boloco's. Boloco Card loyalty program.

The American restaurant chain Boloco is known not only for its burritos, but also for its effective loyalty program. According to its rules, participants receive 1 free product for every $50 spent. It can be an extra-large burrito or a small smoothie. Boloco speaks to its customers in a language they understand, measuring points in dollars and dollars in products.

Multi-tier loyalty program

Finding a balance between the value of the prize and its achievability is the company’s main task when designing a loyalty program. Achieving this goal can be facilitated by the introduction of a multi-tiered model of customer retention and rewards.

By rewarding small prizes as the customer moves up the loyalty ladder to larger rewards, you keep their attention and interest in participating in the program.

The main advantage of a multi-tier model over a funded model is that the client derives both short-term and long-term benefits from it. The savings system is not so interesting to clients, because... The interval between purchase and goal achievement is usually too long, so often clients simply forget about the program.

This system is widely used in highly committed businesses such as airlines, hospitality and insurance companies.

Virgin Atlantic. Loyalty program "Flying Club".

Virgin Atlantics offers its passengers a tiered loyalty program that is quite common among airlines, which involves accumulating miles. Passengers are segmented by clubs: “Red”, “Silver”, “Golden”. Members of the “Red” club can exchange accumulated miles for car rental, parking and hotel payments. “Silver” members receive 50% more points on flights and have priority access at check-in. Gold members get double miles and access to VIP lounges.

Paid loyalty program

The purpose of a loyalty program is to strengthen the relationship between the business and the customer. Think about whether it would be better for you, instead of offering a small benefit for free, to give your customers more value, but at a certain cost?

Apple. Loyalty program “Not in this life, buddy”

Even the most loyal buyers of Apple products do not receive discounts and prizes. The brand focuses primarily on a product and service that fully meets the requirements of their target audience. Therefore, Apple's loyalty program can be called natural.

Finally

Many companies become hostage to their loyalty programs, even when it stops bringing results - they are afraid to cancel it. Marketers need to look at the intricate rewards and incentive systems to understand what provides real value to customers.

After reviewing these examples, you can begin the process of developing a program that will achieve your business goals and be of interest to your customers.