The loyalist: Leverage relationships
with existing customers to increase
return on investment
Best practices for enhancing customer loyalty
An Experian white paper
She is easy to pleasE.
Call her by another name and
she’ll quickly turn to another.
The loyalist
Why customer loyalty matters
Small businesses have long understood that much of their revenue comes from
existing customers and that new customers are very expensive to secure. So while
you are looking to find new sales leads, up-selling and cross-selling to your current
customers are also critical. To maximize long-term sales, businesses today also
need to leverage relationships with existing customers and focus on programs that
deepen customer loyalty.
Surprisingly, in a recent Experian study, only half of the businesses stated that they
have a customer loyalty program. However, 63 percent track the lifetime value of
each customer, and 72 percent see the value of those customers increasing over
time. Tap into this powerful revenue stream by creating effective customer loyalty
campaigns for your business.
Page 4 | The loyalist: Leverage relationships with existing customers to increase return on investment
The loyalist
Consumer loyalty trends
Most consumers today are not as brand-loyal as they were 10 years ago
Recent changes in consumer buying attitudes have forced businesses to rethink
marketing strategies over the past couple of years. Consumer brand loyalty has
diminished based on economic circumstances and the increasingly competitive
environment today. Considering that today’s consumers are becoming more likely
to stray from some of their favorite brands to get a better bargain, the relationship
you build with your customers is even more key to your long-term success.
Service quality matters, but price is becoming increasingly important
Over time, consumers regard price as increasingly important, while the
importance of other considerations (such as good service) is on the decline.
Specifically, the percent of U.S. adults who usually shop at their favorite stores
because they know what kind of service they will receive has decreased by
7 percent since January 2008, while the percentage of U.S. adults who are drawn
by coupons to stores where they do not usually shop has increased by 18 percent
since January 2008.
Percentage of U.S. adults attracted by service versus coupons
50%
45%
-7% relative decrease
40%
35%
+18% relative increase
30%
25%
08/15/14
06/26/14
05/07/14
03/18/14
01/27/14
12/08/13
10/19/13
08/30/13
07/11/13
05/22/13
04/02/13
02/11/13
12/23/12
11/03/12
09/14/12
07/26/12
06/06/12
04/17/12
02/27/12
01/08/12
I usually only shop at my favorite stores because I know what kind of service I will receive.
I shop at stores that offer coupons.
The findings indicate that consumers are more likely to stray from some of their
favorite brands, even the ones they are most loyal to, in order to get a better
bargain. Don’t ignore the service you provide, but make sure that you’re rewarding
your customers with coupons and offers or loyalty programs.
An Experian white paper | Page 5
The loyalist
Brand-loyal consumers are older and more educated than nonloyals
There are certain characteristics that brand-loyal consumers tend to exhibit more
than those who are not brand-loyal. The Brand Loyal Scale from Experian takes a
closer look at these characteristics, defining two distinct segments:
• Brand Loyals — resist buying unknown brands to save money and look for
brand names on packages
• Brand Nonloyals — regularly buy unknown brands to save money and are
less likely to look for brand names on packages
Brand loyalty increases steadily with age
Young consumers are the least likely to be brand-loyal, and older consumers are
the most likely.
Age
Brand Loyals
Nonloyals
18–24
8%
11%
25–34
13%
19%
35–44
15%
22%
45–54
19%
19%
55+
45%
29%
Highly educated adults are the most likely to be Brand Loyals
Adults who attended graduate school are 14 percent more likely to be Brand
Loyals than the average adult.
Education
Brand Loyals
Nonloyals
High school or less
44%
43%
Attended college (<1–3 years)
28%
30%
College — four years (graduated)
15%
15%
Graduate school (any)
13%
12%
Page 6 | The loyalist: Leverage relationships with existing customers to increase return on investment
She is particular. She is faithful. She doesn’t like change.
stop giving her what she wants,
and she will quickly turn to another.
The loyalist
Shopper segmentation
Utilizing a large set of attitudinal and behavioral variables, Experian® has identified
six distinct segments of shoppers who exhibit the following characteristics:
• Virtual Shoppers — This segment comprises 26 percent of adults. The
majority of shoppers in this consumer segment go for the bargains and use
the Internet to help find discounts. Interestingly, many of these shoppers fall
within the Mosaic® America’s Wealthiest segment.
• Status Strivers — Comprising 20 percent of adults, Status Strivers think
that shopping is fun and recreational. They like to browse as much as buy, and
they’re willing to spend the money and time necessary to keep up with trends.
In contrast to Virtual Shoppers, many of these consumers fall within the Mosaic
lower-income groups, revealing the aspirational nature of status striving.
• Upscale Clicks — Comprising 17 percent of shoppers in America, Upscale
Clicks are knowledgeable consumers who buy either in-store or online, always
carefully research purchases online first, and shop around and compare prices
before buying. Several suburban and urban Mosaic® USA types make a strong
showing in this group.
• Just the Essentials — Fourteen percent of Americans fall into this group,
which primarily purchases necessities. They know what they want and are not
impulsive shoppers.
