JANUARY 2018 | INSIGHTS
Defining Loyalty for
Tips for Building the Foundation of Loyalty
Loyalty is the result of timely and relevant engagement with consumers that drives them to become advocates for a brand and to consciously select one brand over another.
Loyalty is more than just discounts and rewards points. Customers are loyal to brands because of quality products, experiences, and benefits. For a brand to build loyalty, it needs to create the best experiences for its customers. So, before a brand launches a new loyalty program or modifies an existing one, it needs to have a clear understanding of what would drive a customer to be loyal to its brand.
“Customers have unique aspirations, and every relationship is different. Our job is to create an experience that shows we understand our customers’ needs, we care about them, and we will exceed their expectations. It’s important to form a bond that will create a unique relationship and ultimately drive loyalty to your brand.”
CMO Synchrony Financial
Below are four steps that may be useful to build a foundation for loyalty.
1. DEFINE WHAT A LOYAL CUSTOMER LOOKS LIKE
First, identify where your brand lives on the customer engagement spectrum.
Next, answer these questions about your customers and the types of behaviors you
want to drive:
What is your brand’s definition of loyalty?
Loyalty looks different for each brand—for some, it means customers shop weekly, for others, the brand is in the top 3 brand choices of the purchase decision.
What behaviors do loyal customers display?
Analyze the behaviors of your loyal customers. Which channels do they prefer? Do they primarily make large purchases? Are they shopping all categories within the brand or limiting their spend to specific categories?
What valuable incremental behaviors do customers need to exhibit?
The more a customer engages with a brand the more likely they are to be a loyal customer. Do they engage via social media? Are they recommending your brand to friends? Are they helping to create brand buzz?
Clarifying your brand’s definition of loyalty and what a loyal customer looks like will help guide decisions on how to drive long-term customer engagement.
2. UNDERSTAND THE VALUE OF LOYALTY TO YOUR BRAND
To maximize your loyalty efforts, it’s important to identify which customers have the highest probability of coming back and spending more.
TO UNDERSTAND THE LIFETIME VALUE OF A LOYAL CUSTOMER, CONSIDER THESE KEY QUESTIONS:
What do loyal customers look like and how do they engage?
Leverage segmentation to identify who the most loyal customers are and what their channel, communications and shopping behaviors are.
What is the value of a loyal customer to your business?
Understand the value of the most loyal customers and invest in those with the greatest potential for loyalty.
How much more growth could be generated if just 10% of customers turned into
loyal brand advocates?
Once you know who your most loyal customers are, you can quantify the value they provide to your business. Are they worth an incremental $20 or $50? Use this number to calculate the potential value of marketing to the next tier of customers, to encourage higher engagement and brand loyalty.
Understand the lifetime value of your customers and identify those customers in which to differentially invest.
3. DETERMINE THE FACTORS IMPORTANT TO YOU AND YOUR CUSTOMERS
Do you know what is important to your customers? Making unfounded assumptions about customers can lead a loyalty program in the wrong direction, costing money and wasting time. The best way to truly understand what customers want is to ask them directly.
In 2016, Synchrony Financial conducted an Affluent Study that showed that:
By identifying what delights customers and prospects, brands can create solutions that better align with their customers’ wants and drive more of the brand’s desired behaviors.
Drivers of a successful loyalty program for a brand:
• Repeat patronage
• Increased sales/share of wallet
• Purchase of ancillary services
• Non-price based differentiator
• Insights from consumer data
Drivers of a successful loyalty program for a customer:
• Recognition and reward for their patronage/loyalty
• Assurance that they are getting the optimal deal
• VIP and insider services
• Personalized offers
Reward the actions that drive incremental results. Find the balance between meeting customer needs and managing ROI.
4. BUILD A DEEPER RELATIONSHIP WITH YOUR BEST CUSTOMER
Brands can develop deeper relationships with customers by leading them up the engagement continuum through more personalized experiences.
The initial reason a customer engages with a brand or signs up for a program can be a discount or a special promotion. But a customer stays engaged because of the product, experience and the relationship they maintain with a brand. The more a customer engages with a brand, the more the brand should look to acknowledge them. Providing special and exclusive customer access and experiences can serve as a brand differentiator in the market.
Discounts and promotions will bring a customer in. Then, deliver the right experiences to encourage engagement, create long-term relationships and improve the bottom line.
Loyal customers are the most valuable. Before creating a strategy to engage customers, have a clear definition of brand loyalty. The four steps outlined here are the starting point to developing long-term customer relationships and ultimately driving more customer loyalty to your brand.
Whether supporting a brand through regular purchases, or advocating for it via word of mouth and social media, loyal customers are essential to a brand’s long-term success. Loyalty is not built overnight. It comes from timely, relevant engagement and results in customers consciously choosing that brand time and again—ultimately, leading to advocacy.
It’s important for brands to create a strong foundation of loyalty by understanding what loyalty truly looks like for each brand. This means finding the intersection between the benefits a brand offers and the types of experiences the customer values. Brands that can differentiate themselves through a combination of rewards, experiences and personalized engagement will build the most successful customer relationships and ultimately drive loyalty.
For more insights from Synchrony Financial, click here.
1. Visa / Bond Loyalty Survey. Market Insights Fall 2017.
2. Synchrony Financial 2017 Digital Study
Focus on what really matters.
Synchrony Financial is one of the premier consumer financial services companies in the United States. Our roots in consumer finance trace back to 1932, and today we are the largest provider of private label credit cards in the United States, based on purchase volume and receivables.
Contact your Synchrony Financial representative or visit us at SynchronyFinancial.com or SynchronyBusiness.com to discover how we can help you grow your business.
Contributors: Megan DeCosta—Vice President, Loyalty, Client Strategy and Engagement; Katie Hughes—Vice President, Loyalty Strategy; Sue Yasav—Vice President, Thought Leadership
This content is subject to change without notice and offered for informational use only. You are urged to consult with your individual attorney, financial or other advisors with respect to any information presented. Nothing contained herein shall be construed as legal advice or a legal opinion.
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