If you are interested in growing your online business and increasing profitability – which we assume you are – you can’t ignore the loyalty factor.
According to loyalty consultancy Brand Keys, lifetime profits per customer can grow as much as 85 percent when loyalty increases by just 7 percent. That’s mainly because it’s so much cheaper to generate new sales from past customers than to bring in totally new customers. Merchants spend up to 11 times more money on recruiting new customers than retaining existing ones. Not leveraging those consumers who have already entered your door is a big mistake. It’s worth putting the effort, energy, time and money into building a loyal relationship with your customers.
After a year of operation, Klarna’s loyalty team reveals some of the most important lessons they’ve learned when it comes to building consumer loyalty.
Secret #1: Make sure it’s super-smoooth to buy from you
Sadly, 77 percent of brands could disappear and no one would care. You don’t want to be one of those.
Before even considering how you can add loyalty rewards to your existing customer base, you need to look at what creates a positive, lasting experience with your brand in the first place.
From a loyalty standpoint, nothing beats offering an overall great shopping experience – from attractive online browsing and easy purchasing to uncomplicated delivery and exciting products.
“Loyalty comes from positive, hassle-free buying experiences. Think about it. Shopping itself is fun, at least for most people. Selecting a pair of new sneakers is fun. Buying new things is fun. However, if the rest of the online shopping experience is filled with inconvenience, it stops being so great,” says Martin Wassborn, manager for consumer growth and loyalty at Klarna.
These days, you might as well wave goodbye to loyalty if there are multiple steps and forms required to complete a purchase, if a customer’s favourite payment method or shipping method isn’t available, if the product takes days to arrive, and so on.
Switching over to a smoooth shopping experience is the best move you can make towards loyalty.
Secret #2: Recognise customers again after purchase
While the foundation above – an overall great shopping experience – is the most important factor to having customers come back, there’s one other thing you can’t ignore:
“People aren’t loyal to brands. They are loyal to emotional experiences. That’s something our marketing director David Sandström keeps hammering in. It’s important to see and recognise the best customers in ways that evoke emotion,” says Martin Wassborn.
It doesn’t need to cost much to arouse those loyalty-strengthening emotions. In fact, what matters more is the contextual relevance, says Josefine Hedlund, marketing manager within Klarna’s rewards team.
The reward itself can be as simple as a small coffee break.
“When we gifted consumers a free hot or cold beverage at coffee chain Espresso House it was really appreciated because the gift came at exactly the right moment, with the right message.”
The gift was sent out via the app, seconds after the customer was done shopping. A golden, emotional moment.
“It’s when the gift is most likely to be valued, but also the right moment strategically, since you want to connect the positive emotion to the shopping experience in the store.”
The message was, in a nutshell: ‘You deserve a break now. Here’s a free drink at Espresso House. Enjoy!’. Here’s what it looked like:
Secret #3: Renew your rewards
There’s one golden rule for Klarna’s loyalty team:
Don’t get stuck in a rut.
“We come up with a new loyalty reward every month in order to keep creating ‘wow’ moments. In brainstorming sessions we ask ourselves: ‘What else would consumers appreciate receiving?’, or ‘What would be a fun or joyful experience?’. We try to tie the rewards to what’s going on in the consumer’s life at that moment,” says Martin Wassborn.
Here are a few examples:
1. When the Swedish football team went to the playoffs in the FIFA World Championship, Klarna users were given an ice cream in the hot weather.
2. After purchasing at Klarna connected stores, consumers could go to the nearest newsstand and pick up their favourite magazine for free, to enjoy in the extra spare time they gained from shopping with Klarna:
3. When Klarna launched the Get Smoooth-campaign, emphasizing how smoooth life is with Klarna, sleep masks and pillows were offered for free to the then 60,000 Klarna card users.
“The emotion we want consumers to experience with our rewards is ‘joy’, as in ‘the joy of shopping’. That’s something our payment products help to bring to your consumers, because it’s so smoooth to pay with us. The emotion your company wants to evoke for your customers might be something different. It probably is. So brainstorm, how can you evoke that particular emotion in different ways?” says Martin Wassborn.
Learn from Klarna’s Mistakes & Insights
Klarna has been working with loyalty rewards for almost a year now. What are the takeaways so far? Here are three of them, shared by Martin Wassborn:
1. Frequent, relevant rewards are better than high-priced rewards
“We have tried rewards that have cost us more, and rewards that have cost us less. What we can tell from the feedback we get is that relevance is much more important than price. Giving away an ice cream when it’s hot outside shows more care than giving away something more expensive without any thought behind it.”
2. Choose rewards that are appreciated by more customers
“We had a 2-for-1 loyalty reward for tickets to see Justin Timberlake in concert. That didn’t work very well. The fans sure liked it, but people who aren’t that into his music didn’t get any value. In other words, it’s better to do a ‘pick your favourite’, as we did with the magazine reward, rather than pre-selecting something that will only suit certain tastes.”
3. Stay true to your brand values
“For many brands in the ecommerce space, it can be a great loyalty-building strategy to give customers a discount after a certain number of purchases, or after they have spent a certain amount. They might really appreciate that. But when we tried this, we got negative feedback. Why? Because the reward wasn’t aligned with what Klarna stands for. Consumers like us because we make life more simple and smoooth, so it feels right when we give rewards in alignment with that. There’s intolerance towards brands who deviate from their core values. Promoting discounts simply isn’t in tune with the kind of relationship we have with our consumers. On the other hand, if one of the customer’s favourite online stores were to offer a loyalty discount, even it if was via our app, that would be a different story.”