Three Steps to a

Winning Consumer
Loyalty Strategy

Three Steps to a Winning Consumer Loyalty Strategy

Table of Contents

1. Understanding Customer Loyalty

2. The Customer Loyalty Imperative
3.

How to Get More Loyal Customers

and Get More from Them

4.

Conclusion: The Best Customers

Are the Ones That Last a Lifetime

Three Steps to a Winning Consumer Loyalty Strategy

Understanding Customer Loyalty

Retaining customers by driving loyalty is the

primary goal of customer-centric marketing.
But what is customer loyalty exactly? This
definition, provided by PR Loyalty Solutions,
offers a perspective:
Customer loyalty is both an attitudinal and
behavioral tendency to favor one brand over all
others, whether due to satisfaction with the product
or service, its convenience or performance, or
simply familiarity and comfort with the brand.
Customer loyalty encourages consumers to shop
more consistently, spend a greater share of wallet,
and feel positive about a shopping experience,
helping attract consumers to familiar brands in the
face of a competitive environment.

So what does it take to earn that loyalty? Loyalty

isnt won in a single transaction or with a loyalty
card program. Its won over time as companies
build relationships with their customers by
delivering on brand promises and providing
amazing service and experiences. In the end,
loyalty is the sum of the marketing tactics and
campaigns that aim to sustain it; married with a
lifestyle that every brand should live.

Customer
Loyalty

Satisfaction

This ebook will explore why customer loyalty

is critical for every marketer to foster and then
how marketers can engage loyal customers as
well as identify and engage non-loyal customers
strategically to build loyalty.

Service

Reward

Quality

Support

Feedback

The Customer Loyalty Imperative

Your company can benefit from loyal customers
in multiple ways. The first step toward building a
band of loyal customers is retaining your existing
customers. Additionally, increased customer
retention optimizes the cost-effectiveness of
your marketing campaigns. According to Bain &
Company, it costs between six and seven times
more to acquire a new customer than to retain
ones youve already got.
The repercussions of losing a customer should
not be downplayed:
For every customer experience failure,
brands lose an average of 65% of the
revenue they would have earned from the
affected customer during the following year,
based on a Avoiding CX Failure Fallout
report by SDL.
Repeat customers generate more revenue for
consumer companies, spending as much as
67% more, based on Bain & Company data.

According to the White House of Consumer

Affairs, retained customers are more profitable
than new customers, have a higher lifetime
value and spend more per purchase. In fact,
the organization says that loyal customers
are worth up to 10 times as much as the
value of their first purchase.
Customers today (and your prospects) are more
likely than ever to defect. They are inundated by
marketing messages and do plenty of research
online before they engage in conversation with
you. In fact, according to Accenture, there is $1.6
trillion in potential revenue up for grabs due to
changes in consumer spending and switching
among brands and providers. Understanding this
environment means that losing a customer is
a real reason for marketers to worry. And thats
why customer retention, loyalty, and ultimately
advocacy, should be every marketers biggest focus.

Consider the revenue or growth that customer

loyalty is bringing to Amazon. According to
a report by Consumer Intelligence Research
Partners, the members of Amazon Prime, the
companys flagship loyalty program, spend $1,500
per year on average, compared with the $625 per
year spent by Amazon customers not belonging
to the Prime program.
When you gain the loyalty of current customers,
you dont just reap the rewards of continued
purchases (and revenue) from them. You also gain:
Important insights that help better engage
these customers and keep them happy.
A deeper understanding of the attributes,
characteristics, and behaviors of loyal
customers, which enables marketers to
develop campaigns to cultivate those same
behaviors in other, less loyal, customers.
Their vocal advocacy as they endorse your
brand to their peers and social networks.

Three Steps to a Winning Consumer Loyalty Strategy

Tap Into the Power

of Advocacy
The impact of customer advocates cannot be
overstated. Every Like and share you get on
Facebook is potentially viewed by that persons
entire social network, acting as a digital stamp
of approval. If you want your customers to stay
happy with your brand, reward them simply for
being customers. The goal is to deliver such an
exceptional experience that your customers are
motivated to tell their story and show their love
via social sharing, reviews, and word of mouth.
To what extent are loyal consumers acting
as advocates? A full 61% of consumers say
they would tell friends and family about
their good experiences.

