Chapter 9

Building a Customer Loyalty and Advocacy Program

Customer loyalty has always been a key factor in the health of any business. Without loyal customers, business owners would constantly be reinventing and changing their products to find ones that generate steady revenue.

If you think loyalty programs are old school, you might be envisioning programs like the trading stamps or S&H Green Stamps programs that started in the late 1890s and became very popular in the 1950s and '60s. These programs issued stamps with each purchase and a stamp book to paste them in.

When you filled up your book, you would take a trip to the local redemption center to pick out your prizes — mostly things like small appliances and toys for the kids. Families would enjoy these outings and come home with a small reward. This motivated them to keep coming back for more. For a while, this worked really well.

A variety of different programs gained and fell out of favor in the years that followed, but if you think loyalty programs aren't in favor now, consider this report from Jupiter Research: “Approximately 75 percent of consumers have at least one loyalty card and the number of people with two or more is estimated to be one-third of the shopping population.”

The nature of customer loyalty itself has changed with the advent of social networks. In the context of social CRM, loyalty programs are based not on products, but on relationships. Businesses need to recognize that loyalty is a two-way street, and pay attention to their customers in new ways. Customers want to be assured that their favorite businesses are listening to them and treating them with respect. This is quite a change from the advertising practices of the 1950s (highlighted in the popular Mad Men TV series) when all the messages were directed outward.

In the following sections, you learn why customer loyalty programs are valuable and how you can incorporate them into your social CRM.

Understanding Customer Loyalty

Customer loyalty programs are big business. The 2011 Colloquy Loyalty Census is available at

According to that report, Americans accumulate approximately $48 billion in rewards points and miles annually. However, one-third of those points are never redeemed. More people are participating in loyalty programs and getting less value from them than ever before.

With this in mind, part of understanding your customers is understanding the value they place on your loyalty program's rewards.

Evolving loyalty programs

To understand how to cultivate today's social customer, look at several of the factors that changed the face of loyalty programs in the 21st century. These factors include the following:

Figure 9-2: Foursquare home page.

Figure 9-3: PunchTab home page.

Figure 9-4: Burt's Bees programs that give back to the community.

Discovering why loyalty programs matter

Fred Reichheld — author of several seminal books on loyalty, including The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World — reports that “a 5 percent improvement in customer retention rates will yield between a 25 to 100 percent increase in profits.” Wow, that's a statistic you can't afford to ignore! The key is to build a program that's highly relevant to the customers you serve.

Loyalty data is one of your company's best assets, no matter its size. By collecting data about your loyal customers, you can understand such things as the following:

How do companies view the value of loyalty programs today? According to a survey by SAS and Loyalty 360, here are the top goals of loyalty programs:

These are difficult goals to pull off. The ability to achieve them is enhanced by the fact that you can reach these customers directly on social media platforms. Your CRM can accumulate the data you need to make a connection with your customer meaningful.

After you're convinced your business needs a loyalty program, remember that your customer needs a reason to join and participate. You must create a reason for your customer to stay faithful. You want customers to value their incentives and engagement to the point that they wouldn't think of buying elsewhere.

The following two sections explore how you can enroll and retain customers in your loyalty program.

Introducing types of loyalty programs

You've probably heard the adage before: Finding a new customer costs more than selling to one you already have. Loyal customers are hard to find and hard to keep. Customers who strictly shop on price will go from company to company to find the best bargain. They will almost never become a loyal customer. If they can find the item cheaper somewhere else, they will grab it.

What characterizes loyal customers? They are the ones who are willing to pay a bit more or stay with you no matter what. Table 9-1 shows some potential ways to inspire customer loyalty with different types of loyalty programs. After customers join a loyalty program like those listed here, you can communicate with them via social media. For example, you could devote a Facebook page to loyalists in the program.

Table 9-1 Types of Loyalty Programs

Making your most valuable customers feel loved

Everyone is vying for your customers' attention. Online ads, videos, points programs, and free samples are available everywhere. If you can think of ways to create a memorable experience for your customer, the rewards will be great. If you can do something extraordinary for a customer, you will cut through the clutter.

A great example of this is the experience Peter Shankman of HARO (Help a Reporter Out) www.helpareporter.com had with ’Morton's The Steakhouse in Hackensack, NJ. Shankman reports that in August 2011 he was on a business trip that would end back at his home airport at a late hour. He was a regular customer of ’Morton's across the country when he traveled. He hadn't eaten much that day, so while on his way home, food was on his mind.

