Promotions vs Loyalty Programmes
Promoting your business through traditional, one-size-fits-all techniques like flash sales and discounts that shave your margins thin feels like a no-brainer. After all, most businesses will be able to look back on a few years’ worth of promotions and see a healthy spike in business accompanying each one.
The mechanism behind that spike isn’t hard to understand. In fact, it’s one of the simplest premises in the business world: competitive prices that feel almost too good to be true will get bodies through the door, and the cash register ringing like a pinball machine.
This is why promotions have been a key part of commerce for a very long time. They’re simple, easy, a great way to shift stock that’s wearing a hole in the carpet, and they tend to offer up a pretty compelling upshot: more business, even if margins are slim.
But how do they really stack up against a B2B loyalty programme designed to cultivate customer loyalty over the long term?
The winner: promotions if you want instant, on-the-spot results, loyalty programmes if you want to generate a strong ROI that withstands the test of time and competition.
A sale or promotion can be done on the spot. It’s ideal for shifting time-sensitive stock – say, Christmas decorations that go on sale for a fraction of the price in January or items in a bakery at the tail-end of the day – and it doesn’t take much work or effort to pull it off. They can be done at the drop of a hat, and the results are instantaneous – high footfall and plenty of transactions.
Essentially, they’re a means to an end.
It’s undeniable that a good customer loyalty programme – one that’s actually worth its salt – takes longer to get up and running. With the right expertise on hand, it doesn’t need a mile-long timeline to complete, but it takes longer to implement than a sale poster in the window.
But, once implemented, a customer loyalty programme operates in tandem with your customers. It’s infinitely scalable and relatively quick to start delivering tangible results, and you don’t need to overwork the marketing channels to maintain interest. It gathers valuable customer data, encourages ongoing engagement and return business, and boosts your brand’s reputation as a truly customer-centric company. And that goes on and on (and on) as your business grows and takes on more and more of the very best kind of customer, or as your channel grows.
We know better than anyone how effective the right channel incentives can be at reinvigorating every partner and boosting business as a result.
Customer lifetime value
The winner: customer loyalty programmes, without a doubt.
This one is pretty much a no-brainer since customer loyalty programmes hit upon all the key metrics for calculating customer value. When you’re looking at customer lifetime value, for instance, then a long-term committed customer will help to raise the average customer lifespan way longer than a customer who only lasts as long as whatever sale you’re running.
When you’re looking at total customer value, there’s a good chance that a loyal customer who’s willing to pay a premium for your brand is going to raise your average purchase value a lot more than a customer who’s only here when it’s 50% off.
Whatever way you frame it, customers who are truly ‘in it’ with you are worth way, way more.
We tend to talk about the most valuable kind of customer as the evangelist. Unlike mercenary customers who bounce between one promotion and the next, not really caring which brand they’re shopping from so long as they offer the most competitive price, evangelists are more resolute in who they align with. They are the most valuable types of customers because they don’t depend on razor thin margins to stay interested, and they’re exactly what a good customer loyalty programme targets.
The winner: again, this is a no-brainer. Customer loyalty programmes enable you to preserve your margins without losing business.
The odd sale or promotion here or there is no big deal. Pretty much any business can afford to factor that into their projections without breaking a sweat, and they can be useful for boosting visibility. But the trouble comes when your customer acquisition strategy depends on promotions – when, each and every time there’s a lull in business, your best course of action is to run another sale.
This is a really detrimental cycle to get into, and it can be hard to break out of it once and for all. Think of the big furniture companies that seem to be running sales more often than they’re not. Most customers wouldn’t consider lending them their business unless they’re running a sale. While it may work for them, it’s not a cookie-cutter strategy for other businesses in other industries.
Less than 50% of customers avoid brands based on a lack of offers, which means more than half are looking for something more meaningful than a sale or promotion.
Loyalty programmes are the perfect antidote. Investing into a scalable programme means you can leave your margins alone while growing your customer base in a way that proves sustainable and much more cost-effective.