Members Attitudes About U.S. Loyalty Program - April 2015

86%
80%

83%

76%

79%

70%

64%

71%
64%

Programs are
definitely worth
the effort

Programs make me
more likely to
continue doing
business with
certain companies

Data Source: Bond Brand Loyalty

Programs are
part of my
relationships
with the brands

55%

I modify when
I modify
and where I make
what brands I
purchases in order purchase in order
to maximize the
to maximize the
benefits I receive
benefits I receive

Coca-Cola Harnesses Customer Advocates to Drive Sales

The Share a Coke campaign spurs a burst of Instagram activity
When you understand what motivates your loyal
customers, you can harness them to great effect.
Thats just how Coca-Colas Share a Coke
sparked a summer 2014 revenue boost and longterm growth in the companys social reach.

The results were impressive:

Sales jumped from 1.7 to 1.9 billion
servings per day
More than 500,000 photos were shared
using the #shareacoke hashtag

Loyal customers took to the Share a Coke

campaign by purchasing personalized sodas
for friends and family and sharing their thoughts
about the campaign via social media.

Consumers created and shared more

than 6 million virtual Coke bottles by
September 2014
Coca-Cola gained 25 million Facebook
followers as a result of the campaign

The Share a Coke campaign spurs a burst of Instagram activity

7 Videos Posted

May
2014

4 Photos Posted
Viewed by 30K People
9 Videos Posted

June
2014

7 Photos Posted
Viewed by 70K People

15 Videos Posted

July

10 Photos Posted
Viewed by 140K People

2014
13 Videos Posted

August
2014

9 Photos Posted
Viewed by
175K People
Three Steps to a Winning Consumer Loyalty Strategy

Tap Into the Power of Advocacy (continued)

Another benefit to cultivating advocacy is the
willingness of these customers to stay loyal.
According to data from The Strategic Marketing
Case for Customer Advocacy Measurement
by CustomerThink, advocates are 3.5 times
more likely than normal customers to forgive
letdowns and stay with a brand.

Simply put, customer loyalty programs drive

customer retention, higher customer satisfaction,
deeper customer insights, and revenue growth.

The Advantages of Customer Loyalty Programs

+
Customer
Retention

+
Increased Customer
Satisfaction

+
Garnering
Insights

+
Increased
Revenue

Advocacy

How Do You Stack Up?

To understand how your company rates against
competitors and industry leaders when it comes
to consumer loyalty, you can benchmark your
own loyalty data against others using tools like
The Temkin Loyalty Index. Published annually
by the Temkin Group, a customer experience
research and consulting firm, the index is
created by evaluating the loyalty of 10,000 U.S.
consumers to hundreds of companies across
20 industries. It is based on the likelihood of
customers doing any of the following:
Repurchasing from the company
Recommending the company to others
Forgiving the company if it makes a mistake
Trusting the company
Trying the companys new offerings
Of course, to perform such benchmarks, your
brand needs to know and understand its own
customers well.

Three Steps to a Winning Consumer Loyalty Strategy

How to Get More Loyal Customers

and Get More from Them
Establishing long-term, meaningful customer
relationships is key to the success of a loyalty
strategy. You need to identify your loyal
customers and engage with them based on
who they are and what theyve done. We call
this engagement marketing, which we define
as the shift away from talking at people and
focusing on transactions to engaging with
peoplebuilding meaningful, lifelong, and
personal relationships.

But how do you know who your loyal customers

are, find more of them, and get more from each?
We break it down into three simple steps:
1. Identify and segment your most
loyal customers
2. Build more loyal customers through
insights gained
3. Communicate based on who they are
and what they do

How Loyalty Boosts Engagement

How frequently loyal customers interact
with the brand:

87%

64%

49%

Daily

Weekly

Monthly

33%
Minimally,
few times/year

What Do You Know About Your Customers?

