Expanding a Brand’s Customer Base Yielding High Returns for Loyalty Programs

Brands are always looking to expand their customer base to grow their business and engage a broader customer base.

Lululemon Athletica, a company known for its popular yoga pants and sports bras, will soon expand its size selection up to size 20. The Canadian retailer — which in the past sold clothing up to size 14 —  made this decision after being criticized for body shaming in recent years.

Other brands have sought additional ways to expand their customer base as well, in an effort to grow revenues.

Thoughtful Brands saw its revenue jump 68% year-over-year, driven by strong demand for its Nature’s Exclusive CBD brand and an expanded customer base. The company says it will continue to expand its portfolio in the nutraceutical and hemp-based CBD product space.

Online pet products retailer Chewy is anticipating more growth in its pet prescription business, according to CEO Sumit Singh, who says the COVID pandemic allowed the company to widen its offerings and customer base and invest heavily in its e-commerce operations.

“In the RX business, we served our broadest customer base on record, serving millions of American households at a time when they needed us the most,” Singh says.

An expanded customer base can also be achieved by modifying the cost structure of a product. Particularly in challenging times, brands may chose to lower the barriers to entry for their products; therefor expanding their customer base.

And example of this is at-home fitness company Peloton recently announcing it would reduce the cost of its most popular spin bike by $350 “to make it more accessible to more people,” according to an email from Peloton. The bike will now cost $1,895.

The Next Step is Important
But when brands do expand their customer base, it is important to have a plan in place for how to communicate with those new customers and welcome them into rewards and loyalty programs. Experts in the industry say brands should be prepared to hit the ground running in getting the new customers up to speed on the engagement programs, and emphasize communication as the key.

Jade McFarland, the Head of Marketing at HTK, says that once a customer has made their first purchase, the next interaction a brand has with them is extremely important. She says it sets the tone for the relationship and, if done well, gets them hooked into your brand straight away.

“It’s important to create value early on in the relationship,” McFarland says. “Whether that’s sending a helpful onboarding series to get them started with the product or service, sharing relevant content from your website, or just keeping them well informed on the progress of their order.”

She says it’s important for brands to make sure they are using the data the customer shared with them effectively. It isn’t about showing off how much a brand knows about a customer, she says, but about being helpful and saving the customer time to get the relevant products, services, or information faster.

“When it comes to retention, especially moving customers from their first to second purchase, keep value front of mind,” McFarland says. “If you’ve welcomed them well, you’ll have a good foundation to keep moving them towards a second purchase, through relevant content and product recommendations.”

Focus on the Best Brand Experience
Tom Caporaso, CEO of Clarus Commerce, says consumers now want everything to be instant.  He says that is affecting every industry, including loyalty.

“Free loyalty programs still focus on rewards customers will eventually get,” he says. “Loyalty programs should instead focus on giving the best possible brand experience to your customers. That will help you retain and grow them.”

Caporaso says this is why new premium loyalty programs — loyalty programs where customers pay a fee to join in exchange for enhanced benefits — continue launching, most notably Walmart+. He says that 70% of the consumers that Clarus Commerce interviewed in their 2020 data study said they would join a premium loyalty program if their favorite retailer offered one, and the benefits were valuable.

“And 94% of those in premium loyalty program already shop with those retailers at least once a month,” Caporaso says. “Plus, 89% of them would recommend a retailer to family or friends if the program offers valuable benefits. That’s real loyalty.”

Emphasizing the Benefits of a Loyalty Program
McFarland says if a brand has a loyalty program, this is a good time to introduce it and emphasize the benefits of becoming a member and maintaining a relationship with your brand.

“Make sure that the program mechanics are clear, the benefits or rewards are achievable, and the sign-up process is straightforward,” she says.

Incentives may also be useful for encouraging a new customer to purchase again, but McFarland says to be wary of setting too much of a precedent for discounts. Too often, she says, brands create an expectation of discounts always being available, which tells the customer they don’t need to pay full price, as long as they wait long enough. For a new customer, free shipping or a trial of a premium service could be a safer incentive.

“Then, once you’ve hooked them in as a longer-term customer, you can shift the focus to growing their value,” McFarland says. “At this point, you should have more data about them - their behavior, product interests, and so on - so use what you know to make relevant cross-sell/upsell offers.”

Caporaso thinks that brands should consider offering a tiered approach. He says a free tier can get new customers in the door and a premium tier will grow relationships and engagement with a brand’s best customers.

“Just remember to always keep a customer-centric focus when designing and optimizing your program,” Caporaso says. “Otherwise, retention and growth will go out of the window.”

Visit www.htk.co.uk and www.claruscommerce.com.

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