A customer loyalty ladder is a great tool that helps brands segment consumers into groups. This allows businesses to better identify different types of customers, and use data to plan and execute the most effective strategies for building customer loyalty.
There’s only one problem; persuading customers to climb your loyalty ladder, requires excellent planning and know-how. But before we continue, here’s a list of what you can expect to take away from this blog post:
What is a Customer Loyalty Ladder?
To understand what a customer loyalty ladder is, we must first understand what it does. It’s a way for brands to fine tune relationship marketing. To put customers at various touch points into groups and engage them in a relevant way. Individuals are placed on one of four or five rungs as a result of their interactions with a brand.
Marketers usually list these rungs starting with the lowest as: “suspect”, “prospect”, “customer”, “client” and “advocate”. Although the names may differ between businesses. Sometimes “client” is swapped for “supporter”, “suspect” and “prospect” are merged, or replaced entirely by “lead”.
How many rungs there are and what you name them, doesn’t really matter. What’s important is you’re able to represent and discern the intentions of your customers from them. This is how we’ll list them out:
Advocate - someone who refers your brand via word-of-mouth, online reviews and referral programmes, to family, friends, strangers and followers.
Client - a loyal customer who often engages with your brand by repeatedly purchasing your products or services and are more open to upsells & cross sells.
Customer - a person who has made their first purchase with you but would still consider your competitors if they offer something better.
Prospect - a possible customer who is in the process of deciding whether to buy from you or your competitors.
Lead - someone who is on the lookout for a product or service and has engaged with your brand.
Anyone who interacts with your brand should be placed on one of these rungs. Your aim is to turn prospects into advocates.
Why is a Customer Loyalty Ladder Important?
Customer loyalty has always been important to businesses. Nowadays though, it’s not enough to simply offer quality products and excellent customer service. Consumers want more. Which is why nearly 80% of the British public are signed up to some form of loyalty programme.
With the amount of retail options on offer, it’s not too much of a stretch to think that most businesses have some form of loyalty programme in place to stand out. More often than not this all starts with a successful and effective customer loyalty ladder. One that both allocates customers to the correct stage and identifies the best benefit at that time.
By doing this, they ensure fruitful long term relationships with customers. Hyper relevant communication, content, and timely rewards, foster a positive perception towards brands. When customers feel engaged in a meaningful way, it paves a path towards long term trust from discovery to point of purchase.
But how does it benefit you?
When customers move up the ladder towards advocacy, they become an ambassador to your brand. In other words, free marketing. And a very effective form of marketing at that! After all,
"92% of consumers rank recommendations from people they know as the most trusted form of advertising"
Of course, reasons why you want to nurture customer loyalty is to reduce acquisition costs, enhance brand growth and boost retention. All in the name of increased customer lifetime value! Whilst also providing a customer experience that matches the quality of your product or service.
But you can only identify, nurture and reward customer loyalty with maximum impact, by being correctly informed.
That’s what a loyalty ladder helps you do and is why it’s beneficial to your business.
Key Conditions and Situational Traits
All customers in the same groups share similar distinctive traits and conditions. Traits refer to situational states-of-minds and the conditions are what resulted in that mind frame in the first place.
Generally, this is similar to the different stages of the customer buying journey e.g., awareness, consideration, purchase, retention and advocacy. But these don’t really delve into what the customer is feeling. This usually tends to lead marketers down a path of surface-level offers. So, using the usual five stages of the buying journey to guide us, we’ve got:
1) Leads at the awareness stage are desirous of a solution after becoming more observant of a problem.
2) Prospects at the consideration stage are apprehensive and become more determined to find the right solution to their problem.
3) Customers near the purchase stage are curious as to which solution best fixes their problem, and they must be confident they’ve picked right.
4) Clients that are always delighted grow ever more trusting of your brand and are firmly in the retention stage.
5) Advocates are motivated to stay loyal and refer your brand to others.
Let’s drop the traditional stages now and focus solely on conditions and situational traits as these are more relevant to your customer loyalty ladder.
Loyalty Levels and Their Actions
Loyal customers act in certain ways. That much is clear when we look at loyalty ladders. Typically, we see in these levels the following actions:
The Loyalty Ladder. To recap..
1) Advocates - extremely loyal customers who champion your brand.
2) Clients - trust your brand enough to try new offers and make repeat purchases.
3) