Creating customer value and cultivating customer relationships has never been more important—or complicated. Consumer expectations are high, business models have changed, and it’s essential for brands to communicate value in everything they do.
This is especially important for loyalty marketers, whose customer loyalty program members spend 3x as much as non-members and are essential to overall growth and profits.
But savvy loyalty marketers recognize that loyalty is more than how much a customer spends—it’s a two-way value exchange. You want customers to engage with you, and you also need to give them a reason to keep coming back for more. This often means you need to kick it up a notch from your typical transactional loyalty program.
It may sound challenging and expensive—but it doesn’t have to be.
This guide will cover everything you need to know about using the customer value concept to generate loyalty across strategies and price ranges:
- The customer value definition
- How to measure customer value
- How to elevate your value exchange to generate loyalty
- How to build customer loyalty, no matter your budget
Let’s start with the basics.
What is customer value?
At its simplest, marketers define customer value as how much customers perceive your products or services to be worth. It’s imperative that your customers think your products or services hold greater value than their price—or no one will buy (or use your service).
Believe it or not, people do not buy things because they like or need them. They buy because they need a solution to something. If your product does not provide a good enough solution for its cost, customers will go elsewhere. And we don’t want that.
How do you measure customer value?
Keep in mind, however, that that value does not refer simply to price—it’s the total benefit a consumer will receive from your product or service by spending x amount of money. This extends past the product itself to how the product makes customers feel, the status it may provide them, and the time and energy they are willing to put into your brand.
To keep it simple, this well-known formula is a standard way to measure customer value:
CV=(perceived customer benefits – total customer cost)
It’s not always that simple, but it’s a good place to start. We’ve covered what customer value is and how we measure it. Now, let’s dig into how we turn customer value into customer loyalty.
Translating customer value into customer loyalty
The perfect loyalty program value proposition is a blend of hard and soft benefits that provide both tangible and emotional value to customers with a purchase.
- Hard benefits provide customers with economic value. They are tangible and consist of a promotional currency (such as earning points or miles or receiving special offers and discounts).
- Soft benefits provide customers with emotional value. These are usually intangible in nature (like offering a special status, privileges, or exclusive access to products, services and experiences).
The right combination of hard and soft benefits will result in a loyalty program value proposition that keeps customers engaged for the long-term.
How to build loyalty—no matter your budget
As a brand, you need to deliver quality products, services or experiences that your customers value. And in exchange, consumers deliver value to you through purchases and word-of-mouth recommendations.
Investing in this value exchange helps your brand to increase:
- Share of wallet: when customers spend their money with your brand
- Share of life: when customers invest their time in your brand
- Share of love: when customers invest their feelings in your brand
By targeting these three types of connections, you’ll naturally create longer-lasting customer relationships. But investing in your value exchange does require financial investment. Thankfully, it’s possible to accomplish in a variety of budget ranges—from free improvements all the way up to significant advancements.
Improving your side of the value equation can also come to life in a variety of forms, such as internal investments (like technology platforms) and external customer experiences (like a loyalty surprise and delight reward).
Low-cost ways to improve value and grow loyalty
You don’t have to have a huge budget to engender loyalty with your customers. There are many free or low-cost strategies to create lasting goodwill.
1. Generate intimacy on owned channels
Using your owned channels more effectively is a low-cost way to create a more loyal relationship with your customers. In our current world of digital and distance, it’s more important than ever to understand the power of human connections when it comes to facilitating intimacy, and eventually loyalty, with your customers.
How much you invest in these different tactics ties back to ROI and achieving your goals. Most business goals around loyalty tie to increasing spend, increasing engagement, or increasing consideration. When we think about trying to win over share of wallet, share of love, or share of life, it’s important to create a strategy and pursue an investment level that helps you achieve your desired outcomes.
If you are looking to establish your relationship with customers, free tactics such as building an online social community or sending a handwritten note may help you achieve more emotional connection.
For instance, when I was traveling recently, I received a handwritten note from my flight attendant on my Delta trip. While this was a small gesture, it was a delightful experience. Now Delta is top of mind for me, and this could impact me considering Delta over another brand in the future.
Example of free tactic for loyalty: This was a hand-written note I received from a Delta flight attendant last week when I flew to Cabo.
But if your goals are tied more to incremental purchasing, incremental ROI may be worth a higher investment. In this case, make sure to evaluate both internal and external innovations to personalize the customer experience.
2. Get to know customers with a good survey
A well-designed survey is a great way to better understand your customers. It gives customers the opportunity to let you know their preferences and allows you to more effectively personalize their experience—from product recommendations to when and how you communicate with them.
Add this information to their customer profile for a more holistic look at each customer’s wants and needs. You could even use it to surprise them with a no-cost birthday greeting, for example.
4. Grow a valuable forum or community
Establish a community of user-generated content and feedback gives customers a forum to add value for each other. It could take the form of a Facebook community where customers share tips, tricks and deals, or an Instagram account where the brand highlights and appreciates customer photos.
