Tips for creating a winning loyalty program

Over the past several years, the number of customer loyalty programs — and the number of customers joining those programs — has skyrocketed. Yet, the customer turnover rate is also increasing.

According to a report by Accenture Strategy, 78% of consumers are retracting loyalty, a faster rate than three years ago. One reason could be that companies are lumping all customers into one large group, without any specific strategy, rather than customizing a loyalty program specifically for their customers.

Understanding your customers at a micro level is important to building a loyal customer base. Without customizing your program, what’s the point? Consumers don’t have the patience for a generic loyalty program.


Why are loyalty programs important?

A customer loyalty program is a marketing strategy used by businesses to attract and retain loyal customers. A good loyalty program helps businesses create a connection with their customers, fostering a deep, long-term relationship.

According to a Bain & Company study, roughly 60% to 80% of customers do not return to do business, including customers who had a positive first experience. The problem is that customers have so many options and as a result, they don’t need to go back to the same business. With a successful loyalty program, a business can entice new customers to revisit the establishment.

Plus, businesses with a successful loyalty program can greatly improve profitability. According to a Harvard Business Journal study, if 5% of a company’s customers return more often, they can increase their profits by 95%.

Cannabis industry growth

The marijuana industry is growing as fast as the broadband Internet market did back in the early 2000s. Broadband Internet is one of the few consumer industries to reach $5 billion in annual sales and have 25% compound annual growth the next five years. According to Arcview Market Research, the North American marijuana market posted $6.7 billion in revenue in 2016, a 30% increase from 2015. Additionally, Arcview projects sales to grow by a compound annual rate of 25% until 2021. By 2021, the market is expected to top $20.2 billion.

This means it’s time for cannabis retailers to invest in their loyalty programs and lock in customers before the market becomes over-saturated with competition.


Tailor-made for marijuana

For marijuana retailers, a customer loyalty program could add to their long-term success. Retailers can test new products, flavors, promotion types and more through their loyal customers. But they can also get something even more valuable through a customer loyalty program: customer analytics.

Customer analytics provide retailers the information every business craves. Depending on the loyalty platform, customer analytics can include purchase information, socio-demographic breakdowns, social media activity, repeat customer history, promotion analysis and more. Plus, analytics give retailers a deeper breakdown of their sales, providing information about whether more sales are coming from new customers or through repeat business.

Customer analytics provide retailers with the information needed to evaluate their business and understand what’s working and what’s not.

Since the cannabis industry is late to the customer loyalty party, marijuana retailers can avoid making the mistakes that many other businesses have made. One key to a successful customer loyalty program is that the program should be focused on customers.

Thus, the program should:

– Be completely integrated: Customer loyalty programs should be fully integrated into each customer touch point, creating an omni-channel experience. When a customer visits the store or its website, their experience with the loyalty program does not change.

– Address customer pain points: Each business has its own pain points; for a cannabis retailer, it could be in-store customer service experience, where wait times are high. One of the benefits of the customer loyalty program could be a personal customer service rep to the top-tier loyalty customers.

– Provide meaningful rewards: It isn’t enough to provide all customers with rewards. The rewards should have a meaningful value to each customer. Understanding buying habits can help tailor rewards to each customer type.

Personalizing a program

The first step to personalization is segmenting customers into different groups.

The segments can be based on a variety of criteria, whether it’s socio-demographic (including location, gender and age) or more specific criteria (including previous purchases and social media activity). Just remember to create the criteria to ensure the segments fit your business.

For example, customers can be segmented into the following age groups: 18-25, 26-35, 36-45, etc. Certain age groups may favor edibles, topicals or flowers more than other groups, so promotions, emails and push notification campaigns can be created for each group’s preferences.

– Promotions: Prepare an automatic trigger campaign to help customers stay engaged. For example, a trigger campaign can be deployed to send out a promotion to any customer that has not made a purchase within the past month. Since you know which customer groups prefer which products, tailor the promotion to each group. The more focused the promotion is, the more likely it is to help retain this customer.

– Gifts: One of the major reasons customers join loyalty programs is to get free gifts. Tailoring gifts to customers’ specific interests will keep them engaged and they will make more purchases to qualify for gifts.

– Exclusive product samples: You can offer all your customers the opportunity to sample the newest products. But retail outlets will get better results through personalization. For example, if you are providing a new topical sample to an age group that prefers flower, you might not get the best results.

Marijuana retailers and dispensaries that set up effective customer loyalty programs may be able to gain an advantage over their competitors. And a good customer loyalty program can actually help retailers reduce expenses and become more profitable.


Arnab Mitra is the marketing manager at SailPlay, a customer loyalty platform. He has experience from several different industries, including a mid-size insurance company and two Fortune 500 companies, Samsung and Panasonic, where he specialized in increasing customer engagement, retention and building customer loyalty.



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