As a joke, he tweeted, “Hey @Mortons – can you meet me at Newark airport with a porterhouse when I land in two hours? K, thanks. :)” Much to his amazement when he landed, a Morton's employee in a tuxedo was waiting for him with a bag that included a 24-ounce porterhouse steak. Needless to say, he experienced shock and amazement. He tweeted a picture of himself with the employee and expressed his uncontrolled joy. Even his dog was going to eat steak that night.

The great thing about this for Morton's was that not only did Shankman tweet his amazement, but his follower's on Twitter went wild with tweets about it. (He had over 100,000 Twitter followers at the time.) In addition, Morton's got free TV coverage and great PR. All for the price of a steak dinner and a trip to the Newark airport.

In retrospect, you can look at that experience and see how Morton's would benefit, but remember, they took quick action in real time. They didn't have time to plan and execute over several days. They had two hours.

What can you learn from this? Think about the following when you're trying to develop incredible experiences that create customers for life:

Figure 9-5: Peter Shankman receives his complimentary dinner from a Morton's employee in a tuxedo.

As we can see from this example, there are many ways to reward loyal customers. The type of loyalty program you employ should depend on the types of rewards that customers find valuable. For example, in Table 9-1, loyalists are rewarded with perks that give them extra value. In the Twitter example, a loyalist is rewarded for mentioning a business on Twitter. The publicity of that tweet had great value to the company as well as the tweeter.

Understanding the Value of Loyal Advocates and Social Influencers

Today's customers demand to be heard. Listening to them and reacting to their requests can build loyalty not only among the respondents, but also among those who see that response. That's one of the true benefits of responding to your customers on a social platform. Others can see and appreciate your engagement.

The loyal advocate is the customer who will aggressively share your message with others. To understand the value a loyal advocate brings to a business, we need to analyze the difference between the social influencer and the true advocate.

Influencing the influencer

Social influencers play a key role in your ability to reach customers. A social influencer is a trusted person with a large faithful following. A social influencer's endorsement of your product or service can help your business acquire new customers. Your loyal advocate uses word of mouth to reach her circle of trusted friends and has the potential to reach a large number of people you might never reach. For more on influence, see Chapter 7.

To find the people who influence your customers, you can look in several places. Here are some data sources to consider monitoring to find influencers. If your CRM doesn't collect social platform data, you may need to integrate it into your data:

Figure 9-6: Twitter search function.

Understanding the needs of the loyal advocate

The true advocate is the customer who loves your brand and lets his family and friends know it. How can you spot a true advocate? Fred Reichheld, in his book The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World, thinks he knows. The ultimate question for him is, “How likely is it that you would recommend our company to a friend or colleague?” If your customer won't recommend your company to her trusted inner circle, she isn't a true advocate. (This kind of advocate is also commonly called a customer evangelist.)

To encourage and cultivate customer evangelists, examine what makes those customers respond to your brand in a way that others don't. Do they look to you to provide information about how to use products like yours? For example, if you sell wedding dresses, do potential customer evangelists look to you because you provide great information and advice about how to host a cost-effective wedding? When you solve customers' problems, do you make them feel special and valued by your company? With the downturn in the economy, customers are looking for more custom shopping experiences. One way to do this is to team up with like-minded companies who can make your sales experience unique.

A great example of this is the iOS app created by a company called SnapShop (www.snapshopinc.com), as shown in Figure 9-7. From an iPhone, iPad, or iPod touch, a furniture shopper can see how furniture (including such brands as IKEA, Pier 1 Imports, and Horchow) looks in his own room. Here's how it works: As the app user, you snap a photo of your room and place the virtual furniture in it. If it looks good, you can buy it on the site directly from the brand.

Think about how you can make the purchase of your products a unique experience that will keep your customer coming back.

Figure 9-7: SnapShop home page.

Enhancing Customer Loyalty and Advocacy

To enhance customer loyalty and advocacy with social customers, you should attempt to provide a more personal experience. To do that, you should be right at the source of customer feedback, watching tweets as they fly by and providing quality customer service in real time whenever possible. (See more about customer service in Chapter 10.) For example, you can set up a Twitter account specifically to receive customer service questions, like United Parcel Service (UPS) does at http://twitter.com/#!/upshelp.

Utilizing customer touch points

To show customers that you're available to hear them, you want to be present at all your customer touch points — the channels where the brand interacts directly with customers. These touch points include e-mails, register checkouts, Twitter, Facebook, and so on. Major retailer Bloomingdale's recently created an innovative loyalty program at checkout called Loyallist, as shown in Figure 9-8, that makes excellent use of customer touch points.

Figure 9-8: The Loyallist program at Bloomingdale's.

