Digital Loyalty Programs - A holistic approach to long-term customer retention

Long-term customer loyalty has become increasingly hard to achieve in an ever more competitive environment. As markets become saturated with offers and switching cost decrease, even satisfied customers can be lured away by competitors. The constant pressure to compete to gain lose, and regain customers can drastically impact a company's bottom line. Avoiding this calls for a holistic approach towards customer loyalty that goes far beyond simple earn & burn loyalty point systems and puts modern technologies to use to bind the customer to the brand in multiple ways.

Who should think about loyalty?

Habit builders

Low-price, commoditized products can struggle with differentiation. The goal is to capture consumers’ spending in the category completely. A loyalty program can create an incentive for the consumer to ignore the competition’s offerings.

Long-term committers

Some companies work to raise the switching cost to keep the customer committed to their offer for the long term. The goal is to maximize the life time value of a customer by prolonging subscription to a service or sell them compatible products in the future.

Market-openers

New services and concepts are developed all the time, but being the first to market is not enough to be successful. Business models can quickly be copied by rivals, so it is crucial to capture customers and create loyalty early on and ring-fence the new market.

Companies with loyalty programs

Many companies already have legacy loyalty programs in place that they have long been benefitting from. Now, they need to stay competitive as rival programs appear. Customers are expecting more and just giving out bonus points and vouchers will soon not be enough.

UNIQUE PROGRAMS FOR UNIQUE COMPANIES

nexum's succesful loyalty projects


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miles & more logo
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The dimensions of customer loyalty

Many aspects about a company’s offering can create loyalty. Usually, the customer's satisfaction is a basic factor for loyalty, as rational customers will always consume in a way that is the most advantageous for them and stay loyal to the company offering the best solution.

 

But companies can do more than just offer a good product to bind customers to their brand. They can improve the proposition around the product itself by utilizing different loyalty strategies that work on different motivations and cover different scopes in the customer-brand relationship.

Motivators

Economical motivators are the measurable cost advantages of staying loyal to a brand. These costs can usually be expressed as money or time. Loyalty strategies that work by economical motivators include classic loyalty programs and loyalty-through-convenience.

Psychological motivators are more intangible and emotional. They are hard to capture by objective measurement or comparison, but they create the stronger bond of a real relationship between customer and brand. Loyalty strategies that utilize such psychological motivators are loyalty relationships and social loyalty.

Scope of the relationship

Whenever a loyalty strategy primarily influences the direct relationship between customer and brand, it is considered a bilateral strategy. Classic loyalty programs and loyalty relationships fall into this category.

If the loyalty program is mostly defined through the actions or interactions of the brand or customer with other brands or customers, the loyalty program becomes multilateral. This is the case for loyalty through convenience and social loyalty.

Loyalty dimensions

Loyalty Matrix

Classic Loyalty - Rewards for increased purchases

Earn&Burn point systems, discounts, coupons, and referral programs

The most direct path to retaining customers is rewarding them directly for their continued purchases. By awarding redeemable points, discounts, or rewards to loyal customers, you create additional incentives for them to choose your offer. Customers take advantage of these offers in order to save money on their usual purchases or to get more for the same price. But the relationship with the brand stays superficial as customers are only loyal to the special offers or discounts. This is why loyalty programs of this type usually have to be combined with other loyalty strategies to achieve long-term loyalty.

Examples: Payback Points, Miles&More Rewards, Starbucks Frequency Card, DB Bahncard

Relationship - Emotional bond with the brand

Personal bonding, value alignment, recognition of the individual

As a regular in your favourite pub, you are greeted by name and get your favourite drink without having to spell it out. Brands who develop a similar relationship with their customers benefit from increased loyalty. Customers want to be acknowledged and treated as individuals. Recommendations have to be tailored to their needs, and priority treatment and awards have to be offered to the most loyal customers. Customers also begin to care more about getting their values and the values of their chosen brands aligned. Conscious consumption has become a major trend, and brands have to position themselves clearly for people to relate to them.

Examples: Easy Jet Personalized Email Campaign, Audible Badges, Patagonia's Common Threads Initiative

Convenience - Customers don´t want to switch

Solution eco-systems, individualized solutions, switching cost

Companies who build up an ecosystem of integrable solutions around their core offering can bring the customer into their brand world, where it makes sense for them customer to keep returning to the same company. The more time customers have to invest into learning and configurating a new solution, the less likely they are to repeat the process for a new product. Products that utilize AI to automatically custom-configure themselves based on user data have a key advantage that cannot be transferred when switching to a different provider.

Examples: Apple Product Eco-System, Spotify's individual Daily Mix, Zalando Size Recommendation AI, Google's integrated Services, Salesforce integrated enterprise solutions

Social - The brand as part of the social environment

Communities, Memories & Emotions, Social platform

When a community of users forms around a product and social connections are created, it quickly becomes irreplaceable for the customer. The product itself is no longer the only focus of the consumer experience, but the connection to friends and social circle. These communities create the most loyal customers, as switching to a different brand might cause them to lose social connections. But if the product’s net value declines, social groups of users can reach a tipping point at which they uniformly switch to a different offer.