Income

Travel

Career

Age

Kids

Trips/year

$$$

- Adventure
- Last-Minute Deals

Professional

35

5-7

$$

- Kid-Friendly
- Planned Trips

Professional

35

0-1

$$

- Guided Tours
- Low-Hassle Trips

Professional

35

Kristen

Brian

Jenny
Three Steps to a Winning Consumer Loyalty Strategy

Step 1:
Identify and Segment Your
Most Loyal Customers
You need to know which customers are loyal
and which are not, because you will treat
them differently in your campaigns. Through a
customer engagement platformthe technology
foundation of engagement marketingyou can
capture information to build rich profiles about
your customers, segment loyal from non-loyal
customers, and map the customer journey of
loyal customers.
To truly get to know your customer base,
pinpoint your audiences preferences, habits,
and interests. Pair this with an understanding
of what works in terms of communications.
You can do this both by looking at your existing
data on a customertheir patterns of purchase,
usage, and engagement and by establishing a
preference center on your website that allows
customers to indicate how they want to receive
communications by channel and frequency.

Drive Loyalty With a Customer Engagement Platform

A customer engagement platform manages and reports on all interactions with customers,
whether they occur on the web, via mobile apps, phones, or in person. By capturing insights
into customers initial interactions with your brand, the platform can automate and refine
future engagements based on their interests, preferences, and ongoing behaviors. That
translates into delivering a consistent, personalized, and differentiated customer experience
that gives customers more reasons to remain loyal.

Step 1: Identify and Segment Your Most Loyal Customers

By granularly segmenting your loyal customers,
you can ensure a higher degree of campaign
relevance and engagement. With that in mind,
assign different metrics to define early-stage
loyalty versus later-stage loyalty. Early-stage
loyalty success metrics could include
the following:
Email Subscriptions
Open Rates and Click-Through Rates (CTR)
Mobile Alert & Notification Responses
Challenge Completions
Social EngagementFollowing, Likes, Shares
Surveys and Feedback

Later-stage loyalty metrics could include:

Customer Spend
Purchase Frequency
Customer Satisfaction
Upsell/Cross-Sell Purchases
Advocacy via Testimonials/Reviews/Referrals
Customer Lifetime Value (CLTV)
By measuring each customer against these
metrics within your engagement platform, you
can easily segment your customer base between
loyal and non-loyal customers. Once youve
segmented your customers accordingly, include
them in relevant campaigns that feature the right
tone, frequency, and benefits.

Who Participates in Loyalty Programs

There are plenty of consumers for brands to engage: a global survey of over 18,000 consumers by
Verint Systems, Inc. found that 27% would sign up for a companys loyalty program.
Grocery Stores
Bookstores
Credit Cards
Airlines
Electronics
Retail Stores
Rental Cars
Credit: Gallup

Customer Engagement in Action: Generations Federal Credit Union

Heres how Generations Federal Credit Union
(GFCU) used a customer engagement to great
effect. Credit unions are high on the list of
companies with the most loyal customers, and
GFCU is a perfect case of why this is so.
GFCU has fully embraced the philosophy of
developing relationships that last a lifetime.
To build those relationships, GFCU needed
to engage nearly 50,000 GFCU members
in individualized conversations; coordinate
communications across direct mail, email,

social, and in-person channels; and deliver a

delightful user experience every time.
Using a customer engagement platform, GFCU
was able to welcome new members to the credit
union through a 90-day cross-channel nurture.
Sales reps reached out to new members via
email and phone calls. The credit union used the
information captured during these interactions
to target product and service promotions to the
members needs and preferences. Were seeing
a 38% open rate which exceeds the standard for

financial services (22%) in these emails,

said Content Manager, Megan Dahle. This
program is allowing us to deepen relationships
with new members and establish loyalty from
the very beginning.
In the end, the campaigns created by the
GFCU marketing team tripled email open rates,
increased click-throughs tenfold, and more than
doubled conversions.

Three Steps to a Winning Consumer Loyalty Strategy

12

Step 2:
Harness Insights to Grow Loyalty
By continuing to engage customers frequently,
you can constantly build customer loyalty. This
supplementary loyalty comes in two forms:
Higher rates of purchasing and advocacy
from your already-loyal customers
Additions to the ranks of customers
you consider loyal
To achieve both of these, you need to leverage
your customer engagement platform to paint a
complete picture of what you know about your
loyal customers. This includes criteria such as their
preferences and interests, their purchase behavior
and frequency, order details, and more. As you
deepen your relationship with these customers,
you can grow your knowledge via different
information tangents. Perhaps a campaign enables
you to gather more information about their
hobbies and interests or reasons for purchasing
a certain product.

