By Leigh Sevin, from Endear
How and where to spend your marketing budget is one of the most challenging, most important decisions you'll make as a founder. You'll count on marketing not only to help you acquire customers, but also retain those customers and (hopefully) turn them into brand evangelists. The money you can afford to spend upfront to acquire a customer (your CAC) is directly proportionate to the money you generate from that customer once you acquire them (her lifetime value, or LTV).
The good news is that you can increase customer lifetime value and, therefore, return on marketing spend by prioritizing customer loyalty.
What is Customer Loyalty?
Customer loyalty is a customer's willingness to purchase goods and services from you on a repeat basis. If you're a media company, that customer may pay in data or subscription; if you're a retail brand, loyalty will be repeat purchases. No matter what business you're in, the more you can increase customer loyalty, the better the return will be on your CAC.
So while your objective is to increase your customer's lifetime value, the way to accomplish that goal is to invest time and money in improving a customer's loyalty to you. It's important to remember that loyalty can take time to cultivate and requires a long-term focus on your relationship with customers rather than expecting immediate conversions and purchases.
The Math behind Marketing and Loyalty
It's far cheaper to hold on to a customer you've already acquired than to acquire someone new. That's because current customers are not only easier to sell to, but also spend more when they purchase. Taking all that into consideration, it's crucial to think about how you allocate budget between marketing aimed at acquisition versus marketing designed to increase loyalty and retention. While acquisition is vital for growth, overlooking the latter may be hurting your company's revenue overall.
Let's think back to loyalty's role in LTV. If customer LTV is determined by how much a customer spends per visit and how often she visits, customer loyalty will have a large impact on the second part of the equation: how frequently and for how long a customer chooses to buy your products over your competitors'. The opportunity to grow LTV through frequency is much greater than banking on a few significant transactions. The more time you spend diving into your data and understanding the type of customer who is most loyal to you, the more you'll be able to hone in on the marketing channels that attract that specific kind of customer.
How to Build Customer Loyalty
You can increase customer loyalty through various practices, not all of which revolve around frequent discounting. As you think about cultivating your strategy, you'll want to make sure you have the right tools and resources to track how it is impacting your business. Popular metrics for understanding loyalty include your customers' LTV, frequency of purchase, NPS Score, and customer churn rate. All these metrics can give you a clear picture not only of how strong customer loyalty is for your brand overall, but also help you identify where there's room for improvement.
At the end of the day, any good loyalty strategy's goal is to extend the length of time customers spend continuing to purchase from you.
Prioritize the Customer Shopping Experience
Today's consumer is a pro at finding the best price, so trying to win her over with promotions may be fruitless. Instead, think about how you can provide a superior customer experience and excellent customer service. 69% of shoppers will spend more money on a company with better service, so thinking through how you can uniquely support your customer as she shops can have a powerful impact on her loyalty.
Offer Unique Services
You can offer many services at any stage in the purchase journey to make the buying decision easier for your customers. Something as simple as same-day delivery may make the difference between a customer purchasing your product from you or someone else. However, you can also take stock of your customers' behavior and develop a service offering that is more uniquely tailored to your audience. For example, if you're an apparel brand, make it easy for customers to communicate with a knowledgeable salesperson. If you are in the beauty business, help your customers learn to apply your products.
Personalize your Outreach
Customers are nearly immune to marketing emails today, with low open rates and even lower conversion rates. But the more relevant your content is, the more likely your customer is to engage with it and transact. In our data, we've found that personalized emails and texts can result in conversion rates that far exceed email marketing. Especially once a customer has purchased at least one time, you can leverage data from that purchase to re-engage them and motivate them to buy again.
Even better than a customer repeatedly buying from you is when she gets another customer to do the same. As customers become more loyal, the next step is to encourage them to find others who can enjoy your products as much as they do. There are tons of software solutions and methods around encouraging customers to review, refer, and promote your brand - your job is to pick the right tech platform to support your strategy.
Examples of Top Customer Loyalty Programs from Shopify Brands
Here's a look at how top Shopify Brands have increased loyalty over time.
Mizzen + Main
Menswear brand Mizzen + Main focuses on solving a particular problem: making it easy for men to move in even the most formal clothing. The brand uses performance fabrics to make traditional, classic men's attire, ensuring that any guy can spend the day in a button-down without feeling uncomfortable or sweaty.
To instill confidence in its customers, the brand offers a handy "Shirt Finder" option on their site - a simple quiz that makes it easy for any online shopper to determine not only what size and shape is right for them, but even the fabric, color and pattern that's most "their style". This quiz is a great stand-in for receiving personal attention at a store and works both as a loyalty driver and an acquisition strategy.
Rebag's Clair Program
The e-commerce industry continues to expand dramatically, but one of the biggest obstacles for many customers is still figuring out how much money they could be earning if they sold their items. While in the past, this could be a very long, drawn-out process, Rebag has changed all of that. In a new retail age where customers expect everything to happen immediately, their Clair program delivers. The program provides immediate estimates on what a handbag could be worth if a customer chose to re-sell it, thus enabling those using the program to make decisions more quickly, and likely decide to re-sell through Rebag rather than visiting their local vintage store. Rebag has therefore set itself apart from its competitors and given customers a reason to stick with them.
Jewelry brand Gorjana encourages brand evangelism in the form of its "Give $20 Get $20" program: customers invite their friends to enjoy $20 off their first purchase. Those customers receive $20 when their friends buy. This is a straightforward, easy way to encourage your customers to spread the word and reward them for their efforts. The discount on their next purchase also extends their lifetime value.
Universal Standard prides itself on its size-inclusive approach to apparel, making sure that women of any size and shape feel their best at all times. To reinforce its mission, the company launched a unique shopping program called Fit Liberty. This exchange program allows customers to swap any product for a different size within a year of purchasing it. This program brings customers peace of mind knowing that they can continue to wear an item they love without rebuying it if the size isn't quite right in a few months. It also makes Universal Standard the best shopping option for customers who feel particularly hindered by this problem when shopping with other brands.
If you notice your cost of acquiring a customer increasing, it's time to think about how you can depend more heavily on your current customer base. This prioritization will dramatically help increase your customer profitability overall. I hope these ideas and examples offer you the guidance you need to develop the right loyalty strategy for your brand and continue to expand how your customers engage with you for the long haul.
About the Author - Leigh is co-founder of Endear, a sales platform for small and medium sized brands and retailers. Retail teams count on Endear in order to continue driving sales over email and text when selling face-to-face is slow or unavailable, all while the app tracks conversions on their outreach.