Written by Brett Duncan. Brett is a “transitionist” who specializes in helping direct selling companies as they transition into the new era of direct selling. He is co-founder and managing partner of Strategic Choice Partners, a business development firm that helps direct selling companies take their next steps.
Turning Customer Acquisition Into Customer Repetition: Breaking Down the Fundamentals of a Customer Rewards Program
Without a doubt, what I have been asked to help companies with the most over the last three years is in helping them create and launch a Customer Rewards Program. These programs are called all kinds of different things (e.g. Loyalty Programs, Referral Programs, Preferred Customer Programs, Points Programs etc.), but the core interest is in finding ways for the corporate team to engage Customers more in a way that leads to more orders and more introductions to the brand.
There’s been a lot of focus on Customer Acquisition over the last five years, and for good reason. After all, a core reason for being for any business is to acquire Customers. But with all this acquisition, companies are now also seeing huge opportunities in turning that acquisition into repetition. In other words, what we all really want isn’t just “Customer Acquisition,” but rather “Repeat Customer Acquisition.”
In my estimation, this is where a Customer Rewards program helps the most. Leverage things like ad spend and promotions and discount codes and Distributors to focus on acquisition, but introduce a Rewards program to really tap into repetition.
There’s a lot to putting a good Customer Program together. Lots of modeling, and data, and process thinking. So a single article can’t cover it all. What I can do is pass along six core foundations to impact your thinking and planning as you put your own program together.
1. Let Your Data Tell You What to Target.
There is no one-size-fits-all program for every company. There will certainly be similarities, but the nuances of your company and the customer behavior at your company is what will make your Rewards Program sink or swim. So before you start putting the parameters of your program together, dig into the data and let it show you where you need to focus.
In my article “3 Stats Direct Selling Companies Must Pay More Attention to in 2022,”, I outline three reports that are proving to be very powerful for every company who digs into them. These are reports you may already run, but my experience has shown me most companies do not, or at least not to the degree that they need to be executed.
The first report I mention is referred to as “Purchasing Data”. You need to get a clear look at how your current customers purchase specific to frequency. Find out how many customers purchase only once a year, only twice a year, etc… If you’re like most companies, at least 80% of your customers order twice or less a year (for many companies, 80% of customers only order once a year). This is quite a revealing stat. And even if your numbers are better than this norm, it’s your baseline that you want to try to improve.
While we would all love to receive orders from customers six or more times a year, we can’t build programs around such a high expectation. And yet, often we do. Your data is going to show you where to focus. Most of the time, it’s in the area of shifting some of those one-time purchasers to get to two or three times in a year. The volume at this level alone has the ability to make a significant impact to a company’s revenues.
Don’t build your program until you’ve let your data show you where the opportunity actually is. Pinpoint it, and then build a program around it.
2. The First Order Is a Means to the Second Order.
One of my clients said this the other day, and the more I think about it, the more I agree with it. On the surface, it can seem a little soul-less, but that’s not the intent. Are any of us doing what we’re doing so we can just sell a product? No, we’re not. We’re interested in impacting a life with our products, and impact almost always requires more than a single order.
On top of that, we all know that the acquisition costs (for corporate and the distributors) for that new customer is typically much higher than ongoing orders. Stack on top of that that our distributors need to see repeat orders in order to experience the success that’s going to keep them going, and we see just how important this mantra becomes.
When you take on the mindset that “the first order is just a means to the second order,” how does that change how you create a sales program? A promotion? Sales training?
A Customer Rewards program can cover a lot of ground, but its fundamental focus must be on getting second orders (and beyond).
3. Give Them Something That Brings Them Back.
So then the question becomes: “Well, how do I get a second order?” Glad you asked…
Of course, for some customers, they’re sold on the value of your product right away. And that’s great. But they aren’t the majority.
Some of your thoughts may go straight to your autoship program. And autoship programs are a very powerful part of “customer repetition,” for sure. But to expect someone to go from one order to autoship is a fairly hefty leap for most. A single experience with your product is typically not enough to commit to ongoing monthly shipments.
This is going to sound quite simple, but your Customer Rewards Program must look for ways to bring them back for another order. You need to give them something that can only be used on their next order. In most cases, this is some form of product credit or discount.
As simple as this sounds, we often do the opposite. We often offer big discounts and rewards and freebies on their first order. And while that has its place, giving a big discount on a product that I’m not even sure I want yet doesn’t really make a lot of sense. In most cases, that first order really isn’t about price; it’s about value. A new customer has yet to experience the value your product brings to their life, and no discount can substitute that. So while a deep promo on that first order can sometimes push someone to make a purchase, it still hasn’t addressed the biggest question that needs to be answered.
