Customer loyalty programs for service businesses: Tips to build and retain loyal customers

Loyal customers are highly valuable to your service organisation – they’re the people who spend more, stay longer and spread the word about how great you are. Here are some ideas to build effective customer loyalty programs.

Key points

  • Customer loyalty programs are seen as a smart financial decision, but at their heart they’re all about relationship-building.
  • In order to become loyal to your brand, a customer is looking for both good value and a great customer service experience.
  • There are many ways that service-based organisations can create effective customer loyalty strategies.

Building and retaining customer loyalty is an important strategy in a modern service-based organisation. Your loyal customers are highly valuable, and creating a strategy to retain them is an opportunity to add value to their interactions with your brand.

While retailers utilise some specific tools to build loyalty programs, customer loyalty strategies can be a little different for service businesses and organisations. Let’s take a look.

What is customer loyalty in a service-based business?

A customer can show loyalty in three ways: repeat purchases, spending more with your brand and making word-of-mouth recommendations1.

That’s why a customer loyalty program can be seen as a smart financial decision. In the latest Inside Australian Online Shopping Report, 80% of small and medium businesses said their loyalty program customers spent more than their regular customers.

But while a loyalty strategy is often summarised as those things a loyal customer can do for your business, at its heart loyalty is about relationships – and that’s good for both your brand and the people you serve. Customers want to feel appreciated, happy and valued in order to be loyal to a brand2, and service-based businesses are well-placed to deliver the relationship-building that creates this emotional loyalty.

That’s right: emotional loyalty. When you can create a connection between your brand and your customers, you increase the chances of retaining them2.

How to build an effective customer loyalty program

In order to become loyal to your business or brand, a customer is looking for both financial value and a great customer service experience1. Your role in this exchange is to not only create those experiences and value, but to clearly communicate them to your customers.

Here are some strategies you can use to help attract and retain loyal customers:

Enhance the value of your customer service offering. When it comes to great service, customers want a range of support: advice on the best ways to use the service you’re offering, knowledge about new services you’re launching, help to achieve a goal and an anticipation of their needs1. How can you build on your current service offering to ensure your customers are receiving the best possible support?

Create a customer loyalty program. For service businesses, a loyalty program can take a little more planning than for a retail business (after all, you can’t add a free sample to their next delivery). This, though, is an opportunity to build an offering that speaks to your customers.

Some of the loyalty program rewards that customers highly value are:

  • exclusive members-only discounts
  • special members-only services
  • a premium level of customer service3

All three of which are relevant to customer loyalty programs for service businesses.

Don’t just stop at a loyalty program; build a full customer loyalty strategy. When you’re assessing what your customers want, extend this plan to form a loyalty strategy that enhances every interaction a customer has with your organisation. Across the business, you can use your learnings about customer loyalty to influence call centre interactions, the development of new services, customer acquisition and more2.

As part of your strategy, you might look at forming a collaborative partnership with another organisation – providing added value to your customers or clients in a way that mightn’t be possible on your own. For example, for each new sign up, renewal or purchase, you could offer a free gift, membership or discount code from a brand or service that complements your own.

Identify your unique offering. In a highly competitive environment, with your competitors loudly showcasing their offers in an attempt to acquire your customers, it’s time to really nail down what makes your organisation different. Is it price, a special offer, a loyalty program, better service, a value-add that none of your competitors offer, or something else? Be loud and proud about your point of difference with potential customers.

Communicate your unique offering clearly and regularly. While it’s important to know the details of what you offer customers, it’s equally important to let your customers know. One great way to do this is to utilise direct mail to grab their attention, create a connection and build trust. Research tells us that three-quarters of people give their mail their full attention, making direct mail campaigns an effective way to speak directly to your customers about your loyalty program and rewards on offer. It also brings your brand or offer into their home, giving the messaging longevity.

One thing’s clear: businesses of all shapes sizes should be focusing on customer loyalty strategies in order to attract and retain loyal customers. There’s no time like now to make a start.

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1 Gartner, Driving customer retention and loyalty through service, 2020

2 Forrester, Advance your approach to customer loyalty, 2021

3 BigCommerce, Favourite retailer loyalty program rewards according to digital buyers in Australia and New Zealand, 2021

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