Think loyalty programs deserve the ‘rip-off’ rap?

Australian consumers have been getting wise to loyalty programs. Reports have indicated that while 0.5 per cent is the going return on purchases here, in the US and UK, shoppers are more accustomed to anywhere between 1 and 4 per cent.

Just Wines is still new to the game. After going head to head with the two big guns in town and listening to our customers about our own short-comings, we’ve figured out a few key principles that can take loyalty programs from rip-off to win-win.

Sharing our customers’ wallets with Woolworths and Coles has been a pretty daunting proposition and we know we’re not alone. This is a challenge faced every quarter by so many Aussie businesses.

When we entered the online wine retail business, we quickly got a taste for what it meant to go up against the Australian duopoly. (Woolies has Dan Murphy, BWS, Wine Market, Cellarmaster and Langtons. Coles controls First Choice and Liquorland). That’s over 70 per cent of the market.

After taking in this realisation (and a deep breath), we started to explore ways to win over customers. Putting aside for a minute product offering (which we already knew was vitally important), we realised that a customer loyalty program was our best chance for success.

Through trial and error, talking to customers and reading many reviews, we learned enough about what they wanted – and gaps in our own offering – to crack the customer loyalty code.

Here are a few of the lessons we learned about customer loyalty programs.

Make it simple for customers to sign up.

It may sound simplistic but make it easy and quick for customers to opt in to the loyalty program. Making them jump through too many hoops or taking too much time out of their busy lives increases the chance of losing them half-way through sign up. Every unnecessary step is an opportunity for them to change their mind.

Making it compulsory for people to sign up online via the website isn’t necessarily a great idea, either. Depending on the target demographic, many people aren’t confident online and prefer the phone. Never underestimate or forget the importance of human interaction.

Another thing we found worked was to offer a guarantee; that there was no risk in signing up and if they didn’t like what they received, they could return it without charge. We also let them know they could opt out of the club at any time or within 30 or 90 days. If the opt-in seems risk-free and the offer seems attractive, it becomes a no-brainer for them.

Specifically reward them for their loyalty.

Don’t just give loyal customers points (what exactly is a point?) Give them actual money off their next purchase or the ability to redeem the points to purchase more products.

Tangible enticements are key. One of the most crucial elements of rolling out a loyalty program is explaining what customer get out of it. What’s in it for them? We determined that this is probably the biggest failing of many loyalty schemes; customers are urged to join but either don’t get anything out of it or don’t understand what they can get out of it. The more customers perceive that they get, the more they will spend.

Give loyal customers actual money off their next purchase. Alternatively, make it really clear how they can redeem the points to purchase your products and make it clear exactly how many points they will accrue with each dollar spent and exactly how many points they need to purchase specific products.

We also realised that it is worth rewarding customers for more than making purchases. Sometimes it’s worth offering incentives to them to do anything that brings value to the business – like filling out a survey, leaving a review, watching a how-to video or downloading the new catalogue.

Calculate how much a loyal customer is worth to you.

As mentioned, many Australian organisations reward loyal customers with offers that equate to less than 0.5 per cent or, in rare cases, 1 per cent of what customers spend. That’s just $10 when they spend $1,000 with your business. And it’s absurd.

To really understand how much you should be investing in loyal customers, track and put a monetary value to a number of categories – like annual spend, cost efficiencies, price sensitivity and word of mouth. Then, compare it to sales and marketing investment aimed at attracting new followers.  

Reduce the marketing budget on Google, Facebook, radio and other channels by 1-1.5 per cent and give that all back to customers; loyal customers who are already on board.

Introduce them to the scope and quality of the products.

By giving repeat customers the full experience and opportunities to try new things each month, they are more likely to maintain interest.

Especially in the wine industry, so many customer programs send out the same products month after month, year after year. It’s one thing to promote signature products, but customers can get bored with the same thing all the time.

We systematically expose customers to the full breadth of our product offering. By giving them new products and experiences to try (and asking for feedback on them), engagement levels increase and so does brand familiarity. Not only does this help customers get to know a product range better, it allows us to get to know them better. Feedback and subsequent orders reveal their tastes, their preferences and the price bracket to which they are most receptive.

When all is said and done, a loyalty program that delivers a diversity and generosity of rewards will always grab attention and boost brand popularity.

Nitesh Bhatia is the CEO and founder of Australian online wine retailer, Just Wines. Since its launch in 2012, the company has become the second biggest wine retailer in Australia, offering 6,000 products from over 1,000 Australian and New Zealand winemakers.

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