Typically, high-end retail loyalty programs require customers to sign up for a store credit card. This confers exclusivity and benefits the retailer by having the customer pay the additional carrying charges. But Bloomingdale's cleverly sets aside this requirement. Their program allows all shoppers to participate by issuing them a Bloomingdale's loyalty card linked to their phone number.

If a shopper doesn't use a store credit card when he makes a purchase, he can simply offer his phone number or physical loyalty card at checkout. This is especially useful to Bloomingdale's because it allows the retailer to collect loyalty shopper data and issue rewards for all its shoppers, not just the ones who have a store credit card.

In addition, Bloomingdale's can utilize several of its touch points by allowing shoppers to accrue loyalty points whether they're shopping online, in a store, or at their outlets. Their loyalty slogan “Every shopper, every day” helps them get everyone into the program. In return, shoppers get one point for every dollar they spend and two points if they use their store credit card. A customer who accrues 5,000 points also receives a $25 reward card in addition to the rewards per point. Loyalists receive monthly e-mails that detail new products and discounts.

In your own business, think about how you can use your customer touch points to create a unique program that connects with your customers at more places than the point of purchase. Do away with any barriers that might be in place.

Hearing what customers are saying

Before the Internet, retailers never had to deal with was customers from across the globe sharing all manner of opinions with fellow customers in easy-to-access public forums with no permission required. For example, the web abounds with stories about restaurants that have treated their customers with disrespect or bad service. Pre-Internet, the complaints were only heard via word of mouth by local customers. Now customers get the benefit of hearing the opinion of customers they don't know personally.

The types of products and services you offer dictate where your products are reviewed. Here are some places where you'll find online reviews:

Figure 9-9: Yelp's home page.

One general finding about customer reviews is that one or even a few negative reviews won't turn a customer off. Most people know that you can't please everyone and realize that some negative comments attached to a product listing simply means that real people are sharing their opinions.

Don't be afraid to let bad reviews stand, even when you've tried your best to resolve them. If potential customers sense that you're censoring your reviews, they'll leave quickly, never to return. Responding to negative reviews gives you the opportunity to demonstrate that you want to engage unhappy customers and fix things.

It's also a good idea to provide a link to these reviews from your site instead of trying to host the reviews yourself. You'll get more exposure on a site with multiple restaurants. In searching the database, someone may run across a review of your restaurant and be inspired to try it.

So how should you deal with feedback received in online reviews? Consider the following tips:

Delivering relevant content

Key to the success of any loyalty program is the use of relevant content that provides real value to the customer. The term relevant content refers to such things as product suggestions and tips for using the products and discounts. This is where your CRM data becomes crucial. To understand how content impacts your loyalty programs, you need to consider the following two factors:

Armed with information like this, you can create content that's highly relevant to your customers. Obviously things like loyalty cards and coupons might already be in your arsenal. But how about a promotion of store brands or bulk purchases?

This is just one possible example, but it gives you a direction upon which you can base small content experiments. The standard type of content that you create about products and services will always be in the pipeline. This type of specific data can help you impact your customer in real time.

Using gamification to encourage loyal customers

Gamification is a concept that's grabbing the interest of customers and loyalty program managers alike. It refers to the application of game dynamics to business functions to encourage customer engagement. According to a Gartner report, “by 2014, a gamified service for consumer goods marketing and customer retention will become as important as Facebook, eBay, or Amazon, and more than 70 percent of Global 2000 organizations will have at least one gamified application.”

People are playing online games with others, buying virtual goods, and looking for the next hot game app in record numbers. Marketers are jumping on the bandwagon hoping that they can encourage loyalty by using this new-found interest in games.

The concept of using games behaviors in loyalty programs isn't really new. Some variation on the customer winning points has always been part of the process. What's new is the nature of social gaming. The technology goes far beyond old-style loyalty programs.

The benefit of applying gamification to business apps includes the following:

When you think of gamers, you may have some misconceptions about their profile and the value of social games for your business:

From her studies, McGonigal found that when we play games we are

Figure 9-10: SuperBetter.

Her goal is to marshal this behavior for good causes and to encourage others to do the same. With this in mind, think about the kinds of games you can create for your customers. There really is no limit to the type of business that could benefit from a loyalty game.

One fun example of a loyalty game is Snooth Wine Rack (http://snooth.com/wine-rack). Snooth is the world's largest wine site. Its mission is to simplify “how people select, learn about and purchase their favorite wines.” The game lets you select wines and compete to become an expert. The home page is shown in Figure 9-11. As you learn about Snooth's selection, you can price wines and purchase them from vendors through the Snooth website.

This game is popular because it hits the mark in three important ways: It's entertaining, educational, and easy to use. Those are three criteria that most good games should have.

Figure 9-11: Wine Rack on the Snooth home page.