• Original Traditionalists — Thirteen percent of adults are Original
Traditionalists who are loyal to their brands, stores, services and country.
They are knowledgeable and the most environmentally responsible group,
and they incorporate Green practices regularly.
• Mall Maniacs — Ten percent of shoppers in America are not just consumers,
but also “try-sumers.” They like to try new products, stores and styles and
connect and interact with preferred brands. They enjoy shopping.
Page 8 | The loyalist: Leverage relationships with existing customers to increase return on investment
The loyalist
Shopper segmentation
Mall
Maniacs
10%
Original
Traditionalists
13%
Just the
Essentials
14%
Upscale
Clicks
17%
Virtual
Shoppers
26%
Status
Strivers
20%
When examining brand loyalty by the shopping segments described above, we
see that Original Traditionalists, who stick with tried-and-true brands, and Mall
Maniacs, whose purchases are driven by image, quality and peer approval, are
the most brand-loyal. Upscale Clicks, who are always searching for a deal, are
the least brand-loyal.
Understand who your customers are
Appending data to your customer file can help you to create segments
of customers based on loyalty behavior.
1. Appending data and segmenting your customer file
First, create a list of your customers with valuable relationships and purchase
data. Data such as the number and nature of customer service inquiries,
frequency and recency of transactions, customer usage and customer revenue
are powerful drivers of customer retention and loyalty.
Next, append data from other outside sources to your customer file. Data such
as age, household income, education, presence of children and homeownership
can be valuable in creating a profile of your best customers. Once you have the
data appended, you then can analyze the data to look for relationships between
your transactional data, third-party data characteristics and retention/loyalty.
This step probes deeply into your data to unlock and illuminate significant
information within your customer database that you may not have fully
understood before now.
An Experian white paper | Page 9
The loyalist
2. Customer loyalty segmentation
The data review in Step 1 typically reveals not just an overall customer profile,
but also multiple distinct segments within your customer database. These
subsegments enable you to identify different triggers of churn or attrition
so that you can develop effective strategies to combat these factors.
Segmenting your customers by the causes of churn (i.e., service need,
competition, cost) and then understanding the underlying characteristics
of customers who fall into each category lay the groundwork for successful
solutions. For example, an examination of the data may indicate that young
professionals with high incomes may be more apt to churn for competitive
reasons, while older consumers with limited usage may drop your service
for lack of need.
3. Strategy planning
The key to successful customer loyalty programs
is to understand the drivers of loyalty or churn.
Once you understand the drivers, you also should
determine whether the cost of trying to save a
customer is greater than the expected benefits.
Targeted loyalty marketing campaigns can be
created to reduce churn and increase customer
loyalty over time.
Data enrichment quick tips
Enrich your customer file with demographic
and behavioral data to build a detailed profile
of loyalty customers — By combining data
from an outside data source, you can gain a more
complete and accurate view of your customers.
Categorize customers by value
and attrition risk
Strong loyalty
High value
Strong loyalty
Low value
Weak loyalty
High value
Weak loyalty
Low value
Use transactional data to expand your customer profiles and compare
loyalty customers — Investigate how the profiles differ based on categories
of products purchased, overall spend and frequency of purchase.
Go beyond basic demographics by appending predefined segments —
Predefined segmentation systems like Mosaic offer valuable insight without
the need for sophisticated modeling and data analysis. Mosaic, for example,
classifies all U.S. households and neighborhoods into one of 60 unique
segments, providing highly comprehensive and robust insight for better
understanding the American consumer.
Page 10 | The loyalist: Leverage relationships with existing customers to increase return on investment
He is devoted. He is sharp. He prefers routine.
keep your end of the bargain,
and he’ll never stray.
The loyalist
Create targeted and relevant communications — Avoid treating all loyalty
customers the same by developing communications and offers for these
customers that are versioned by segment membership. Communications that
resonate with young married couples with preschool children aren’t necessarily
relevant for affluent empty nesters, for example.
Email
Email marketing can play an important role in optimizing customer loyalty
By leveraging email to communicate with loyalty members, your business can
benefit from extensive opportunities for enhanced customer relations and
generate increased revenue.
Loyalty-focused campaigns tend to perform better than standard promotional
mailings in terms of customer response and revenue.
Emails targeted to current loyalty program members outperform bulk
promotion mailings
Compared with bulk campaigns, emails targeted to current loyalty program
members have 40 percent higher open rates; 22 percent higher click rates; and
transaction rates and revenue per email that are 29 percent and 11 percent
higher, correspondingly.
Loyalty mailings generate higher transaction
rates and revenue per email
0.10%
$0.19
0.09%
0.08%
0.07%
Transaction rate
$0.18
$0.18
0.06%
$0.17
$0.17
0.04%
$0.16
0.02%
0.00%
Loyalty
Nonloyalty
promotional mailings
Revenue per email
Page 12 | The loyalist: Leverage relationships with existing customers to increase return on investment
$0.15
The loyalist
Source: Experian CheetahMail
Loyalty mailings boost open rates by 40 percent
and click rates by 22 percent
30%
27.4%
25%
19.6%
20%
15%
10%
4.0%
5%
0%
Total opens
Loyalty
3.2%
Total clicks
Nonloyalty promotion mailings
Source: Experian CheetahMail
Loyalty programs engage prospects
Mailings targeting prospects with an invitation to join a loyalty program
outperformed promotional mailings by 28 percent.
