Did you know that likely 20% of your customers make up 80% of your revenue? What does that mean exactly? It means that keeping those 20% happy and satisfied is extremely important to your business. It’s more important than ever for retailers to understand and create a marketing strategy around what customers actually want- loyalty and engagement.
According to RIS News, “sales plus customer engagement and loyalty equals long-term value.” It’s important for retailers to understand that while having sales is a good thing, it takes more to really give customers what they want. At the end of the day, if you asked customers what they value most, they probably wouldn’t even know themselves. Giving them what they never knew they needed is the beginning of providing customers with long-term value.
Engagement with High-Value Customers
Let’s start with customer engagement. There are multiple ways you can engage with your current customers, but basic segmentation and personalization is something many retailers have yet to implement. We would suggest starting with your high-value customers as they account for most of your revenue. It is a good idea to segment and speak to them differently than you would someone who consistently purchases $5 goods from your store. While still a good customer, they are not nearly as valuable as the person who just bought that $1200 bike last month and the $100 helmet this month. Taking these high-value customers and treating them well will result in loyal, repeat customers.
There are many ways to find these customers. It depends on your business for how you split them out and what might constitute as “high value”. We recommend starting by looking at your RFM score. For anyone that is scoring a 5-5-5, you know that these customers purchased recently, they tend to purchase frequently, and they spend a lot of money when they do. This list is an effortless way to pull high- value customers. You can also use a dollar amount to identify these individuals. Maybe $500 is a high value customer for you, so you create a list of anyone that purchased more than that the previous day to segment them out. You can identify these customers many ways, but it is just important that you start to do so.
For one client, if a customer spends more than $500 for one transaction, the store manager will be notified and will send the customer a hand-written thank you note. Managers do this once/month and are notified 2 weeks after the purchase as well. Show high-value customers their purchase is appreciated and it will go a long way.
Loyalty Goes a Long Way
Creating a loyalty email program can help retailers keep customers coming back. Even a small reward can go a long way. According to RIS News, the importance of creating strong loyalty among customers as a successful way to improve sales and profits was rated an 8.6 out of 10. Loyalty programs have two main functions: To incentivize and obtain new customers and to reward existing, loyal customers. Enticing and giving them something different and better than a regular customer is one of the easiest ways to grow your revenue and customer base.
Loyalty systems can be set up differently depending on your business. You may reward points for taking specific actions such as making a purchase, opening an email, etc. or maybe you give them cash back after their purchase. Below are three different loyalty programs often implemented.
Rebate/Cash Back System: The customer is able to get money back after purchasing the products. This can come in the form of a gift certificate or cash. This program can draw customers back into the store/website and gives them something to look forward to after purchase.
Point System: Points most commonly equate to amount spent. Points can also be used in a tiered system. Typically, once a customer spends a certain amount, he or she is “bumped up” to the next level, in turn, giving them more incentives. This program tells customers “The more you spend, the more you’ll get.”
Discount System: The customer receives a certain discount off their purchase, usually at checkout. This program provides the customer instant gratification.
One client of ours uses purchases to create their loyalty program. Customers receive a certain amount of points depending on their purchase value. From there, those points convert into discounts that are sent out as monthly certificates and can be printed and brought into the store for a discount off their next purchase. This allows the client to also know how many are being redeemed and by who. As each certificate has a unique barcode created, they are able to track conversion and ROI on their loyalty program.
Want to read more about how retailers can give customers what they really want?
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