Web3 Marketing: How to Create Loyalty and Referral Programs that Drive Higher Retention
Strategies on How to Implement Loyalty and Referral Programs to Drive Retention Rates and Reduce Acquisition Costs.
Loyalty and Referral Programs are not a new growth strategy.
Many brands over the years have executed some of the most admirable loyalty programs we’ve ever known and these kinds of programs led to the launch of brands that have succeeded.
I remember vividly the Dropbox Referral program; Free additional storage space for the referrer and referred when a referral happens.
As simple as this referral program was back then, it was instrumental in driving early growth, allowing Dropbox to acquire new customers (at a low cost) and retain the existing customers and this led to huge revenue generation and market expansion.
Aside from Dropbox, many other smart brands like the Sephora Beauty Insider Loyalty Program propelled high retention rates and repeat purchases of Sephora products.
Starbucks also had “My Starbucks Rewards” a loyalty program with different tiers, where customers earn stars for every purchase made using the Starbucks app. And again it contributed to high retention rates and repeat purchases of Starbucks products.
Many more brands have leveraged loyalty and referral programs, Brands such as Amazon with their Prime Loyalty Program, Southwest Airlines Loyalty Program, Ubers famous Refer a Friend, Domino’s Pizzas Loyalty program, and Apple’s famous “Apple Card” loyalty program.
The list could go on, however, the point still stands, Loyalty and Referral Programs are not a new growth strategy.
And smart brands have used these growth strategies in the most iconic way:
Killing Two Birds (Acquisition and Retention) using one-stone loyalty and/or Referral Programs. Why have they always done this?
Well, it’s because these growth strategies, when done well, have the ability to cut down Acquisition costs and increase and sustain retention rates, which leads to more revenue generation and market expansion.
However, with Web3, brands (both native Web3 brands and Web2 migrating brands) have now been presented with a rare opportunity. One that aligns with the very ethos and ideology behind web3 — decentralisation.
With the introduction of decentralisation, into how businesses operate and relate with their community members (customers). Loyalty and Referral Programs have an opportunity to become relevant and efficient for web3 brands.
That’s because the core of every Loyalty and Referral Program is People: Customers. Or Users. Or Community members. Or Subscribers.
And Decentralisation is hell-bent on empowering People. Giving them the ability to co-create with their favourite web3 brands, giving them power over their privacy (so no more cookies … lol) and most importantly, giving them community governing power.
This completely changes the game and the rules for Web3 businesses. They cannot afford to fail at one of the most important layers of their brands’ growth; The Community Member.
Because with Web3, Loyalty programs move from just being transactional into a new relationship called Co-Creation.
Trust me, when Philip Kotler said “Customer is the king in marketing” I am quite sure he didn’t know they’d become this powerful; to dominate price action and the literal future of a business.
And because more web3 brands are looking towards growth, they now need to understand Two things,
- In Web3, everything revolves around the community member (who’s a customer) in the community.
- The Battle for High Retention and Low Acquisition begins right from the community and snowballs into the product’s adoption rate; then the rest is history.
Generating high acquisition and retention rates is a must for any brand that wants to survive. This includes Web3 brands.
While Loyalty and Referral programs can prove to be efficient growth strategies to scale up retention and reduce Cost per Acquisition, they are most effective when implemented with a superior product, within a solid marketing campaign and a strong community-building culture.
Remember Blackberry? Well I do, used to own a Z30 myself, it was the most desired Mobile brand at one point.
However, BlackBerry struggled to retain customers as Android and iOS devices gained popularity.
Gaining popularity is me saying, Android and iOS devices were a much superior product, based on the changing customer (community members) demands.
The company’s failure to keep up with consumer demands for app ecosystems and touchscreens led to declining sales and market share. And like many other previous customers, I bought a Samsung, others bought an iPhone.
The need to increase retention rates, both from the Community and product usage, is a Do or Die affair.
Loyalty and Referral programs, when sandwiched with a superior product, a solid marketing campaign and a strong community-building culture are the only way to both Do and Win.
If that’s the case, how can you, right now implement an effective Loyalty and Referral program, what are the go-to-market strategies you can implement and what mindset should you work with …
The answer to these questions is answered below.
Effective Web3 Growth Marketing Strategies for Implementing Loyalty and Referral Programs
In today’s competitive business landscape, retaining existing customers while attracting new ones is crucial for sustained growth.
To achieve this, companies can leverage loyalty and referral programs, these are powerful growth tools that drive customer retention rates and also reduce customer acquisition costs.
While this could be true, there’s a need to execute these kinds of campaigns or programs perfectly using strategies that can get the desired results, especially with proven real-world use cases to highlight their impact on businesses.
Tiered Rewards System
A tiered rewards system is an excellent way to incentivize customer loyalty by offering increasingly valuable benefits as customers progress through different tiers based on their engagement and spending or activities.
Each tier should represent a higher level of commitment from the community member, making them more likely to continue their relationship with the brand.
Also, each tier should offer increasingly more meaningful rewards to the community member, which will incentivise more commitment to the brand (which means a higher retention rate).
I wrote about this in the case study I wrote about Sephora. If you’ve not read that case study, Sephora is a leading cosmetics retailer, and they implemented one of the most exciting tiered rewards systems which they called the Beauty Insider Program.
Customers earn points with each purchase, and as they accumulate points, they move up to higher tiers. These tiers include the Beauty Insider, VIB, and VIB Rouge.
And with each tier, customers gain access to exclusive benefits, such as early access to new products, birthday gifts, and invitations to exclusive events.
This tiered strategy encourages customers to keep shopping at Sephora to unlock more rewards, boosting retention rates significantly.
