Maximise Customer Lifetime Value with Loyalty Programmes

To gain customers is one hurdle, to keep them is another, and to ensure your customers can contribute to business growth is its own thing entirely. Whilst keeping a customer and increasing the value each customer holds to the business are often closely related and interlinked, today we’re going to focus specifically on Customer Lifetime Value (CLV). This is a metric which can help you understand how much each customer contributes to your business, as well as discuss and explore ways in which we can enhance our CLV with an appropriately chosen loyalty programme. 

To do this we are going to have to look at how we retain and engage our customers, and loyalty programmes are the number one method of achieving both. By utilising a loyalty scheme we can effectively ensure that repeat purchases are encouraged and rewarded, leading to your customers staying longer and spending more.

Loyal customers also have a habit of sharing your brand with others and raising awareness of your business, because they want to share the value they have discovered with you. And so enhancing CLV will also help with the impact customers have on your brand image.

Enough with the introduction, let’s dive into this topic and explore how loyalty programmes contribute to an increase in CLV and why those loyalty programmes are essential for long-term success. 

Understanding Customer Lifetime Value (CLV)

Customer Lifetime Value (CLV) is a metric used as a way of measuring the value a customer has to you and takes into account factors such as:

• How often a customer purchases
• The value of those purchases
• How often a customer engages with the brand
• The value of those engagements
• How much a customer advocates for the brand

The two main values most of us are interested in are how often a customer purchases, and the value of those purchases. By combining these two we can calculate very quickly, and simply, an estimate of the total lifetime spend that a customer is likely to spend with you throughout their life. This gives the basic measurement of CLV.

From here we can think of ways to increase the lifetime value (LV) in those customers we would like to have more engagement with our business. We have two main avenues we can explore:

1, How often a customer purchases is a measure of engagement, as it shows the frequency at which a customer will interact with your brand. If you have collected the right data, you might even be able to tell how long that customer spends engaging, and not just how many unique instances of engagement they participate in. 

2, How much a customer spends is a combination of factors, but is a good measure of loyalty. You’ll find that loyal customers tend to spend more, as they have trust in the business and its products. The really loyal customers will look towards your premium selection more frequently than the average customer, as they trust your brand.

How Loyalty Programmes Increase CLV

Loyalty programmes tend to increase both how much a customer spends and how frequently they do so, as well as a host of other customer benefits relating to loyalty, brand awareness and market resilience. The main means by which loyalty programmes encourage loyalty is by providing a structured opportunity for repeat engagement.

By offering rewards and incentives with every purchase,  a customer gains something of value when giving their value to you, most commonly through a points system or discounts. By receiving something of value, they have a positive emotional experience they want to recreate again.

Secondly, a loyalty programme provides an almost endless supply of customer data. We can then utilise that data to create strategies that encourage higher spending, such as the personalisation of product suggestions based on previous purchases.

By recommending products based on past purchases and guiding customers toward premium options, and offering discounts for first-time buyers, loyal customers, or point redemptions - you can turn low-spend customers into high-value ones. This is the reason we create personalised loyalty schemes in the first place.

We want to understand our customers and provide them with an individual and unique experience, and we want to do this in a way which seems unobtrusive and simple. A loyalty scheme provides the means and method of doing so. 

A well-executed loyalty scheme can quite easily and naturally increase our customers' frequency of purchases. By making use of the data gathered through the loyalty programme, we can then begin to shape our customers' spending habits in a certain direction or encourage them to make broader purchases now that trust has been established.

Maximising CLV Through Loyalty

Loyalty cements the relationship between a business and a customer and this has to be built on the grounds of mutual benefit and trust. That is where Loyalty Works comes in, we help to show your customers that you value them and show that tangibly with a loyalty scheme.

Once the customer sees that value in you and sees your investment in them, then customers are more likely to make repeat purchases. The ground is set to understand your customer on an even deeper level. From there, we can start to personalise the customer experience they receive from your business.

By keeping up-to-date with our loyalty programmes we can adapt and change to the customer's needs, and ensure those purchases stay frequent and the value of each purchase remains higher than the spend of the average customer. One possible method of doing this is to have a second loyalty programme, an exclusive scheme accessible only to customers who meet certain criteria on the general loyalty scheme.

This is great if you have customers you know you can target in this way and can encourage those customers as their spend and frequency of purchase increases, to join in on a tiered or exclusive members programme where they can gain greater rewards and access even greater rewards.

This incentive alone will encourage many average customers to change their habits just to gain access to the exclusive scheme. But really it is a natural evolution of the loyalty scheme. Identifying the customers who will provide you with the most lifetime value and fairly rewarding them with better rewards, prices and discounts.

Which, when you think about it, is where we started. We were looking to engage our customers more and increase the frequency and value of spending. To do so we develop a personalised rewards programme that engages and delights them.

Achieve Long-Term Success with Loyalty Works

Our passion for loyalty is in developing frameworks and programmes that our customers can trust, as we create and implement ways to bring loyalty to your customer base. 

At Loyalty Works we specialise in designing loyalty programmes that increase engagement and customer retention, incentivise repeat purchases and gently lead customers towards greater spend values. We use sophisticated technology and years of industry expertise to analyse customer data and develop bespoke loyalty programmes that perfectly match you and your customers.

Whether you want to utilise a tier-based reward system, or a points-based loyalty programme, incentivise repeat purchases, create lasting connections or enhance your customer's lifetime value, there is a will and a way here at Loyalty Works. 

Conclusion

So, hopefully, it is a little clearer now, that being able to maximise your customer's lifetime value is more than just a strategic priority for businesses, it is a natural inevitability of a well-planned and executed loyalty programme. 

Through the encouragement of repeat purchases and analysis of customer data and personalisation, it is possible to create loyal customers and increase their CLV. 

With Loyalty Works as your partner, you'll have years of industry expertise and invaluable experience shaping and managing your strategies to enhance customer lifetime value. 

If you’re interested in maximising CLV and enhancing your loyalty programmes, get in touch with us today, our helpful team would be delighted to work with you or provide you with any information you need about our services.