An Experian white paper | Page 13
The loyalist
Sending loyalty mailings to prospects also boosts
transaction rates and revenue per email
0.10%
$0.21
0.08%
Transaction rate
$0.22
0.09%
0.07%
0.06%
$0.17
$0.20
$0.18
0.04%
$0.16
0.02%
$0.14
0.00%
Prospects
Nonloyalty
promotional mailings
$0.12
Revenue per email
Source: Experian CheetahMail
Many types of loyalty programs perform well
Loyalty programs provide a unique opportunity to have an ongoing dialogue
with your most highly engaged customers. Today’s savvy marketers leverage the
low cost and effectiveness of email by deploying a variety of loyalty-based email
communications. Listed below are nine mailing types that collectively provide a
platform for achieving high loyalty program results.
Page 14 | The loyalist: Leverage relationships with existing customers to increase return on investment
The loyalist
Many types of loyalty mailings have high open and click rates
140%
126.4%
Total opens
120%
Total clicks
100%
80%
60%
40%
58.5%
56.1%
53.6%
50.0%
51.1%
49.7%
30.7%
26.2%
19.0%
9.7%
W
el
co
m
e
12.4%
7.9%
Su
rv
ey
6.5%
Re
ar wa
riv rd
al
St
at
em
en
ts
St
at
us
-le
ve
l
pr
om Lo
ot ya
io lty
ns
0%
11.2%
11.4%
N
ew
s
Re
de
re mp
m t
in ion
de
r
3.5%
9.0%
Re
ne
w
al
20%
Loyalty mailings provide opportunities for outstanding
transaction rates and revenue per email
1.6%
$8.00
1.4%
1.4%
Transaction rate
$7.00
Revenue per email
1.2%
$6.00
$6.81
1.0%
0.8%
0.8%
$4.00
0.6%
0.5%
0.4%
0.4%
$1.26
$1.60
$1.82
$2.00
co
m
e
$1.00
$0.00
W
el
ey
Su
rv
Re
ar wa
riv rd
al
St
at
em
en
ts
St
at
us
-le
ve
l
$0.80
Re
ne
w
al
ew
s
Re
de
re mp
m ti
in on
de
r
$3.00
$1.62
0.1%
$0.11
N
0.1%
$0.17
pr
om Lo
ot yal
io ty
ns
0.0%
$3.86
0.7%
0.6%
0.2%
$5.00
0.9%
Source: Experian CheetahMail
An Experian white paper | Page 15
The loyalist
Promotional loyalty mailings
Clean, simple designs with clear, short messages work well for
promotional mailings.
Newsletters
Newsletters work as a means of providing offers, membership information
and highlights of upcoming events.
Statements
Statements can be the heart of a good loyalty program, with double the
open rates and 10 times the revenue per email of loyalty promotional mailings.
It is a best practice to provide clearly defined account information, reward or
point value or certificates earned, as well as new offers to continue to engage
your members.
Surveys
Loyalty members can be great resources for obtaining valuable customer
feedback on products and services, as well as opinions on new products
or proposed events. Surveys were second only to reward arrival mailings in
performance, with double the open rate, three times the click rate and nine
times the transaction rate of promotional loyalty mailings.
Following proven best practices can significantly deepen customer
engagement through loyalty-based email marketing
Engage loyalty members throughout their life cycles
A good loyalty program is more than a simple sign-up and special offer. From
the initial welcome campaign on, there are a number of triggers related to loyalty
activity when you can engage with your customers. The loyalty messaging also
can be incorporated into all other email communications, including promotional
emails, newsletters, monthly statements and surveys to enhance member
engagement with your business.
Clearly present account information
Enhance your customers’ experience by prominently including account details
and benefits on statements, particularly the loyalty number. Account links can
also be placed on other types of loyalty mailings to reinforce the benefits of
your program.
Page 16 | The loyalist: Leverage relationships with existing customers to increase return on investment
The loyalist
Include offers
Account management emails do not need to be limited to text. Including HTML
offers in mailing types such as statements, renewals and status changes can
provide effective ways to increase brand awareness and generate transactions.
Clearly communicate program benefits
To remain active in your loyalty program, customers need to understand and be
able to take advantage of the program’s benefits. Make reward benefits clear in
all of your loyalty communications, and include reminders in your main email
communications, so that your customers perceive the special attention and
reward values.
Conclusion
Creating a successful customer loyalty program doesn’t have to be a daunting
task. To overcome today’s obstacles and build a program that is worthwhile to your
customers as well as your business, remember to look at your customer data and
key trends to determine your marketing strategies. Arming yourself with the right
data and expertise will deepen customer engagement and increase return on
investment now and into the future.
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