Times are tough for Danish e-commerce businesses. This is according to figures from the Danish Chamber of Commerce. That's why it's important that your organisation focuses on customer loyalty - and therefore customer retention. Because yes, of course it's important to bring new customers into your store, but if you don't focus on your current and previous customers, you're missing out on a huge revenue opportunity.
In this article you can read about why it's important to focus on customer loyalty right now, as well as why and how SMS is the perfect channel to create customer loyalty among your existing customers and win back former customers.
Enjoy reading.
What is customer loyalty?
Customer loyalty can be described as your customers choosing your product or service over your competitors', even if the competitors' offering may be objectively better. A loyal customer is a customer who shops with you again and again rather than accepting competing offers.
Another typical trait of a loyal customer is that they buy more and more from your business over time and are happy to recommend your products or services to their friends and family. Your loyal customers therefore also act as ambassadors for your business.
Why is it important to work with customer loyalty?
It can be put very simply: It's cheaper to sell to existing customers rather than new customers.
An old rule of thumb is that it costs 5x more to acquire a new customer than to retain an existing one. Of course, this is a rough estimate and will always depend on what your average CLV(Customer Lifetime Value)is and what it usually costs you to get a new customer in the store.
That said, there is something to it. Overall, it is more costly to acquire new customers than to retain existing ones. In addition, the average purchase amount is higher with an existing customer rather than a new one.
Statistics show that returning customers typically shop more and for a higher amount than new customers do(HubSpot) and according to Semrush, there is a 60-70% chance of selling your product to an existing customer, while this figure is only 5-20% for new customers.
This is because existing customers are already familiar with your company and your product or service, so you don't need to convince them of the value of a purchase. They already know it, but the new customer doesn't necessarily. They may still be testing the market.
Promotions, discounts and sales can be excellent motivators when it comes to attracting new customers - or even getting previous customers to shop with you again. However, great offers don't necessarily create loyal customers.
The problem is that your competitors can do exactly the same thing - and if your competitor's offer is 5% better (cheaper) than yours, why should the customer choose your company over theirs?
This is exactly the question you need to be able to answer if you want to build a group of loyal customers who will always choose your business over your competitor's.
Customer loyalty is largely emotion-based
An important point is that customer loyalty is very much emotion-based. Loyalty is all about the customer having continuous positive experiences with your brand.
Salesforce's The state of the Connected Consumer study found that 71% of consumers worldwide switched brands at least once from 2020 to 2021. According to the latest PwC Customer Loyalty Survey 2022, the number one reason consumers have left a brand is that they had a bad experience with the product or service. The second most common reason is poor customer service.
Statistics like this only emphasise how important it is for customers to have positive experiences across their entire interface with your business. It's the repeated positive experiences with everything from products to customer service that ultimately create loyal customers.
What makes a customer a loyal customer?
A satisfied customer has had a good experience with your company and your product or service. A satisfied customer might even identify with your company brand. What separates a satisfied customer from a loyal customer, however, is that the loyal customer will return and shop with you again and again - and they are also happy to recommend your company to friends and acquaintances.
Whether a customer is and remains loyal to your organisation depends largely on whether you can meet their needs and expectations. This applies to expectations of your brand and company values as well as your product or service itself and, of course, the entire buying experience.
If the customer finds that the communication, product and experience of shopping with your company exceeds their initial expectations, you are well on your way to having a loyal customer. However, if you don't live up to expectations, there's a risk that the customer won't return and buy from you again. Not even if you have a good offer.
Therefore, it's obviously important that you work on your customer loyalty as it can have a big impact on your company's bottom line. Just as a satisfied and loyal customer is happy to recommend your business to others, a dissatisfied customer can ensure that friends and family don't shop with you. Naturally, this affects your ability to attract new customers and boost your sales.
So the conclusion is that focusing on customer loyalty doesn't just increase sales with existing and loyal customers. It also helps to give your business an overall positive reputation and attract new potential customers to your business.
How can SMS increase the loyalty of your customers?
Loyal customers are not something you get overnight. It's a difficult discipline to work with, because there is no easy path to customer loyalty. Instead, it's something that your business needs to earn over time.
If you want to actively work towards gaining a larger loyal customer base, SMS messaging is your best friend. SMS is a direct channel that lets you connect with your customers in the most personalised way.
