How to build customer loyalty without a large price tag

Customer loyalty is a high-priority goal for companies seeking sustainable, long-term growth. But traditional loyalty programs can come with a hefty price tag. And despite all the benefits of a traditional loyalty solution, sometimes cost can impede an organization’s ability to move beyond the exploration phase of loyalty.

That begs the question: Are traditional programs the only way to engender stronger bonds between brands and their best customers? Not always. Many companies are refreshing tried and true strategies to drive ongoing engagement, increase customer share, and build long-term retention. Here are some approaches to consider.

1. Invest in and double down on your frontline employees and customer service

Strong customer service is often an overlooked means to drive advocacy that leads to loyalty. Customer experiences are greatly impacted by the fluidity of digital and brick-and-mortar interactions. Anything that gets in the way of a customer-first mindset—a clunky online transaction or an indifferent customer service representative—can erode trust, which studies tout as the cornerstone of customer loyalty and relationships health.

Consider Trader Joe’s as an example. They are masterful at hiring, training, and empowering their employees to put the customer at the center of their work experience. They hire positive employees—and keep them happy with some of the best pay and benefits in the industry. They are consistently named as one of the best places to work in the U.S. by Glassdoor. But more than pay and benefits, Trader Joe’s has mindfully built a culture that aligns with what their employees seek. That culture carries over into the shopping experience for the consumer, which is why it’s not uncommon to see customers pushing a cart out the door with a smile on their face. And they’ve achieved that customer satisfaction without sales, coupons, or a traditional loyalty program.

2. Amplify positive customer reviews

Positive reviews are critical to gaining new customers. There are two important components of reviews to unpack. The first is that customers who take the time to review your business are passionate—positively or negatively—about your product or service. Capture the easy opportunity to recognize positive reviewers and thank them for their review. Be sure to also respond to negative reviews and use them to decide how and where to improve your product or service.

The second component is that positive reviews have a dramatic impact on winning new customers. Over 50% of customers today read online reviews and are more likely to choose highly rated companies. Tap into your reviews as a powerful channel to improve the customer experience and, ultimately, customer loyalty.

3. Build your referral network

Simply put, referrals matter. According to Neilsen, customers are four times more likely to buy when they have a recommendation from a trusted source such as friends or family. Referrals can have a dramatic impact on customer acquisition and customer loyalty. Provide a referral channel to encourage your customers to refer their closest friends and family, build word of mouth, and drive customer growth.

Ensure that your e-commerce and brick-and-mortar locations allow customers to easily and frictionlessly share your products or services with others.For example, Madison Reed, a hair color company, has an elegantly simple referral program. When you refer a friend who tries Madison Reed, they get $15 off, and you get $15 in credit. Refer another friend? Another $15. Another? Now you're up to a $45 credit. Not only are your most loyal customers rewarded, but newly-gained customers get in on the action too.

4. Create a brand club

Countless brands offer clubs designed to recognize and reward their best customers. These clubs typically require registration, which lets companies capture critical data on customer preferences, and enables personalization in marketing communications. Clubs tend to be either free, where a member receives periodic communications (typically by email) and offers or discounts, or fee-based, where a member pays a fee or subscription for access to various benefits. Both forms can increase customer loyalty. However, fee-based clubs typically come with heightened consumer expectations in terms of the perceived value of the perks to the member.

In both cases, there are risks. For paid, if the member doesn’t perceive value in club membership (most studies show consumers expect to recoup their investment at a rate of 6:1), then the club may fall flat or decline. With free clubs, if the content isn’t relevant and meaningful, drop off will be a problem as there will be minimal value exchange or utility for your members.

5. Surprise and delight

T-Mobile does a good job of surprising customers with regular deals and savings through their T-Mobile Tuesdays app. Each week, customers can visit to see what specials are available to them. From gas discounts, concert tickets, and even contests and sweepstakes, T-Mobile Tuesdays offers a broad set of offerings designed to reinforce the value of being a T-Mobile customer. And since the benefits are likely funded by other merchants, it’s an inexpensive way for T-Mobile to offer value for a minimal cost to their marketing budget. 

Which approach is right for you?

When assessing which approach may work best for your brand, keep a few things in mind. First, what type of experience would best resonate with your customers? Customer research will help define which paths are the best for you to explore. Consider testing various approaches and iterations and validate approaches with economic, propensity, and predictive models where possible. That can help mitigate risk and allow your brand to learn through a pilot, for example, before rolling out to your entire customer base. Finally, have key success metrics and key performance indicators firmly established before you get started. With all of that in place, you can develop a winning loyalty strategy—without the large price tag.