Some brands even go a step further to feature customer content on their product pages. Old Navy, for example, has a #sayhi Instagram feed on the home page of its website. This was a light lift for Old Navy, but it offers customers a powerful soft benefit of visibility front and center on the brand’s website—showing appreciation and creating a stronger relationship with its customers.
Medium-cost programs to move the loyalty needle
If you have a little more budget, there are a variety of mid-level investments that will help you to better connect with your customers—and add to your even of the customer value exchange.
1. Personalize more with more customer insights
The more you know about each individual in the form of data, the more you can personalize their experiences with your brand to keep them coming back. Consider incentivizing customers to share more information with you. For example, amp up that low-cost survey by offering customers a reward in exchange.
2. Offer exclusivity
Another medium-cost option to increase perceived value and loyalty is exclusivity. Give top customers special access to products, offers or rewards. Early access and limited quantities also add to the exclusivity and uniqueness of your offers.
For example, Chipotle and e.l.f cosmetics partnered on unexpected and wildly popular burrito- inspired makeup. While the entire collection was limited, elf offered the collection one day early for those who signed up for their loyalty program.
Not only was this a clever way to acquire more loyalty members, but the exclusivity resulted in half of the items being sold out before they were even available to the public. Chipotle sweetened the deal with a voucher for free chips and guacamole, which likely resulted in incremental engagement and spend with both brands.
4. Create agile offers
To really personalize your brand experience and loyalty offerings, consider more than just customer data—pull timely events and market trends into the mix, too. It’s important to pivot beyond the day-to-day when large scale happenings are affecting your audience—this shows customers you’re truly considering their needs.
For example, U-Haul offered 30 days of free storage to college students who needed to quickly vacate their dorms during the initial COVID lockdown. The brand also typically offers this compassionate perk to communities dealing with natural disasters. All these timely offers cost the brand is vacant space.
Sizable loyalty investments tie to customer spend
If your brand is ready to double down on customer value and loyalty, it’s important to evaluate the ways in which you can innovate around experience both internally and externally. Investing in technology like a chatbot or machine learning may help you to improving your internal operational excellence and improve personalization. Technology investment has been particularly important? in the aftermath of COVID. Without as much brick-and-mortar shopping, many brands had to re-evaluate and pivot their approach to loyalty.
Externally, it may be worth spending more to reward your most valuable customers and deepening your relationship.
1. Offer flexible and differentiated experiences
One way to make a sizable investment in loyalty is to offer new and differentiated ways to shop with your brand that account for varied consumer preferences. While many brands have increased their same-day delivery services, you can get even more creative with home shopping options—like in-home appointments with personal stylists or personal chefs—to your most valuable customers.
Investing in technology like augmented reality can also create customer value during the shopping phase, allowing people to see their hotel room ahead of time or visualize what that new sofa would look like in their living room.
Beyond shopping, you can also create customer value with other exclusive experiences—such as VIP events and care packages (many people are especially excited about mail these days!).
2. Add value throughout the customer journey
The most comprehensive approach to loyalty considers how to add value throughout the entire customer journey, using wholesale innovations and personalization to make the experience as convenient as possible.
Dunkin’ is a great example of a restaurant that has built contactless loyalty by establishing a safe process for ordering. The brand promotes contactless ordering in their ads, with a CTA to download their app and join their loyalty program. Once customers have downloaded the app, they can choose to continue signing up for the rewards program or order as a guest.Dunkin’ encourages ongoing contactless engagement throughout customer journey with:
- Clear steps. The brand provides step-by-step guidelines for ordering digitally—from downloading the app to picking up an order. This includes articles and videos showing how simple and safe the process is. The brand made these resources readily available and promotes them across their website and ads.
- User interface. The app showcases benefits up front, reinforcing why customers should use the app to place orders.
- Pickup convenience. Dunkin’ added curbside pickup to 1,000 stores that didn’t have drive-thru options. Now, curbside pickup represents 2% of all transactions at those stores. The brand has also expanded delivery from 2,000 to 4,000 stores across the country. Dunkin/ customers benefit from the contactless convenience the brand built into their experience. But the brand benefits, too—delivery orders are showing 3x the average check size.
- Easy reorders. The app allows loyalty members to save their favorites and easily reorder, reducing the time and effort it takes for customers to get their favorite coffee and meal in hand.
Check out more strategies and tactics to build share of wallet, share of life and share of love at any budget in this chart.
Overall, there are many ways to increase customer value and create loyalty—no matter how much or how little budget you have. Every interaction is an opportunity to generate goodwill, and all marketers can create customer value via soft and hard benefits that touch on the emotional and rational sides of loyalty. Feel out what is best for you, your brand, and the situational context around how you normally engage with your customers—but keep the tactics discussed here in mind as you explore new ways to build relationships.
If you’re interested in learning more in-depth about topics we’ve discussed in this guide, here are a few recommended resources: