Research shows that when customers receive a reward, they feel happier and more relaxed. While all businesses want their customers to feel happy, it’s crucial that merchants give out rewards to the right customers at the right time in order to have a loyalty program that remains ROI positive.
Rewards can build customer loyalty and increase revenue, but if done the wrong way, it could negatively impact the bottom line.
In this post, we’ll review the true art of the reward and how you can use rewards to build better relationships with your best customers and grow your business.
What role does data play?
Data-based customer engagement platforms like Thanx, provide you with robust customer data that you can use to find out important information like how often your customers visit your business, how much they spend, how satisfied they are with your product and service, and even their lifetime value. That kind of data can help you determine who your best customers are so you can target your efforts on incentivizing them to come in more frequently (since they already love your business) with relevant offers, rewards, and discounts.
This model of rewards works. Instead of attempting to reward everyone and offering heaps of discounts, you focus your energy and your budget on the customers that impact the bottom line of your business the most. This, understandably, results in an ROI positive program vs. a loyalty program that tries to reward everyone and erodes your bottom line in the process.
Who should you reward?
Everyone loves a reward – but as we’ve just said, this doesn’t mean that everyone should get one. Historically, businesses have tried to provide all of their customers with discounts in order to drive incremental revenue. While this may be the traditional way of thinking about customer loyalty, providing everyone with rewards all of the time without a strategy, simply doesn’t work.
Giving offers and rewards to every customer can make your VIP customers feel unvalued and can damage your customer loyalty program. Not every customer behaves the same. By rewarding the top 20% of your customers who generate 80% of your revenue, you can increase your ROI and build stronger relationships with your best customers.
For example, Susan Tyler CEO of Team Tyler Marketing Solutions, who handles the marketing for the Running Center, told us, “We want our customers to feel special…we single out our best customers and engage them with personalized outreach. For example, during our next sale, I want to offer all our VIP rewards members something over and above what everyone else receives. I want them to know that we recognize and value their loyalty.”
The Running Center’s customers who are close to earning loyalty rewards visit more often and spend more on each visit, which continuously increases their revenue. Look at the example below of how the Running Center offered a $100 gift card to their customer who accumulated the most reward points during the year.
By focusing on your most loyal customers, you can ensure that they will continue to come back for more great experiences and refer friends which helps you acquire new customers and grow your business.
Which types of rewards should you offer?
There are three main types of rewards that you can offer your best customers with and ignite them to take the action that you want. You can offer percentage-based discounts, dollar-based discounts or free gifts.
- Percentage-based: You may choose to offer your loyal customers a certain percentage off of their next purchase. Sending percentage-based offers can encourage customers to spend more in order to save more money on a purchase. For example, Project Juice offered 50% off of an 8 pack of their smoothies.
- Dollar-based: When customers receive a dollar-based reward, many feel as though they are wasting money if they don’t it. According to Entrepreneur, “Redemption of dollar-based offers vs. percentage-based offers can be as much as 170% greater.” Take a look at the example below from Elephants Delicatessen. They offer $10 off for every $100 a rewards member spends.
- Free gifts: Offering free gifts when a loyal customer reaches a milestone, can make them feel valued and appreciated. For example, Pacific Catch offers a free dessert to all members who sign up for their rewards program. This creates an incentive to join the program and get an instant reward. Pacific Catch knows that in order for their program to grow, it needs to scale. Scale comes from adding new members, and they can only get data about their rewards members once someone has joined and made a purchase so this growth strategy works well.
When should you send rewards?
You want to make sure that the timing is right when offering rewards to your best customers. Perhaps one of your top customers stopped visiting and you want to give them an incentive to come back. Or, maybe it’s a customer’s birthday and you want them to have a special reason to visit. Below are some examples of when you should send discounts.
- Customer milestones: Milestones are a perfect opportunity to provide your customers with rewards. For example, you may want to send a personalized offer to a customer once they spend a certain amount of money. You could also send a reward when a customer writes a review or refers a friend. Use the robust data you get in Thanx to measure their visit frequency, average spend, and more.
- Holidays: Customers love receiving rewards during the holidays. Whether it’s a traditional holiday or something a bit quirky National Donut Day, celebrating your customers by sending them offers is a great way to build a relationship and drive revenue.
- Social media engagement: Keeping in touch with your customers after they leave your business is important. You can do this through an app, a customer loyalty program, and your social media channels. One way you could encourage your customers to interact with you when they are not at your business is by sending them offers if they follow your social media pages, or join your online rewards program.
- Event attendance: A great way to increase foot traffic is by throwing events. Offering discounts to attendees will not only encourage them to come to your event, but it will also result in more sales and possibly new loyal customers. The more positive interactions you have with your customers, the better your relationship will be.
- Winback: Using data from customer engagement platforms like Thanx will show you when some of your most loyal customers (those with high visit frequency and spend) stop coming into your store or restaurant. You can use targeted messaging to send these customers offers in order to win them back. For example, Mike’s Carwash won back more than 30% of their lapsed loyalty members with well-timed winback offers, delivered straight to customers’ phones.
Rewards are an effective way to engage with your customers, reward them, and win them back. When used correctly, rewards can dramatically increase ROI and customer loyalty.
Customer data will unlock an entire world of knowledge about who your best customers are. Use the data to reward your best customers at the right time and watch your business grow and grow.
Learn more about how Thanx can grow your business.