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Why Loyalty is a Critical Part of Your Customer Experience Image
Diff Blog
7
min

Why Loyalty is a Critical Part of Your Customer Experience

The ecommerce landscape is undergoing substantial changes. What was once sufficient to entice shoppers to make purchases and keep them coming back simply doesn’t cut it anymore. Price and functionality alone aren’t enough; loyalty is the most powerful tool a brand has to win in today’s ultra-competitive market.  

The numbers back it up. A recent Yotpo survey of 2,000 consumers in the United States revealed that loyalty is indeed the way to go. Nearly nine of 10 respondents said their brand loyalty has either remained constant or increased over time, and a quarter (24.8%) reported being more brand loyal this year as compared to last year. 

Simply deploying a generic loyalty program, however, isn’t the answer. A one-size-fits-all approach may work in the short term, but a customized, tailored model is what it takes to set up your brand for lasting success. This means creating a personalized, on-brand loyalty program that offers your best shoppers the experiences and benefits they’ve come to expect, all while remaining fully aligned with your brand identity. 

This article will cover how brands can get to the root of what drives their target customers, and how to craft a loyalty program that delivers on those expectations.

Loyalty 101: the 3 core pillars  

Consider the following statement from J Crew’s former CEO about their core customer: “She’s loyal as hell until we go wrong, then she wants it all on sale.” A customer’s relationship with your brand is always changing, meaning a brand’s approach to loyalty must be flexible and dynamic to keep up. 

To get to the root of what makes a customer loyal, it’s necessary to take a step back and ask a simple, but critical question: why is a customer buying from your brand in the first place? Usually, the answers to this question converge around 3 main reasons:

1. They get good value for money (Transactional)

2. It's convenient or the quality of the product is good (Functional)

3. They just plain love it (Emotional) 

The good news is, brands don’t need to nail all three to win a customer’s lasting fidelity. They can choose a single approach that appeals most to their ideal customer and achieves their goals. Let’s take a deeper dive into each approach.  

The transactional approach 

What is it? 

This model emphasizes lowering the barrier to entry in the early stages of the consumer’s relationship with the brand. It focuses on offering monetary incentives to improve acquisition and entice shoppers to take that crucial first step.

Why is it effective?

Who doesn’t love a good deal? Most shoppers are price-conscious and appreciate being rewarded with discounts. This strategy pays off for brands once customers have had the opportunity to grow attached to the product. In fact, 39.4% of consumers are willing to spend more on a product for brands they love, even if there are cheaper options elsewhere.

Who does it work for? 

The Transactional Approach is best suited for brands that: 

  • Generally have high lifetime value customers 
  • Want to focus on lowering the barrier to entry for new customers
  • Need to show why their product is superior to their competitors’ products

The approach in action 

UntuckIt has masterfully crafted a loyalty program centered on the transactional approach. The apparel brand’s “Give $25, Get $25” referral program is optimized for social sharing via email, Facebook, and Twitter and is designed to help lower customer acquisition costs and increase conversion.

Refer A Friend Get $25 Off

Refer A Friend Get $25 Off

The functional approach 

What is it? 

This model focuses on all the ways brands can provide tangible value to customers aside from monetary incentives and is designed to inherently create value above and beyond the purchase.

Why is it effective?

You can only reduce prices so much. Eventually, you’ll need to find a way to increase the perceived value of purchasing from your brand and separate yourself from the competition. This is where functional aspects like the product (e.g. free samples, exclusive access to new products) or customer experience (e.g. free shipping) come into play.

Who does it work for? 

The Functional Approach is best suited for brands that: 

  • Sell products that people buy frequently
  • Offer a variety of products and want to make sure they all get visibility
  • Are wary about reducing prices (e.g. premium or luxury brands)
  • Have a pricing model that doesn’t leave room for promotions (e.g. subscription boxes)

The approach in action 

Soko Glam’s multifaceted “Soko Rewards” program is designed to appeal to a wide array of customers with diverse spending habits. A key feature of their program is that it is tiered, meaning certain limited edition products are only available to VIP or VIP Premier customers. This creates a unique and exclusive experience that generates more value from top-performing customers. They also strategically juxtapose options available only to VIP members next to those open to basic-level members, subtly encouraging customers to engage in actions that will move them up the ranks. 

VIP Premier Exclusive Awards

VIP Premier Exclusive Awards

The emotional approach 

What is it?

Emotional loyalty is deep allegiance to a brand, often based on intangible benefits that outweigh price, convenience, or even product. This approach is based on shaping how your brand is perceived, and what people associate with it.  

Why is it effective?

Emotionally loyal customers consider a brand to be an integral part of their lifestyle. It’s all about communicating the brand’s raison d’etre and rewarding customers who are dedicated to it. This approach also extends beyond mere purchases and gives customers a reason to engage even when they aren’t buying, further strengthening the emotional ties. 

Who does it work for? 

The Emotional Approach will usually be effective for brands that: 

  • Strive to remain top of mind for customers
  • Sell products made by other brands or who are wholesalers
  • Want to educate customers on their brand story
  • Leverage engagement between purchases to drive sales 

The approach in action 

Thrive Causemetics operates on a one-for-one business model, donating a luxury beauty product to a woman in need for every product purchased. Thrive’s customers feel a natural emotional bond based on a shared charitable mission. To reach other like-minded shoppers, the cosmetics brand runs a “Give $10, Get $10” referral program. A discount combined with the social proof of a referral from a friend means new shoppers are more likely to make that first purchase and develop an instant emotional connection with the brand.

Give $10, Get $10

Give $10, Get $10

Tying it together 

With a variety of options at their disposal, brands have all the necessary tools to craft a loyalty program that simultaneously speaks to their ideal customer and achieves their business objectives. But, while the core concepts may seem simple, there is simply no replacement for expertise. Tapping into the services of an experienced agency can help brands delve deeper into what exactly makes their core customer tick and then connect those motives to key business drivers.  

How Diff and Yotpo work in tandem 

Combining the tactical know-how with the right technical solution is a recipe for success for brands looking to implement an ironclad loyalty program. Diff embeds Yotpo's review and loyalty solutions onto a brand’s website as part of their UX and design process, ensuring that they seamlessly blend with the look-and-feel of the rest of the website. 

Yotpo and Diff work together to accelerate growth for today’s leading ecommerce brands. The strong partnership ensures success through innovative technology, one-of-a-kind design, and creative strategies that help brands convert, engage, and retain customers.

Submitted by Ashley Chemtov, Partner Marketing Manager, Yotpo

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