How to create customer loyalty without price sensitivity

two women in a workshop

Attracting a new customer can cost 5 times as much as it does to retain a current one.

Keeping your existing customers happy and making sure that they remain loyal is one of the most effective ways for your business to save money. 

Offering discounts may temporarily drive up your sales—but it is not a sustainable driver of customer loyalty. Over the long term, sales and promotions may end up cutting into your revenue. 

The key to fostering meaningful customer loyalty is to nurture your existing customers using your owned channels. If you work to improve your customers’ experience by demonstrating their value to your business—price sensitivity will be less of an issue. 

What is meaningful customer loyalty and why is it important?

A loyal customer equals reliable revenue

Loyal customers are motivated to purchase from you again and again. Factors that contribute to customer loyalty are consistently positive experiences with a brand, the perceived value of the products or services you offer, and customer satisfaction. A loyal customer who chooses your brand over the competition leads to brand advocacy. This means that your customers are so happy with your brand that they will often share their experience with friends, family and coworkers—and best of all, you don’t need to discount your products for this kind of reaction. Loyal customers who are brand advocates are often customers for life—and that equates to a reliable source of revenue. 

Happier customers always pay off in the end. Recent research indicates that current customers spend approximately 67% more than new customers.1

Consider this: It is the middle of the holiday rush, and company A sends out an email blast touting their discounts to motivate shoppers to purchase their products. Company B may also offer  a promotion, but their main focus is on personalization, subscriber incentives, and rewards. Company A experiences a brief surge in revenue, but when the holidays are over, customers drift away. Meanwhile, Company B enjoys healthy customer retention and maintains consistent sales after the holidays and beyond.

The problem with price sensitivity

Customers who only purchase from your brand when you offer a sale or discount are referred to as being price sensitive. They need to be incentivized by the prospect of saving money in order to be motivated to buy from you. This is unsustainable. Your business needs customers who value what you offer—even if it’s not on sale. People who trust and appreciate your brand will reward you by becoming long-term customers.

Relying on sales and discounts to drive revenue can hurt the integrity of your brand. A company that promotes endless sales and markdowns “cheapens the brand,” according to Sue ten Brummeler, ecommerce marketing consultant at MarketingYYZ. Once you fall into a pattern of offering endless promotions and discount codes—you’re stuck. You’ve conditioned your customers to only purchase from you when you’re having a sale. It can take years for a company to climb out of that cycle. 

While it may be challenging to devise a customer loyalty-building strategy that is entirely free of price sensitivity, it never hurts to invest in your customer experience. According to the Temkin Group, for companies with revenues up to $1B, it is projected that investing in their customer experience will help them earn up to $700M more within 3 years of driving a stronger customer experience2.

Strategies to build meaningful customer loyalty

Use Customer-First™ data to design a personalized experience

Using first-party data on your owned channels to create strategic, personalized marketing can help nudge your customers towards a purchase. “It’s common for around 98% of people to leave your (ecommerce) store without making a purchase,” Jean Kroon, cofounder of Ecommerce Accelerator, explains. And research from Epsilon shows that 80% of customers say they are more likely to buy from a company that makes an effort to personalize their shopping journeys3.

Smart Home Beveiliging, a home safety solutions company, partnered with Ecommerce Accelerator to use Klaviyo’s WooCommerce integration to collect first-party data from their customers. Then, they used that data to create a personalized lifestyle journey for their customers. Through the subscriber signup forms, Smart Home’s team learned valuable insights about their customers: Items customers had previously purchased, the most popular categories, and products that customers had browsed—but didn’t go on to purchase.

After learning more about their customers’ behaviors, Smart Home’s team sent out a segmented welcome email series, designed to align with their customers’ preferences. The team also used a targeted browse abandonment email flow to help their customers choose the right products for their needs.

Through personalized email marketing, the team at Smart Home was able to compel their customers to make repeat purchases without having to rely on other costly methods of advertising.

Developing subscriber loyalty by offering incentives

Persuading customers to purchase your products without using sales or other promotions can be challenging—but not impossible. Email or SMS subscriber incentives can help to motivate ecommerce customers to make a purchase. According to HubSpot, incentives like gifts with purchase or contests not only develop trust with your customers—they create a phenomenon that the marketing software company describes as “customer delight.”   