According to leading marketing and customer

experience strategist Don Peppers, loyalty
programs can impact strategy because they
provide the data that enables a better
understanding of individual customers. For
example, loyalty programs link a retail customers
identity from transaction to transaction. Or in the
case of an airline, they are the conduit for personal
data in exchange for points, awards, and mileage.
All of this information makes it easier to
accelerate purchase cycles, cross-sell, and
upsell. No wonder the probability of making an
additional sale or upselling to loyal customers is
60-70%, according to Marketing Profs.
Knowing the attributes of your loyal customers
makes life far easier when trying to find additional
prospects who could one day become loyal
customers. With these prospects, you are not
starting from scratch with spray-and-pray
campaigns. Instead, you pursue those that look
like your most loyal customers based on what
youve gleaned about loyal customers through
their engagement with your brand over time.

Three Steps to a Winning Consumer Loyalty Strategy

13

Step 2: Harness Insights to Grow Loyalty

How PS&E Boosted Loyalty and Revenues
Lets see this two-pronged approach in action
by looking at how Palace Sports & Entertainment
(PS&E) built deeper relationships and found
additional loyal customers.
PS&E is a sports and entertainment company
that owns numerous properties, including The
Detroit Pistons, The Palace of Auburn Hills
arena, and DTE Energy Music Theatre. It also
holds the operating contract for Meadow Brook
Music Festival. All told, the organizations annual
schedule includes an 82-game basketball season
and more than 100 summer concert events.
PS&E wanted a solution to help it understand
consumers as individuals and tailor content
in ways that would allow it to build deeper
relationships with its fan base.
Using a customer engagement platform to
perform personalization at scale, PS&E can
cultivate relationships and learn more about
consumer behavior. For instance, the companys
marketers can track individual fan patterns
closely, understanding which game tickets
consumers bought, which concerts they
attendedand even track views on the website.
They can also tailor future communications by
leveraging social networking data to identify a
fans favorite player or artist and invite the fan
to a specific game or concert. The customer

engagement platform has also empowered the

organizations marketers to set up strategies,
such as automated birthday campaigns, that
help drive merchandise sales and enhance the
value of being a fan.
Using customer engagement to segment
communications to different fan lifestyles, PS&E
now has a way to engage more personally with
ticket holders at the right time. It can also easily
determine if a fan is a likely candidate to buy
season tickets.
PS&E uses its customer engagement platform
to nurture potential season ticket holders
before theyre ready to have a conversation
with PS&Es sales team. It also automates timely
communications when plans are almost up for
renewal, and offers reward programs to ticket
holders, further personalizing and enriching the
experience for attendees.
The results tell the story: since moving to a
customer engagement platform, PS&E has racked
up a 132% increase in year-over-year e-marketing
revenue. As Mike Donnay, VP, Brand Networks
at Palace Sports and Entertainment explains,
Over the past two seasons, weve exceeded 90%
renewal ratethe best, in terms of renewals, ever
in the history of Palace Sports & Entertainment.

Three Steps to a Winning Consumer Loyalty Strategy

14

Step 3:
Communicate Based
on Who Your Customers
Are and What They Do
As we noted in step one, getting into the heads
of individual customers is vital to engaging and
keeping them loyal. Don Peppers cites Tescos
Clubcard program, which launched way back in
1993, as a great example of why it pays to treat
individual customers differently.
Thanks to a mass of data on individual customers
and what they buy, Tesco has done numerous
things. For example, the Tesco Loves Baby
club represents three-quarters of pregnant
women in the UK and revolves around giving
them information based on the babys age and
development. These members buy millions of
pounds of baby products from Tesco, which
they could have bought at rival chains. Yet the
club isnt designed to sell products, and theres
no rewards structure. What Tesco offers to get a
customers data is information and help.

