Loyalty is an area we’re often asked to help with – our clients typically have questions about what loyalty might mean for their business, whether it’s worth investing in, and if so, what the right approach should be.
It’s a big topic, and one where it can be easy to jump straight to the detail of points, discounts and complex reward schemes. But loyalty is broader than that. At its simplest, it’s about whether customers want to do business with you, whether they want to keep doing business with you, and whether they’re happy to recommend you to others.
In this article, we bring together our thinking on customer loyalty: the foundations that need to be in place, the different ways loyalty can be encouraged, how to choose the right rewards, and how the loyalty ladder can help you decide how far to go.
Loyalty starts with customers enjoying being with you
Loyalty shows up in a number of different ways. Customers may stay with you beyond their initial contract, buy more products or services from you, buy from you more frequently, or recommend your company to others. All of these behaviours are usually the result of customers feeling a positive connection with your brand, your products or the experience they’ve had with you.
That connection matters. Without customers who value what you offer and feel good about choosing you, it’s hard to persuade them to keep buying, stay longer or become advocates. Businesses that are seen as customer champions, such as Giffgaff and Monzo, use customer centricity and loyalty to acquire new customers, as well as grow relationships with existing ones.
Get the foundations right first
Before thinking about rewards, the fundamentals need to be in place. Pricing needs to be competitive and affordable for the audience you want to attract or retain. Products need to be strong, with features customers value. The experience of engaging with your brand needs to be easy and positive. And your brand needs to feel credible.
Anything you then do to create stronger connections, reward customers, or encourage repeat behaviour is an added bonus. It can help tip a purchase decision, but it won’t compensate for weak fundamentals. If the core experience is poor, even the most generous loyalty offer is unlikely to persuade customers to stay.
Be clear on the behaviours you want to drive
The right loyalty approach depends on your brand, your commercial model, your customers and what you need loyalty to achieve. Customer data and insight are the best place to start. Look at who your loyal customers are today, what behaviours they demonstrate, where there’s headroom for growth and what motivates different customer groups. You also need to understand what works commercially by looking at factors such as margin, lifetime value, optimum product combinations, tenure and market share opportunity.
This is where insight, commercial, analytics and finance teams all have an important role to play. Together, they can help shape the case for loyalty and identify the behaviours that are most valuable to both customers and the business.
Loyalty doesn’t have to mean a complex scheme
When people think about loyalty, the default can be to think of points, discounts and data-driven reward programmes. These can be powerful, but they are not the only option. For some brands, a simple service promise, price promise or benefit available to everyone may be enough.
For example, Admiral’s multi-product discounts reward customers for bringing more of their insurance needs together, while also making the experience simpler through one joined-up account. Recommend-a-friend programmes can reward advocacy and often acquire new customers at a lower cost than traditional acquisition channels. Tiered rewards can recognise tenure, spend, value or life stage. And more complex schemes, such as Tesco Clubcard or Boots Advantage Card, can combine rewards with valuable customer data.
The point is not to build the biggest scheme. It is to choose the approach that best supports the behaviours you want to drive and the relationship you want to have with your customers.
Think creatively about rewards, then keep the structure simple
There are many different reward types to explore: discounts, points, gifts, vouchers, prize draws, charitable contributions, exclusive experiences, personalised advice, tailored content or enhanced customer support. Some customer groups may respond well to guaranteed value, while others may be motivated by surprise gifts, exclusive access, recognition or a contribution to a cause they care about.
This is why it’s useful to create a broad list of potential rewards before narrowing down. Look beyond your category and competitors for inspiration, including overseas examples. Then filter the ideas against your objectives, commercial reality and what your customers are likely to value.
Once you have potential rewards, map them against the structure of your programme. Will every customer get the same promise? Will rewards build over time? Will they be triggered by tenure, spend, product take-up or advocacy? Keep the structure easy to understand. Customers won’t want to engage with a scheme that feels complicated, and a complex scheme is also much harder to explain and manage operationally.
Use the loyalty ladder to decide how far to go
One framework we use to shape loyalty programmes is the loyalty ladder. It helps brands decide the level of relationship they want to build with customers, from practical recognition through to a deeper emotional connection.
At the bottom of the ladder, customers want their custom to be recognised. That recognition may be as simple as existing customers getting a better deal, or customers receiving a discount when they buy multiple products.
The middle step is about relevance and personalisation. Here, brands use customer data in a way that benefits the customer, through personalised pricing, bespoke offers, tailored product recommendations, relevant messages or service levels that reflect the customer’s needs. Nectar Prices, Pets at Home’s VIP Club and personalised recommendations from retailers such as Majestic are all examples of how this can work.
At the top of the ladder, loyalty becomes more closely linked to values, purpose, expertise and belonging. This is where a brand aligns what it stands for with what customers really value. Apple is a useful example: the Genius Bar and the wider connected ecosystem create value, confidence and advocacy without relying on discounts.
Not every brand needs to get to the top of the ladder. For some, meeting the first step brilliantly is enough. For others, especially those that want customer centricity and reward to be central to their positioning, moving further up the ladder can create stronger emotional connections and more powerful advocacy.
Research, refine and build confidence
Before launching, test your thinking with customers. Qualitative research can show how people interpret different rewards, what feels motivating and what does not. Quantitative research can then size the opportunity, compare options and show how different customer groups may respond.
This process helps you refine not just the reward itself, but also the structure around it. It gives you evidence for the business case, gives teams confidence in the direction, and helps ensure the final approach is motivating for customers and commercially sensible for the business.
A summary
Loyalty is ultimately about customers wanting to choose you, stay with you, buy more from you and recommend you. It starts with strong foundations: a credible brand, valuable products, fair pricing and a positive customer experience. From there, the right loyalty approach depends on your objectives, your customers, your commercial model and the behaviours you want to drive.
Whether you create a simple benefit, a recommendation mechanic, a tiered programme or a data-led rewards scheme, the aim should be the same: to give customers a reason to feel recognised, valued and motivated to keep choosing your brand.
If you’d like to explore how Blue Feathers can help you shape a loyalty strategy that works for your business and your customers, please do reach out to us at [email protected].
