First year goals for a repeat purchase-focused loyalty programme
Do 75% or more of your customers make one purchase and then disappear? Do you have trouble identifying and engaging these customers? If so, you probably have either considered developing or have already developed a loyalty programme. Commentary by Marc Darling Tibco
The goals presented below, based on real-world examples, provide specifics on what businesses whose customers exhibit “one and done” customer spending patterns (e.g. specialty catalogues, luxury items, apparel, etc.) should expect from their loyalty programmes in the first year.
GOAL 1: ENROLL AND IDENTIFY MOST CUSTOMERS
Programme enrolment is the most critical factor determining early success of a loyalty programme. Without a critical mass of customers, lifts in retention rates, purchase frequency, and average order size do not generate sufficient revenue to pay back overall programme costs. In addition, customer identification (usually done by capturing an email) is especially critical for retailers who rarely see the same customer twice. Programme enrolment rates of 10-40% with valid email capture rates above 75% are good goals to strive for.
Never Miss a Retail Update!Furthermore, in an effort to enable future relevant messaging, successful programmes are increasingly requesting critical information from customers following programme registration. Common benchmarks for response rates to these surveys start at about 10%.
GOAL 2: DRIVE A SECOND PURCHASE
Loyalty programmes for businesses with low-frequency customer spending patterns should be intensely focused on driving consumers to make a second purchase.
A simple program design that we’ve seen successfully employed consists of
(1) a strong bounce back email offer triggered after initial purchase, e.g. get 25% off your second purchase, and
(2) a published reward threshold set at the monetary value equivalent to the third purchase. For example, if your average basket size is £25 then it would be “spend £75 get £10 back.”
The combination makes for a vibrant program that motivates new customers to make a second and third purchase without unnecessarily eroding company margins.
After launching a repeat purchase program, a high-end specialty home goods retailer that we work with achieved 100% lift in repeat purchase rate and 156% lift in purchase frequency of new loyalty members versus non-members over a
60-day period. And the good news is that while these results are phenomenal, depending on your margins and consumer spending patterns, you often need only achieve a 5-10% lift to realise a positive ROI.
GOAL 3: ENGAGE NEW CUSTOMERS WITHIN 30 DAYS
Engaging programme participants early and often is another basic building block of loyalty programme design. The 30-day window following a customer’s initial purchase is the most critical period in determining and shaping a customer’s on-going relationship with a brand. Good programmes start triggered, relevant, event-based communication from day one. In fact, effective on-going CRM is the “secret sauce” separating the very profitable loyalty programmes from the mediocre ones. Email and direct mail response rates over 0.5% are good; 3-5% response rates are exceptional.
The key to building your customer engagement programme is employing a test and learn philosophy by testing four basic dimensions:
(1) offer
(2) creative/ subject line/messaging
(3) timing/frequency, and
(4) target.
Based on lifts across those dimensions versus a control group (that receives no communication), those learnings tweak and evolve your strategy.
Success in year one of a loyalty programme starts with a strong and steady enrolment rate, enabling follow-up communication to drive increased purchase frequency. For businesses where most customers only purchase once, it is even more critical to capture and engage new customers with a loyalty programme structured for them.