Step 3: Communicate Based on Who Your Customers Are and What They Do
Dont Overlook the Value of Non-Loyal Customers
What about your non-loyal customers? Nonloyal customers will take a different type of
engagement than your typical loyal customer.
Look at the data that you have about loyal and
non-loyal customer behavior to determine
if there are behaviors or activities that differ
between the two groups. Additionally, identify any
commonalities amongst the groups that can help
you communicate with them in a more personal
way. Using this information, you can tailor your
communications to your non-loyal customers to
guide them toward the behaviors and activities
that build loyalty and help nudge them to the

next stage of their customer lifecycle. However,

there may be non-loyal customers that may not
engage with you at all anymore. In fact, they may
no longer be customers. The most recent Loyalty
Report states that 60% of consumers are willing
to switch brands if it means getting more benefits,
and this is especially true in consumer-packaged
goods, telecommunications, and entertainment.
In other words, those customers who have
churned away from your brand are probably
still available. To win them back, focus on reengaging them with relevant communications
based on what youve learned about them over

time. This includes insights youve gleaned

by listening on social channels and paying
attention to negative word of mouth, such
as from online review and complaint sites.
Even if they have gone quiet because of a bad
experience with your brand, according to data
from an SDL study, 30% of consumers say they
will go back to a brand after seeing how
business has improved.

Customer Loyalty Stages

New Customer

Trial Customer

Non-Loyal

Loyalist

Advocate

Three Steps to a Winning Consumer Loyalty Strategy

16

Step 3: Communicate Based on

Who Your Customers Are and
What They Do
Consider that Amazon Prime is a wildly successful
loyalty program with tens of millions of members.
Still, knowing that some customers were staying
away from Prime membership based on its yearly
fee, Amazon offered a 25% discount for joining
Prime in January 2016. This type of course
correction with non-loyal customers can help
convert more of them into loyal customers. After
all, who doesnt like a 25% discount followed by a
year of free shipping?

Avoid Angering Your Loyal Fans

As marketers develop creative offers and campaigns to recruit and develop new loyal customers,
its critical that they consider the impact those campaigns and offers will have for their current
loyal customers. Its vital that your loyal customers and advocates do not feel like their loyalty
isnt important or reciprocated. While its natural that every business focuses on new customers
and growing new loyal customers, its critical that marketers strike a balance and continue to
acknowledge and include already-loyal customers.

When attempting to re-engage non-loyal

customers, apply the same discipline in
engagement techniques as you do with regular
communications aimed at loyal customers.
Call upon what you know about them
including their preferences, past purchases,
and buying behaviorto inform and make all
communications highly relevant. Remember,
Gen X and Millennial consumers in particular are
more likely to permanently disengage with brands
after receiving high volumes of mass generic
email communications, according to the AIMIA
Institute. So, analyze your data and stay relevant!

Three Steps to a Winning Consumer Loyalty Strategy

17

Conclusion: The Best Customers

Are the Ones That Last a Lifetime
Too often, marketers invest their hard work and
precious dollars in campaigns and promotions
aimed at getting customers to make that first
purchase. But once those customers are in the
door, theyre left largely to their own devices.
Like most companies, yours likely finds that
the Pareto principle holds true and that 80% of
revenue comes from 20% of your customers.
By consistently engaging those customers over
time with relevant, appealing offers, you can
cultivate long-term loyalty that translates into
higher revenues and advocates who drive even
more business for you through powerful
word of mouth.

Marketo (NASDAQ: MKTO) provides the leading engagement marketing software

and solutions designed to help marketers develop long-term relationships with
their customersfrom acquisition to advocacy. Marketo is built for marketers, by
marketers, and is setting the innovation agenda for marketing technology. Marketo
puts Marketing First. Headquartered in San Mateo, CA, with offices around the world,
Marketo serves as a strategic partner to large enterprise and fast-growing small
companies across a wide variety of industries.
To learn more about Marketos Engagement Marketing Platform, LaunchPoint partner
ecosystem, and the vast community that is the Marketo Marketing Nation,
visit www.marketo.com.

2016 Marketo, Inc. All Rights Reserved

Three Steps to a Winning Consumer Loyalty Strategy

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