To meet these demands and maximize the revenue potential of the business, it’s more important than ever to focus on building customer loyalty.
What is customer loyalty?
At its core, customer loyalty is a sustained, positive relationship between a customer and a brand. When a person chooses to repeatedly purchase from a particular company, despite competitors offering similar products or services, they’re demonstrating loyalty to that brand.
Why invest in customer loyalty?
Building a strong, loyal customer base is advantageous to any business. The 80/20 rule teaches, on average, 80% of profits come from 20% of customers. This means a loyal base of 20% of customers will deliver more value than the other 80% of customers combined.
Loyalty translates into steady revenue and lower marketing and acquisition costs. If you can create memorable, positive experiences for customers, you’ll not only increase the chances of them coming back but spending more per trip. And that’s not all – they’ll tell their friends about you, too. Let’s look at four reasons to set your sights on customer loyalty this year:
Retaining loyal customers is more cost effective: When brands fail to invest in building customer loyalty, they often see a higher customer attrition rate. They must then replace the customers who stopped doing business with them. It costs five to ten times more to acquire a new customer than to keep an existing one. When you retain loyal customers, you save on the marketing and advertising costs required to attract new ones.
Loyal customers spend more per trip: Customer loyalty and average order value (AOV) go hand in hand. Loyal customers spend 67% more than those who are new to your business. Imagine most new customers spend an average of $20 when purchasing from a particular brand. This would mean that a loyal customer purchases an average of $33.40 per purchase.
Loyal customers shop more frequently: Loyal customers not only buy more from you, but they also buy more often. Sixty percent of loyal customers shop more frequently. Because your existing customers have already had a positive experience with your brand, and these experiences reinforce loyalty, they return more regularly.
Loyal customers turn into brand advocates: Strong loyalty won’t just keep your audience coming back – they’ll bring their friends and family with them too. McKinsey & Co reported that word of mouth is the primary factor behind 20-50% of all purchasing decisions. Loyal customers can assist your marketing efforts by referring new customers, saving you time and money on acquiring new customers.
Loyalty is more important than ever, yet harder to maintain.
Today’s macroeconomic realities are comprising brand loyalty. With costs up, so is price sensitivity, making it harder for shoppers to stay loyal to brands when their needs aren’t being met. However, it’s not impossible to earn loyalty. It simply means brands must understand and offer the experiences customers want and demand.
Rakuten Drives Customer Engagement, Retention, and Loyalty
Delivering loyalty-building experiences across multiple channels can be a challenge for businesses. That’s where Rakuten comes in. Rakuten combines cash back, first-party data, targeting and technology to connect brands with their audiences and deliver highly-personalized shopping experiences that drive retention and loyalty. In fact, 72% of customers making second or third purchases do so within a month of their first purchase. What’s more is that 70% Rakuten shoppers stay with us – a statistic we’re incredibly proud of.
Turn Customers into Advocates with a First-Party Approach: First-party customer data is critical to building personalization strategies that create a clean feedback loop between
data and shopper behaviors. Using Rakuten’s proprietary, first-party data of 17+ million members, you can target audiences with precision to deliver more personalized, relevant experiences, build genuine relationships with customers, and nurture them into loyal brand advocates.
Personalization Cultivates Loyalty: Customer retention demands you treat first-time, two-time, repeat, and loyal shoppers with nuance. At Rakuten, we give partners a complete picture of shopper, category, and platform insights to determine the most effective cash back rates to support their acquisition, retention, and re-engagement goals. For example, you may find that 5% cash back is enough to engage a loyal, existing customer, but 15% might be the more effective rate to entice a second purchase. Personalized Rewards allows you to use data from your customer relationship database in combination with Rakuten’s first-party data to target audiences with an optimized cash back rate. Taking a data-driven approach, you gain a deeper understanding of what motivates your customers, so you can incentivize them to keep coming back.
Rakuten Drives Meaningful Engagement: Our targeted rewards approach creates experiences that keep customers engaged so brands can collect insights, respond with the right experience, and repeat, thus unlocking more robust data on every customer. Each interaction becomes more personalized than the last.
Engagement informs ongoing optimizations that are critical to the effectiveness and efficiency of your program. Rakuten uses audience engagement to determine the right cash back rates to activate shoppers while keeping margins healthy, as well as how and when to optimize those rates based on performance.
Reward Customers with Cash Back: Shoppers have come to expect some kind of recurring compensation for their business (i.e. loyalty points, cash back, and more). Today’s consumers prefer cash back as their loyalty currency. This is likely because, oftentimes, loyalty rewards take too long to accumulate or expire before they’re ever used. With an always-on cash back program, you can reward customers how they want to be rewarded for shopping with you.
Get in touch to learn how Rakuten can help you create rewarding experiences that drive long-term loyalty.