Are you thinking that your customers would never give you their phone number? So allow us to correct that misunderstanding.
A survey of 2000 US consumers from Text Talk revealed that 91% of respondents were interested in signing up for SMS marketing in 2021.
If you use the channel correctly, you can ensure that your customers don't even consider looking at the competitor's catalogue - they only want to shop with you.
There are several different ways you can work to increase loyalty among your customers. Some of the areas you can work with are:
- The great customer service.
- A personalised relationship and communication with customers.
- An overall positive reputation.
- Rewards via personalised offers and events.
- Open up the opportunity for dialogue and feedback.
- An attractive loyalty programme.
This is all something you can work into your SMS strategy. Below we elaborate on how you can work with each element.
The great customer service
One of the most important ways to increase the chance of gaining loyal customers is by offering great customer service. In the past, many companies had a personal relationship with their customers, but this is rarely the case today. Many online businesses have no direct or personal contact with their customers - unless the customer needs customer service.
Customer service is one of the areas of your business that has the most direct contact with the customer. This is also where the customer can form a positive or negative impression of your company, depending on how the contact goes.
Good customer service is all about listening to and understanding your customer's problem - and then solving it to the best of your ability. It's also about doing what you promise your customers. Don't make promises you can't keep. This can only lead to disappointment.
In addition, you must treat all customers with understanding and respect, whether it's a positive or negative enquiry. The best customer service representatives are able to turn a negative enquiry into a satisfied customer. Not necessarily because the problem is 100% solvable, but because they listen and try.
Finally, it's also important to make it easy for the customer to get in touch with your company. Make it clear where they can contact you and how long they can expect a response time. For example, if your customers can write to you via SMS, it doesn't matter if you forget to reply to their messages.
Set up an autoresponder with an expected timeframe so customers know they'll hear back from you next morning, on Monday or in an hour - depending on your resources.
Using automated chatbots has also become increasingly popular, and it can make a lot of sense. Be aware, however, that according to PwC, human interaction is one of the areas that has a major impact on customer loyalty to brands.
A personalised relationship and communication with customers
If you want loyal customers, you need to build a relationship with them. In a physical store, a large part of this encounter is between customers and store employees. Of course, this meeting is different if you run an online business.
Common to both types of businesses (physical and online) is that the way you communicate with the customer from start to finish helps to create the personal relationship and trust between your business and the customer.
First and foremost, it's important to know your company's tone of voice - how do you communicate with your customers and why? Secondly, it's important that the way you communicate is the same on all platforms. Your customers should have the same (positive) impression of your business whether they see you in a store, on a banner, on social media or anywhere else.
The good reputation
When consumers are out researching different companies, they no longer only look at product quality and price. A large part of consumer product choice today is about values.
People are increasingly shopping for values and emotions. Exactly the same thing that customer loyalty is largely based on.
That's why everything from supply chains to employee satisfaction and gender quotas are scrutinised when putting products in the shopping basket today. That's why it's also important that you make sure things work internally in your organisation. If you don't get these elements right, you risk being penalised by consumers. Even if your product has the highest quality or the cheapest price.
Personalised VIP offers and events
Most people like to feel like they're special. This also applies to your customers. Therefore, one way to convert a happy and satisfied customer into a loyal customer is to send them special VIP offers or invite them to events only for the most loyal customers of the company.
A loyal customer doesn't automatically become loyal and doesn't necessarily stay loyal forever. Therefore, you need to show them that you value their loyalty. When the customer gets an offer that isn't available to everyone, they feel seen by the company. Especially if you also manage to personalise the unique offer. For that, you need data.
Is there a specific product that the customer always buys? Then offer them a unique discount code on this product. If they have indicated interest in a specific category, your offer should of course belong to that category. The more relevant your offer is to the individual customer, the more they will feel understood and the more they will value your offer.
Dialogue and feedback
When you get a new customer in store, it's a good idea to ask them a few questions either via a link to a short questionnaire or by asking them to rate their experience. You can also allow customers to ask you questions directly via SMS or ask them to elaborate on their preferences for communication and offers etc.
When you open up for dialogue and feedback, you get to know your customer much better. This knowledge is important to ensure that your customers receive more personalised and relevant messages and offers from you in the future. It also helps build a relationship between you and your customer from the start, and this relationship should be the foundation for future loyalty and trust.
