The Cornerstone of a Successful Business in Challenging Times

Yesterday, I had an experience that truly highlighted the importance of customer loyalty in today’s business landscape. I had placed an order online for click and collect from a small, independent beverage shop in my town. The store had a website and it took click & collect orders - a lesson it itself for local retailers that are not leveraging online.

When I went to check out, I was asked if I wanted to join the store's loyalty program and earn "sips". I was informed of the rewards I’d already earned and I eagerly said "Yes!".

When I picked up my order, I ended up doubling my purchase with the stores fantastic selection. I was again told exactly what I would get if I collected more points: a 10% discount on my next order (over $50) - nothing major. It was a simple yet powerful incentive that made me feel valued as a customer. This interaction made me realise the impact of loyalty programs, especially in a time when businesses are challenged with a slow-growing economy and the pressures of inflation.

But that isn't the only think that I realised ...

A New Owner, A New Approach

The business had recently changed ownership. The original owners, a younger couple, never had a loyalty program or even connected their online store with their retail one. I hadn't been more than an infrequent customer as there was nothing motivating my buisness. The new owner, though older and not particularly tech-savvy, understood the essence of customer loyalty. He recognized that his customer base was invaluable and that maintaining their trust and satisfaction was crucial. He was very happy to give me additional "sips".

This experience underscored a vital lesson: It’s not just about making sales or increasing orders; it’s about cultivating a customer base that trusts and believes in your brand. Every loyal customer represents repeat business, and in turn, your ongoing success. Are you leaving your own success on the table?

Since this visit, I now know about a free wine tasting and food truck at the business next Friday. I've already invited others to come along.

The Value of Loyalty Programs

Loyalty programs are more than just marketing strategies; they are essential tools for sustaining a business. A well-implemented loyalty program can significantly enhance customer retention, which is critical as acquiring new customers is often more costly and time-consuming than retaining existing ones. When customers feel valued, they are more likely to return, bringing consistent revenue to your business.

For me, I never let my vouchers and rewards go to waste. When I moved suppliers for our families phones and mobile devices, I received quite a few rewards points. I ordered an Apple watch with these points and accrue points with every monthly billing cycle. I've also had quite a few purchases with other retailers heavily discounted or even free.

A loyalty program that clearly communicates its benefits, like offering points for purchases or providing discounts on future orders, can drive repeat business. Customers appreciate transparency and immediate rewards. For instance, when a customer knows they will receive 10% off their next order, they have an incentive to return. This not only boosts short-term sales but also fosters long-term customer relationships.

On the flip side, I have seen one national retailer discontinue their loyalty and rewards program recently. This isn't a reflection on loyalty programs and potential success, it is a reflection that either their rewards were too generous or execution was poor. When I hit a $500 spend with one clothing retailer, they sent me a $30 voucher which I used and appreciated that they didn't put onerous restrictions on it's use.

But loyalty is not (just) a program.

The Human Element

Reflecting on my recent experience, it’s clear how powerful even the most basic program can be. The new beverage store owner, despite not being as tech-savvy as his predecessors, focused on connecting with customers and offering tangible rewards for their patronage. The result? Customers, including myself, respond positively, leading to an increase in repeat sales and customer engagement.

I don't necessarily want to go back immediately to get another alottment of points. But I am eager to help this business owner succeed and be part of that success.

This example highlights that while technology can facilitate the implementation of loyalty programs (and many see this as the barrier), the key lies in understanding and valuing your customer base. It’s about recognizing that each customer is integral to your business’s success and rewarding them accordingly.

Why Rewarding Existing Customers is Crucial

Many businesses make the mistake of focusing solely on acquiring new customers, often neglecting the potential of their existing ones. We are seeing this unfold against multiple market leading companies in social media today. However, rewarding current customers can yield higher returns. Here’s why:

1. Cost-Effective: Retaining an existing customer is generally more cost-effective than acquiring a new one. It’s an investment in an already established relationship.
2. Increased Spend: Loyal customers are likely to spend more over time, especially if they feel valued and appreciated.
3. Word of Mouth: Satisfied customers are your best advocates. They are more likely to recommend your business to friends and family, providing free and effective advertising.
4. Customer Insights: Existing customers provide valuable insights into their preferences and buying habits, allowing you to tailor your offerings more effectively.

Implementing a Successful Loyalty Program

To create a successful loyalty program, consider the following strategies:

• Clear Communication: Ensure that the benefits of the loyalty program are clearly communicated to customers and at each transaction. Transparency about how points are earned and what rewards are available can drive participation.
• Easy Enrollment: Simplify the enrollment process. The easier it is for customers to join, the more likely they are to participate. Just a mobile number is a great start and doesn't force customers to carry a card.
• Tangible Rewards: Offer rewards that have real value to your customers, whether it’s discounts, exclusive offers, or free products. This is based on patronage and should be worthwhile against that spend.
• Personalisation: Use customer data to personalise rewards and offers. A tailored approach makes customers feel valued and understood.

It's not just about a sale or additional revenue. As a "sip" member, I also get invited to tastings and events. Many of which are a chance to connect with new local artisans and further support where we live and what's available.

Loyalty programs are no longer optional; they are table stakes for any successful business, especially in challenging economic times. By focusing on customer loyalty, businesses can ensure repeat business and build a foundation of trust and reliability. Are you leaving your own success on the table? Invest in your existing customers. Reward them, value them, and watch your business thrive. Loyalty, rewards, and gift-with-purchase initiatives are not just strategies; they are the keys to sustaining success and growth. Reward your existing customers, not just your new ones, and secure your business’s future.

About Mike Fowler

Mike Fowler is a payments and merchant acquiring veteran, senior leader & growth strategist for some of Australia's best known brands. Technical Transaction Specialist, Corporate & Institutional at National Australia Bank (NAB). Formerly at Afterpay as Director, Merchant Services APAC. With a long career in eCommerce retail as General Manager and founder of the growth team at Mosaic Brands (Noni B Group) developing and launching 9 iconic multi-category online marketplaces, including: Noni B, Rockmans, Millers, and Rivers. Member of the Australia Post Customer Advisory Group with more than 15 years experience in helping retailers leverage eCommerce, CX, payments, & logistics opportunities to maximise growth.