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The chances of a company being able to sell again to a customer are between 60% and 70%. On the other hand, the chances of a new customer doing so are reduced to 5-20%. This is indicated by data cited by Forbes, which clearly points to the undisputed importance of customer loyalty.
In a market where it is increasingly necessary to stand out from the competition, loyalty strategies have become the cornerstone of business growth and development. And in all of this, mobile apps are a powerful tool to improve the customer experience and, in turn, increase customer loyalty.
Therefore, in this article we review what is user loyalty and its objectives and analyze in depth how to make an effective customer loyalty program using an app.
Customer loyalty refers to the processes and strategies that a company adopts to create strong and lasting relationships with its customers, getting them to remain as customers or to return to make purchases again and again.
Despite being an essential process for improving company revenues, this strategy is still not 100% implemented. According to CustomerGauger, only 66% of companies calculate their customer retention rate, despite the great difference that these strategies demonstrate.
The truth is that many companies leave loyalty strategies aside, thinking that the important thing is to attract new customers. And of course, it is important. However, as we mentioned at the beginning of this blog, the costs of attracting new customers are constantly rising, so that focusing solely on generating new customers often results in very high costs and lower revenues.
In addition, while attracting new customers is becoming more and more complicated due to the complexity of the market, customer loyalty is usually easier: users already know your product or service.
Finally, in case you are still unclear about the importance of user loyalty, it is estimated that, on average, 65% of a company's revenue comes from approximately 8% of its most loyal consumers and regular customers (Thinkimpact).
Learn below the 5 main types of loyalty strategies, discover which one best suits your ecommerce or app and how you can implement them to maximize their effectiveness.
In the points program, customers accumulate points for each purchase, redeemable for rewards such as discounts, free products, or additional services. This type of program encourages repeat purchases and reinforces commitment to the brand.
In tiered programs, customers "level up" as they purchase and interact more with the brand. Each level offers additional benefits such as exclusive discounts, early access to products, or exclusive services. It fosters loyalty and long-term engagement.
Paid loyalty programs refer to recurring payment proposals for exclusive services or benefits. They are the brands' exclusive membership plans or clubs. These programs generate additional revenue and ensure that customers feel engaged because of their initial investment.
Cashback is a program in which customers receive a percentage of the money spent as credit that they can use on future purchases. It offers immediate benefits and motivates customers to return.
Coalition programs are those in which several brands join together to offer joint rewards. Customers can accumulate and redeem points at different stores that are part of the coalition, expanding choice and increasing convenience. It enhances your brand's exposure by partnering with others and provides more options for customers, increasing customer loyalty.
While it is true that one of the main objectives of customer loyalty is to increase sales and revenue for companies, these strategies also end up having a positive impact on other relevant aspects for companies.
1. Increase retention rate. Reduce cart abandonment and encourage frequent purchases.
2. Increase Customer Lifetime Value (CLV): Extend the customer-brand relationship and increase average spend with strategies such as cross-selling.
Generate brand ambassadors. Loyal customers who recommend the brand and enhance its reputation in social networks.
4. Reduce marketing costs. It is less expensive to keep an existing customer than to attract a new one.
5. Improve the customer experience (CX) Customer loyalty programs significantly help to improve customer satisfaction and experience, in turn improving their trust and affinity towards the brand.
6. Generate recurring and stable revenues, especially in subscription business models.
Apps not only eliminate reliance on physical cards or other traditional systems, but also transform the customer experience through advanced digital tools that boost retention. In addition, an app gives users quick and easy access to their points, rewards and promotions from anywhere. This level of convenience enhances program perception and encourages active participation.
Likewise, the importance of push notifications continues to grow. This powerful tool helps keep customers engaged through reminders of point accumulation or expiration, announcements of exclusive promotions for app users or promotion of participation with limited, real-time offers.
Last but not least, apps make it possible to offer an increasingly personalized experience to customers. Thanks to the collection of data on user behavior, loyalty strategies are becoming increasingly effective and surgical.
Measuring customer recurrence is essential to evaluate the effectiveness of your ecommerce and app loyalty strategies. Among the most effective methodologies are cohort analysis and the Recency, Frequency, Monetary Value (RFM) model. Both methodologies are complementary and offer deep insights to measure customer loyalty rates in ecommerce and apps. Implementing them will allow you not only to evaluate the success of your loyalty strategies, but also to adjust them to maximize their impact.
Popularized by experts such as François Derbaix, cohort analysis is an essential tool for understanding how your customers interact over time.
A cohort is a group of users who share a common characteristic, such as the date of their first purchase or app download. To measure the loyalty rate with an e-commerce or app cohort analysis, you typically segment users according to the date of their first purchase. Thus, each segment can be analyzed, how many users return to purchase in the following month, or in the second month, or quarterly.
With this approach, you can:
To do the cohort analysis, we recommend that you use data measurement tools in your ecommerce or app such as Google Analytics 4.
The RFM method evaluates three key metrics to segment your customers and understand their value to your business:
By analyzing the purchase history of each user, each customer is assigned a score from 1 to 5 in each of the parameters indicated above. In this way, the customers with the highest value and profitability are those with a score of 5-5-5 and those with the lowest value, 1-1-1.
Classifying your customers according to these criteria will help to identify the most valuable customers but also to detect customers who might be at risk of dropping out and to customize retention strategies for each segment.
Practical example: Customers with high recency but low frequency could benefit from incentives such as additional reward points or exclusive discounts to encourage recurring purchases.
Customer loyalty trends are being transformed by innovative technologies such as artificial intelligence (AI), marketing automation and app-only programs. These tools not only improve the customer experience, but also optimize retention strategies.
AI allows loyalty strategies to be personalized by analyzing customer behavioral data. Ecommerce and apps use artificial intelligence to send product recommendations, reward notifications and personalized offers, improving retention by offering a unique and tailored experience to each user.
Marketing automation facilitates the management of loyalty programs by automating communication with customers. Automation platforms send personalized messages based on specific behaviors, such as number of purchases or points accumulated, improving the effectiveness and relevance of strategies.
Loyalty programs in apps allow companies to offer exclusive benefits such as discounts, personalized promotions and loyalty rewards. Real-time data collection within the app allows for the design of more engaging experiences and increased loyalty, especially when combined with gamification and reward elements.
Ultimately, customer loyalty is a key factor in the long-term success of any business, and mobile apps are a powerful tool for achieving it. From offering points programs to personalizing customer communication, apps enable companies to not only improve the customer experience, but also maximize their profitability.
If you have not yet implemented a loyalty program through an app, now is the perfect time to start measuring your results. Not only will you improve customer satisfaction, but you will also stay one step ahead of the competition. And if you don't have your app yet, ask for your 100% functional demo now .
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