You can benefit from working with SMS automation - for example, a welcome flow - where you welcome your customers and ask them to answer the questionnaire you have prepared for new customers.
Loyalty and referral programmes
According to Salesforce, by 2022, 56% of global consumers believed they are more likely to shop with companies that have some kind of loyalty programme.
This in itself is positive for those who either have or are about to start working with a loyalty programme in their company. If you have - or dream of having - a loyalty programme, there are a few pitfalls to be aware of if you want to succeed in creating a positive loyalty programme that results in loyal customers.
The average consumer is a member of 4.3 loyalty programmes, but 2/3rds of consumers only use their loyalty programmes once a quarter or less. The biggest reasons for this are that it's simply too difficult to understand what benefits the programme offers and how to redeem them.
An SMS loyalty programme is a great option for several reasons. Firstly, because it's such a direct channel with extremely high open rates. Also because everyone understands how to receive, read and send an SMS message.
If you want to try your hand at referral marketing, e.g. in the form of a referral programme like the example above, it is essential to keep track of which potential customers come in from referrals - and of course which customers should receive rewards for their referral.
To do this, the best solution in many cases is to find a referral marketing software that can keep this overview for you. Fortunately, there are a number of them, for example:
Most referral marketing software can also be integrated with your SMS marketing software and CRM system for an even better overview.
Several of the programmes also have free trial periods so you can test the system before investing. Some of them even offer a free basic user, which in many cases will be enough to start with.
If you don't want to invest in referral marketing software, it's also possible to take a more manual approach. However, we only recommend this if your campaign is limited to a small handful of loyal customers.
In that case, you could create a unique link for each of your most loyal users that they can then share with their friends. Every time you receive a new user/customer via one of these unique links, you can manually make sure that the customer who made the referral gets their reward.
Another option is to create a landing page that your loyal customers can share with their friends. On this landing page, new customers should write who they were referred from. You can use this information to manually send a gift in the loyal customer's direction.
However, the two examples above require a lot more manual work from you than referral software will. Therefore, depending on the scope of your referral campaign, it may be worth looking into referral software.
Don't forget your former (lost) customers - how to get them back with SMS
To create a healthy business, we've now established that it's important to focus on both attracting new customers, but also maintaining your existing customers and (hopefully) turning them into loyal customers.
However, there is one more segment that is also worth mentioning in this context. These are the former customers who no longer shop with you. The group of former, now lost customers is a segment that is also worth focusing your energy on. That's why we will briefly go through how to incorporate this segment into your SMS strategy.
How to identify inactive customers
Inactive customers are, as the word suggests, former customers who no longer interact with your business. This means, for example, that they have stopped reading your emails, they no longer visit your website and they haven't shopped in a very long time.
Let's say your customers buy new products from you every three months on average. At the same time, you send 2-3 SMS messages per month. If a previous customer hasn't made a purchase in a year and hasn't interacted with your last 8 messages or browsed your website in the last month, you can assume that this customer is lost - for now.
Win back your lost customers with a well-organised SMS campaign
Once you've identified your inactive customers, it's time to try and win them back to your business. SMS is an ideal platform for this purpose, partly because SMS is a personalised, direct and reliable channel.
There are several ways you can try to entice your former customers back into the fold. A classic approach is to offer them a discount code. It works sometimes, but it's also a bit generic. At least if the code is not unique to the individual customer.
You can also create an exciting SMS competition and invite your inactive users to participate - remember that a great prize is usually the best incentive to participate. You can also take it a step further and invite previously inactive customers to a special VIP event with goodie bags, special offers or perhaps an exciting personality, depending on what is relevant to your company's product.
Once you get an inactive customer to respond or act again, the chances of turning them into a loyal customer in the long run are also much higher. You've reminded them why it's worth doing business with your company.
Summary: How to win your customers' loyalty
As the old saying goes, it's never a good idea to put all your eggs in one basket. That's why it's also important to revisit our point about dividing your resources and focus between finding new customers, retaining existing ones and reactivating former (inactive) customers.
We didn't say it's easy to create a solid, loyal customer base. But it's not impossible either. Hopefully, you now have a good idea of what you can do in your business to ensure your customers' loyalty going forward.
Enjoy your work.