Les Raffineurs, a Parisian concept store, discovered that delighting customers is a winning strategy. Using Klaviyo’s platform, Les Raffineurs promoted monthly giveaways on its website and through email, encouraging visitors to join its database with the lure of free products. 

Once customers are in the database, Les Raffineurs continues to send out emails, reminding customers about their giveaways. Naturally, customers who want a chance to win products flock back to the site. This email channel strategy not only helped Les Raffineurs double the number of customers in its database—it earned them a 6-figure revenue over a period of 90 days.  

GhostBed, a mattress and bedding company, also found that using its owned channels to send subscriber incentives was invaluable in building customer loyalty and driving enhanced revenues. It sent an SMS welcome series in Klaviyo, targeting email subscribers and new site visitors. GhostBed offered a 25% discount with 2 free pillows and early early access to future sales and promotions. Its SMS strategy generated $77,600 from the single SMS welcome series flow, earning the company 1,286 new subscribers over the course of one week. 

GhostBed’s subscriber sign up form and SMS customer communications

For satisfied customers, encourage customer feedback 

When you ask your customers for feedback, you’re showing that you care about their opinions. Cultivate a community of loyal customers by using your owned channels to reach out to them on a personal level. Not only will you gain actionable insights, it’ll improve your customers’ experience with your brand. 

Every year, Tortuga, a travel backpack manufacturer, emails its customers a survey that asks what designs and features they’d like to see in its new products. Customers are asked to reply to Tortuga’s newsletters with tips and personal stories about its products. These stories often turn into interviews, which are then featured on the company’s blog. Customers appreciate when a company values their voice and opinions and then integrates it into their content. Microsoft’s State of Global Customer Service Report shows that 77% of consumers prefer brands that ask for—and implement—customer feedback4.

Involving the customer voice in the process was really powerful. Even if only a couple products hit the market from customer requests, “People felt like they were part of the team—and that they had a say.” Taylor Coil, Tortuga’s former director of marketing, explains. 

Simply asking for customer feedback is not enough—you need to actually listen, value the information your customers give you, and respond by implementing real changes to your brand.

Recognize loyal customers with a rewards program

Customers who are rewarded for being loyal will feel appreciated—and reward you in return by continuing to purchase from you. According to the “Future of Rewards“ ebook from Virtual Incentives, 75% of consumers report that they prefer to do business with companies that offer rewards5.

Sephora’s rewards program organizes customers into different categories. Anyone who signs up for their rewards program becomes a Beauty Insider, and the rewards increase depending on the amount they have spent with the company over the period of a year. Once customers have earned a certain number of points, they receive awards—including free products. Beauty Insiders also receive  early access to sales and exclusive events—and a special treat on their birthday.

Your owned email and SMS channels are ideal platforms to consistently communicate with your customers about their loyalty status and the awards they have earned. Here’s an example of an email sent to a loyal Sephora shopper who reached VIB—or Very Important Beauty—status:

Email from Sephora to a loyal customer of VIB status

Work your customers’ price sensitivity into your strategy to build sustainable customer loyalty

Reducing your dependency on sales and discounts will ultimately help your bottom line. But you don’t need to ditch sales and discounts altogether. The key is to work them into your customer loyalty-building strategy. Focus on using your owned channels to develop customer loyalty so that future priced-based incentives won’t degrade the integrity of your brand. 

After establishing a strong customer experience through your owned and operated channels, your now-loyal patrons will be delighted with any future sales or discounts. 

Check out top examples of successful customer loyalty programs to rev up your customer experience. 

Sources:

1 “Returning Customers Spend 67% More Than New Customers – Keep Your Customers Coming Back with a Recurring Revenue Sales Model” via business.com

2 “Four Strategies to Maximize Customer Value in 2020 and Beyond” via grammarly business

3 “New Epsilon research indicates 80% of consumers are more likely to make a purchase when brands offer personalized experiences” via Epsilon

4 “2017 State of Global Customer Service Report” via Microsoft

5 “The Future of Rewards” via Virtual Incentives

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