The Ultimate Guide to Lifecycle Management

Customer Lifecycle Management Advanced tactics: WOM, Referral, Subscription, Loyalty programs

Create programs to increase customer loyalty

Customer lifecycle Tactics

This is part 4 of the Customer Lifecycle series.

In this part, we will cover programs that can increase Word of Mouth and retention including Referral, Subscription and Loyalty programs.

In the previous parts, we covered the steps to create a customer lifecycle strategy and Definitions, KPIs and tactics for each Lifecycle Stage.

Ultimate Guide to Customer Lifecycle Management: Strategy- Part 1

Ultimate Guide to Customer Lifecycle Management- Part 2: Tactics and best practices

Word of Mouth (WOM)

Word of Mouth (WOM) is the organic impression that is left on prospective customers from what they hear from existing customers. WOM can be both positive and negative and it requires intentional investments and strategies to improve a brand’s WOM.

As customers engage more with social networks and get wider access to reviews and ratings online, WOM Marketing has become an important area of focus for companies. WOM if managed appropriately can be a steady channel of acquisition and protect customers from churn:

• 92% of consumers believe suggestions from friends and family more than advertising- Ref: Nielsen Reference
• Beyond friends and family, 88% of people trust online reviews written by other consumers as much as they trust recommendations from personal contacts- Ref: Bright Local Reference
• And 74% of consumers identify word of mouth as a key influencer in their purchasing decisions- Ref: Ogilvy Cannes Reference

The power of WOM

Here are some WOM best practices:

• Deliver a great service every day- Nothing grows a brand’s WOM quite like consistent amazing service.
• Identify and nurture your most loyal customers- These are the ones most likely to speak positively about your brand so get to know their values.
• Ask for reviews and feedback when things are going well- On average people read 7 reviews before deciding on a product! So create triggers to ask for reviews and feedback from your customers and share them on your website or App.
• Show your customers that you genuinely care by solving their problems in a non-scalable way- SouthWest Airlines famously returned a boy’s favourite teddy bear across the country which blew up into a viral campaign.
• Offer unique Share-worthy WOW experiences- This can be something as small as a surprise gift or a lavish getaway but the most important thing is that it is unexpected and presented in a way that can be shared easily through social media.
• Encourage User-Generated Content- Not only good customers are willing to share their experience, they occasionally are looking for ways to contribute by adding their reviews, pictures and testimonials. Additionally, encourage open and un-moderated discussion on your social channels.

Referral programs

Referral programs are widely set up as scalable campaigns to encourage advocacy and further increase engagement. These programs add value to a business in several ways:

1. Lower the Customer Acquisition cost- Referrals generate FREE (no advertisement or channel cost) and High-intent leads. These leads go on to become new customers at much higher rates than leads that were targeted through marketing channels.
2. Increase loyalty of existing customers- Customers who refer their friends and family become more loyal in the process, not only because they receive a referral bonus but also due to the consistency bias (Where people don’t want to be inconsistent by advocating your brand to others and not engaging themselves).
3. Referred customers are more loyal and spend more- reference — Due to a better initial impression and in some cases a bonus, these new customers go one to buy more from you and stay engaged much longer.
4. Referrals create exponential Growth- Perhaps most importantly, a referral program can kickstart a growth loop in which existing customers continually refer new customers who go on to advocate further for your company. These types of growth loops increase the number of customers exponentially and continually with minimal direct investment from you.

Referral Growth loop

There are 3 ways to set up the referral bonus:

1- Only the customer making the referral gets a bonus.

2- Only the new customer joining from a referral gets a bonus.

3- Both sides of the referral get a bonus. Most companies use an equal 2-sided referral bonus.

Referral rewards can be in the form of Cash, discount, Free product/ service or access. To decide on the amount of the reward, remember you want the reward to be perceived as generous enough to nudge both sides of the referral but at the same time not too expensive that you don’t get a positive ROI from the customer’s lifetime value.

A simple formula is:

Referral reward formula

Some best practices for Referral programs are:

• Identify the ideal stages of the customer lifecycle to present the referral program. For example, customers are most likely to refer a friend post-purchase, especially if they had a good experience.
• Ensure that the referral bonus that both the referee and referrer receive is perceived as valuable and highly relevant.
• Be very clear with the terms and conditions of the program and ensure that the customers know when they should expect their bonus and how they will get it.
• Remove any friction from the process by enabling 1-click voucher forwards and include a canned message to go along with the code that includes the value proposition of your product and the steps that the referred person will need to complete.
• Consider a tiered reward structure so the more friends a customer refers the more they could earn from each referral.
• Run campaigns or contests throughout the year to engage more customers with the referral program.
• Think through the terms and conditions of your program to ensure that there are no unintended consequences and costs to your business. For instance, you might want to introduce a minimum spend threshold or impose sharing rules to reduce potential fraud.

Subscription program

A subscription program often refers to a business model where the customer pays for the product or services in an ongoing manner. There are subscription models in all types of industries such as content memberships (whether it’s experts or entertainment), Insurance and services, consumable products and access to services or product sharing.

This business model has become very popular in the last decade as it has significant advantages for both the business and its customers.

For the business:

1. The repetitive nature of the payments creates higher switching costs and increases customer loyalty.
2. It provides predictable recurring revenue for the business that can be used to better plan for investments and even raise capital.
3. It facilitates better Demand forecasting due to known upcoming orders which enables companies to hold the optimal inventory. This allows companies to both lower their cash invested in inventory AND reduce the chance of running out of specific products.
4. It allows the company to revise their pricing model or create custom pricing tiers for different customers.
5. A successful Subscription program can be a considerable strategic advantage against competitors.