However, after they purchase the product and experience, things have changed completely. They know the value the product brings (or doesn’t). So they’re open to perks that can be used on another order.
And the best news is that… I’ve yet to see a perk toward a second+ order that costs more than everything that goes into the first order. So you’re economically better off saving your discounts for after the first purchase, and focus your marketing efforts (story, video, ad spend) and distributor efforts on finding new customers to place their first order.
4. Expiration and Breakage Are Keys to Success.
Whatever reward you offer in your program, make sure it has an expiration date. Simply put, we all need a deadline to do something.
Some clients I’ve worked with have had a rather altruistic attitude about the program, and hate the idea of expiration. And I applaud the thought behind that. But it doesn’t work.
Your Customer Rewards program will work because it gives you opportunities to inform your customers of something that most of them will appreciate: “Your discount is about to expire.” In my experience, nothing gets people to act like the threat of something expiring.
That said, some perks will expire. As a matter of fact, a lot of them will. Make no mistake: You’re not putting this program together so people don’t use their rewards. If you construct your program correctly, it will be in your best interests (from all perspectives) for customers to redeem rewards.
But some still won’t. As a matter of fact, probably 50% of them won’t. Maybe more. I typically like to assume that only 30% will expire, and build a program around that assumption, but I’ve yet to see it be that low in real life.
5. Success Lies in How You Communicate the Program (Not the Program Itself).
As I alluded to in the last point, the real value of a Rewards Program is that it gives you all kinds of reasons to stay in contact with your customers. They may tire of your promotions, or your marketing emails, or your newsletters, but no one thinks badly about the person who reminds them that they have a reward they can come redeem.
The corporate team who figures out how to effectively segment their communications related to their Rewards Program is the one who truly wins with a program like this. The communication around the program is way more important than the program itself. As you can imagine, this is also where most companies fall short.
We direct sellers are great at launching things, but typically lack in the nurturing process that should begin after a launch. We just move on to the next thing to launch. If you do that with your Rewards Program, expecting it to flourish on its own, it’s already failed. So don’t do that.
Of even more importance is that a Reward Program gives your distributors an amazing reason to stay in front of customers, and that’s the real win. As I’ve said on many instances, the fundamental unit of success in direct selling is a conversation. If a conversation about your company isn’t taking place, then nothing else can. It all starts with a conversation. Your Rewards Program gives your distributors a simple way to spark all kinds of conversations.
6. Don’t Expect Too Much Out of Your Referral Program.
Many Customer Rewards Programs incorporate some form of referral component for customers. I think this is a fine idea, and should be considered in most cases. Just don’t expect that much out of it.
We direct sellers think we can talk anyone into sharing how amazing our company is. And in an era when the average distributor may be falling short of the productivity that we think should be in place, it’s only natural to wonder how we can get customers to go out and do some sharing for us.
But customers aren’t that interested in your referral program. Think about all the different rewards programs you’re a part of. I’m sure some of them offer referral plans, too. How often have you referred them for someone using the program? I bet it’s not many of us.
If you’re customers were that interested in sharing your company with others, they would become a distributor! So, definitely incorporate a referral component of your program (when it does work, it’s great). And add all kinds of other stuff, too, if you want. But just remember that what most customers think of is simply this: “When I spend $XX, I get X back.” That’s it. Don’t overthink it.
BONUS: Rethink Your Host Program Through the Lens of a Customer Rewards Program.
In this era of Customer Rewards Programs, party plan companies are facing an interesting dilemma: How does a Customer Rewards Program co-exist with our Host Program?
I’ve certainly seen it work where both can exist. The real question, though, is why bother with both? At its core, a host program is a referral program, yes? At least that’s what it’s supposed to be. But in today’s world, where distributors regularly host their own shows, and collect orders and submit as a “show,” the host program is being used in ways it’s not intended.
If you find yourself in these shoes, I would challenge you to rethink it all. Don’t make your Customer Rewards Program be a slave to your host program; rather, think about how you could maybe merge them together. There’s no straightforward answer on how to do that, but it’s a paradigm worth taking on. Otherwise, not only will your many different programs be confusing and maybe even compete with each other, but you’ll also be losing a lot of margin.
I hope this helps. There’s always so much more to think through when it comes to these programs. Of course, you also have to make it work within the structure of your compensation plan. Which means you may need to tweak it a bit to account for your new Rewards program.
I’d love to hear what experiences you’ve had with Customer Programs below.
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