Brands are Using Loyalty to Cut Acquisition Costs

The ongoing battle among brands today is the one raging over customer loyalty. The environment of digital marketing is shifting, and this causes competition in various forms. As more brands become aware of the importance of building a loyal customer base — while also keeping their new customer acquisition costs low — some creativity is needed to entice those customers not only to stay loyal, but to bring more people into the fold via referrals.

This challenge has led to an increase in loyalty and rewards programs. For example, the recently announced Target Circle is one of the latest iterations of loyalty programs promising perks and benefits for those who choose to spend their money in Target stores. Another way brands are trying to find a permanent home in a customer’s rotation of needs is to offer increasingly more convenient options such as low-cost or free home delivery of groceries.

And other brands have built loyalty on a referral model, understanding that the CPA goes down exponentially when customers are referring in new business on their own. By incentivizing the referral process — offering exclusive discount codes, free gifts for a certain number of referrals,  etc. — brands can essentially recruit existing customers as salespeople eager to share the value of the product. This reduces the CPA to virtually zero and allows for current customers to act somewhat as influencers. This creates a reliable system for referrals, as customers are more likely to convert their friends than a standard ad might.

Building out a strong loyalty and referral program can accomplish many goals on a marketer’s list. Loyalty is a strong currency in today’s marketing environment, but the program must be strong with robust perks and incentives for staying in. A strong loyalty program will also encourage organic referrals from happy customers who feel strongly enough about something that they’ll promote it on their own.

A referral program can also bolster the sense of community associated with a brand. This is another up and coming metric that is beginning to hold more value for businesses. Community is something that consumers actively seek out. Whether it’s the dedicated Facebook page for the New York Times Cooking section or a group of exclusive club members for the Morning Brew who have referred in the most new subscribers, consumers love to gather in places where like-minded individuals exist.

This sort of environment creates a more organic feel of promoting products and services that accomplishes more than a paid search ad or a television ad. It is good to remember that consumers are more trusting of the opinions of people they know. Not even a customized ad can have as much converting power as the endorsement of a trusted friend or acquaintance.

Businesses looking to reduce their acquisition costs while also bolstering consumer loyalty would do well to take a page out of the playbook of companies such as Target, The Skimm, or Morning Brew. Brands such as these that have capitalized on the fierce brand loyalty of their customers will find new avenues opening up that lead to increased conversions and happy, satisfied customers.

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