For the customers:

1. Most subscription models make it easy for customers to manage their costs and usage, lowering the administrative burden of the product.
2. In order to make the subscription more enticing, companies often build in a discount in their pricing model, especially if the customer is willing to commit for a longer period.
3. It reduces resource requirement and risk to customers since instead of having to make a 1-time big purchase, they get to pay over time with an option to cancel if their needs change.

There are 4 common types of subscription programs:

1. Fixed usage- which offers a set price for a fixed quantity of goods or services (eg, Newspaper subscriptions)
2. Unlimited usage- Which offers a set price for unlimited usage of the services (eg, Netflix)
3. Pay as you go- Where offers customers ongoing products or services with the option to cancel at any time (Eg, Dollar shave club)
4. Freemium- Where a set of features are provided for free and the customer will get charged for additional value.

Depending on your business, you can create a subscription program structure that can move customers through the lifecycle stages from activation to advocacy, by understanding where the value for customers overlaps with your company goals.

“The ongoing nature of subscriptions means that you have an enduring relationship with the customer so avoid messages that are overly transactional.”

However, there are some universal best practices:

• Lower the friction in the process to set up a subscription and help customers maintain their subscriptions by allowing flexibility in the quantity and timing of their renewals.
• Ensure that your communication regarding billing including amount, payment method and timing is completely transparent and understood by customers.
• One of the main advantages of subscription programs is that you have the payment details for the customer saved, however, this means that you are responsible for keeping it secure. Additionally, in order to avoid failed payments, send customers reminders ahead of their expiry and assist with updating their card.
• The ongoing nature of subscriptions means that you have an enduring relationship with the customer so avoid messages that are overly transactional.
• Remember the main aim of the subscription is to make the customer’s lives easier, so ensure that the design of the program does not require the customer to constantly manage the subscription.
• Subscription customers are generally more engaged with your brand so leverage their feedback to improve your offering or identify if you need different tiers of subscription.
• Talk to the customers that cancel their subscriptions, they have much more valuable information about what you can improve.
• Don’t make it hard for customers to cancel their subscription, this will only affect your WOM and future subscription signups.
• There will be times that you may need to adjust your pricing, but keep in mind the impact this can have on your loyal customer and whether you can provide short-term discounts to lower the risk of churn.

Loyalty program

Loyalty programs are a high investment complex tactic, however, they improve every step of the customer lifecycle significantly by retaining customers and growing their spending. In addition, loyalty programs often allow companies to gather much more data and better understand and predict their customer’s needs. Customers get value from loyalty programs not only because of the value of points they can redeem and exclusive deals but also from the reduced friction of purchases and payments.

The promise of loyalty

Interestingly Loyalty programs themselves have similar stages to the overall customer Lifecycle.

Below are some best practices in setting up and managing loyalty programs:

• During Discovery, clearly communicate the rules and terms of the program including how points are earned and redeemed, if there are expiries and partnerships, any earn or burn tiers or any additional special features your program may have.
• Make the Registration step as easy and painless as possible. You might opt to only ask for a few points of information at the start and use progressive profiling to create a more holistic view of the custom later on.
• Offer smaller and more frequent rewards for new program members to build a habit of accruing and redeeming points and ensuring that they experience the rewards as early as possible.
• Ensure the rewards redeemable are relevant to your customers and that the exchange rate is considered generous. Especially think about loyal customers who may have lower spending due to their use case but are loyal to you versus your competitors. It may be helpful to have point accelerators or delighters for customers based on their tenure.
• Remember customers care about what your brand stands for so embed your values into your program and ensure that it emotionally resonates with your loyal customers. If your customers care about a special cause, allow them to donate points to that cause or provide a “Buy one Donate one” scheme.
• Create levels or tiers to encourage customers to increase their engagement and spend over time. However, avoid overcomplicated rules of earning points that make it hard for customers to know how exactly they will get their reward. It is often best to communicate the rules with simple graphics and examples if required.
• Join a coalition or partner with other relevant programs to give customers more options to redeem their points.
• Differentiate your program from your competitors by adopting cohesive branding aligned with unique rewards and campaigns.
• Leverage Gamification & “Surprise & Delight” to keep customers interested in the program. Customers are more likely to disengage with the program if it's perceived as routine and consistent. Any surprise reward, even small will make sure that your brand is top of mind.
• Use customer data to structure customized offers to specific segments, these can be multiple earn events when you need to counteract a dip in the engagement of a certain cohort or special perks for a segment of customer who has a special need (Eg, Airport lounge access for frequent flyers)
• Ensure your customer service protocols are aligned with the program and your team knows how to deal with disputes or disappointments from customers. Additionally, make it as easy as possible for customers to manage their points or report issues.
• Invest in a scalable but flexible Loyalty Management platform that can track the lifecycle stage of customers, their relevant segment and customers’ spending habits on top of the point balance and reward history. For best results, look for a platform that can integrate with your customer support to give your team a real-time view of costumes’ behaviour.

“Customers are more likely to disengage with the program if it's perceived as routine and consistent. Any surprise reward, even small will make sure that your brand is top of mind.”

Several more tactics can be unlocked by a loyalty program to enhance every stage of the Customer Lifecycle.

Loyalty program tactics per customer lifecycle stage

In the next part, we will look at Customer Lifecycle Management: Advanced LC Optimization Tactics: Link to Part 5- coming soon …

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