Examples: Football Clubs, Sephora Beauty Insider Community, World of Warcraft, BTS, Social Media like Instagram

Choosing the right loyalty ingredients

High involvement

If a customer is highly involved in finding the right product, because the price is high and there is a lot of differentiation between brands, the best choice is combining elements from the relationship and social dimensions.

Low involvement

For cheap products with a low purchasing risk, customers do not seek perfection, but quickly pass through the buying process instead. Switching brands is common for these products, so direct and immediate rewards work best.

The right program

Any loyalty program should enhance the existing value proposition or add additional product benefits for the consumer. It is key to know the customer’s wishes and pain points and try to address these with the loyalty program.

Segementing & Combining

Customers can be segmented to find and fuse the right loyalty incentives for each segment into one loyalty program. Building blocks from the relationship dimension are usually a good fit for any company’s loyalty program.

nexum's loyalty building blocks - A holistic approach

Multi-dimensional

  • No loyalty program falls perfectly into one of the 4 dimensions of loyalty, but always contains aspects of all 4 dimensions
  • The most effective loyalty programs consciously combine aspects of different strategies
  • In order to create a loyalty program, one should analyse existing programs and adopt the building blocks that make them successful

Loyalty building blocks

  • Loyalty programs can be built using the nexum loyalty building blocks
  • We analyse the elements of the most successful loyalty programs and refine them into combinable concepts
  • For each client, we compose a loyalty program that fits the company's offer and target market
  • We work in interdisciplinary teams that can tap into the synergies between the building blocks of different categories

Classic Loyalty Building Blocks

  • Loyalty point system, including a point accounting infrastructure
  • Tiered reward and discount system
  • Development and implementation of a paid membership strategy
  • Referral programs
  • Welcome journeys & campaigns across all channels
  • Cross-site point collection with a custom browser extension
  • Integration of all online and offline channels into the loyalty program through QR-codes and NFC
  • Coupons optimized to promote cross and upselling with maximum margins
  • Option to donate loyalty points to charity
Headline: Classic Loyalty, Image: Two women in retail

Convenience Loyalty Building Blocks

  • Gamified customer surveys natively integrated into browsers, emails, apps, in-store, or other touchpoints
  • AI 1:1 personalized site and product navigation based on each visitor’s intentions
  • Customer data analysed to pinpoint actionable insights
  • Interface personalization options for users
  • Content personalization based on user behaviour
  • On-site search optimization
  • Convenient product order options on new sales digital channels with a streamlined check-out
  • Subscription models
  • Payment app for easy in-store check-out and integration with classic loyalty building blocks
Headline: Loyalty through convenience, Image: smart watch

Relationship Loyalty Building Blocks

  • Development of a brand's character for increased relatability for customers
  • Brand values modelled to fit its offer and target customers based on market research
  • Individual acknowledgment of each customer through personalized communication on all online and offline touchpoints
  • Individual recommendations that fit each person, instead of general rules of product association
  • Individualization of email communication with different content, images, information, timing etc. based on customer wishes and pain points
  • Personalized landing page with the information that is most relevant to each customer
  • Custom post mailings, personalized to each customer’s story with the brand
  • Push notification strategy to minimize exits and maximize impact
  • Integration of advanced chat-bot AI on all digital channels for 24/7 customer attention
  • Multichannel customer attention integrated on one platform to pick up the conversation based on past interactions
  • etc.
Headline: Loyalty Relationship, Image: Two Hands holding a yellow flower

Social Loyalty Building Blocks

  • Community building with the right digital tools and a long-term strategy
  • Social media account optimization and administration
  • Production of content and interaction guidelines to develop a recognizable voice for your brand
  • Loyalty lead generation through social interaction on all channels
  • Content generation on young media platforms like Youtube and twitch to engage communities of future customers
  • Social platform challenges that playfully integrate your brand in people’s social interactions
  • Viral content that makes your brand the must-see among social circles
  • Merchandise for the most loyal followers
  • Collaborations with other (brand) communities that lead to more social interaction around the brand's offer
Headline: Social Loyalty, Image: Smartphones recording a concert

Advantages of nexum's holistic loyalty approach

What we do differently:

  • No run-of-the-mill, boring loyalty points
  • We create custom, multidimensional loyalty programs that promote customer retention in many ways
  • We maximize the impact of your loyalty program by combining aspects of different loyalty dimensions
  • nexum composes cross-functional teams of experts of its different business units and competence units for each project

Complete loyalty solutions:

  • Dedicated strategy and concept as the basis for any custom loyalty program
  • Creation of all technical features and content for the loyalty concept
  • Implementation & integration of the loyalty program into existing sales channels and CRMs
  • Multichannel promotion
  • Operation and maintenance of the program

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Roberto Rizzi

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Roberto Rizzi

Roberto Rizzi

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