And I believe this is a very exciting retention strategy for smart web3 brands offering product-based solutions via games, e-commerce items etc.
Gamification of Loyalty Programs
Gamification involves adding elements of fun, competition, and rewards to the loyalty program, turning it into an engaging experience for community members.
By incorporating game-like features such as badges, points, and challenges, brands can tap into customers’ desire for achievement and rewards, increasing their loyalty and enthusiasm for the brand.
I am sure you know Starbucks, the global coffeehouse chain, well, they successfully gamified their loyalty program and made it less boring, more fun and exciting which increased retention rates — causing huge repeat purchases.
With their loyalty program strategy community members (their Customers obviously) could earn stars for each purchase, and as they collect stars, they unlock different levels with varying rewards.
The program also includes limited-time challenges and double-star days, creating a sense of excitement and competition among customers. This spurred a desire to buy more star bucks coffee (which is the goal)
And this gamification strategy has been instrumental in driving customer retention for Starbucks.
Their customers actively participate in the program to achieve higher status and unlock exclusive perks. The more they purchase they get more stars
With web3, it could be … the more they play the game, the they get more point that unlocks exclusive benefits like in real-life items.
Or the more they use the trait technology, they get new points to create more traits which could be sold on a secondary market for gamers, allowing them to generate more money, and spurring them to use the trait tech more — this is something I hope Psychedelic Anonymous incorporates.
Either way, when you gamify the experience in a loyalty program, you flip the switch, and it becomes fun and effortless, while you gain more retention and product adoption.
Personalized Offers and Recommendations
Personalization is a powerful tool for customer and community retention.
Tailoring loyalty program rewards, offers, and product recommendations based on individual customer preferences and behaviours can significantly enhance customer engagement and loyalty.
Customers feel valued and understood when they receive personalized treatment, leading to higher retention rates.
When you think of Amazon Prime, you know it’s a subscription-based loyalty program, what you might not know is that it excels because it provides personalized offers and recommendations to users.
Amazon does this by analyzing customers’ purchase history and browsing habits, Amazon can suggest relevant products, offer personalized discounts, and even anticipate customers’ needs through services like Amazon Dash Replenishment.
This level of personalization has contributed to the program’s success, as members are more likely to remain loyal to Amazon due to the convenience and tailored shopping experience it provides.
For all this to happen, Amazon utilises cookies.
With Web3 and the privacy-focused theme, unconnected multiple wallets to one user, with different Twitter accounts, it’s nearly impossible to track people with cookies.
It is against the ethos of the industry. It’s very bad, a bad thing to do — many people, do not want to be tracked in web3, that includes me.
So how do we provide personalised loyalty program rewards, offers, and product recommendations based on individual customer preferences?
Especially when we can’t use cookies, the best alternative which works in web3 is an automated feedback loop. This Feedback loop requires a CRM with a database of actual users.
It must be clear what the data is for and every user should have access to it.
Based on the feedback loop, you can get feedback from users in-app, or in-community and this data is updated in their CRM, giving more insight on what the members want.
This allows brands to efficiently serve the members with personalised loyalty program rewards, offers, and product recommendations based on individual customer preferences.
But do so based on the green light from the members.
I believe there could be many iterations here based on what the community want, still, the idea is obvious and it’s a win-win situation for both the members and the brand.
Referral Incentives
Referral programs leverage the power of word-of-mouth marketing by encouraging existing customers to refer new ones in exchange for rewards or discounts.
By tapping into their satisfied customer base, businesses can acquire new customers at a lower cost while simultaneously strengthening customer loyalty.
You might have used Airbnb in the past — well, I’ve not — it’s an online vacation rental marketplace and it has a successful referral program that benefits both referrers and referees.
The strategy was simple when an existing Airbnb user refers a new user, they both receive travel credits once the referee completes their first booking.
This win-win approach encourages existing customers to refer their friends and family, resulting in significant cost savings on traditional advertising and customer acquisition channels.
Additionally, the referees are more likely to become loyal customers, thanks to the initial positive experience with the platform. And they also get to receive travel credits once they refer someone who completes their first booking.
It’s a win-win approach that cascades into a chain reaction. It solves both Acquisition and retention with one shot. It’s simply brilliant.
I think the only referral campaign I can think of that’s as good as Airbnb was that of Dropbox. Both were astutely engineered referral models.
And Web3 brands can build a similar referral strategy.
If you look closely at the Airbnb strategy, the driving force was the incentive; travel credits.
Airbnb users are people who typically travel to a new location. A major incentive for them would be to reduce their travel cost. And that’s what this referral program offers; Travel Credits.
For Web3 brands, Whitelist spots are not good incentives for a referral program. You might think, what if they are in high demand, then it would not make sense to add that as the incentive for referral because the scarcity would dampen as people refer.
The best way to design incentives for a referral campaign or a loyalty campaign is to find out what interests your target audience.
For gaming projects, these could be exclusive skins with demand on the secondary market. For a web3 Music platform, this could be a free three-month access to stream and buy your favourite artist’s music.
It’s important to get creative with incentives, even more important is to iterate on them if the first isn’t effective.
Conclusion
Implementing loyalty and referral programs can be a game-changer for businesses looking to boost retention rates and reduce acquisition costs.
Loyalty or Referral Programs can be executed in any form, from quest campaigns to educational campaigns, the list could go on and on.
However, the most important part to remember is “Everything we do, the community and its members are who we serve and we must tailor every action towards this understanding”
So, by employing strategies like tiered rewards systems, gamification, personalization, and referral incentives, Web3 brands can foster stronger relationships with their existing customers while attracting new ones through the power of word-of-mouth.
As demonstrated by real-world use cases, these strategies have proven to be effective in driving customer loyalty and long-term business growth.
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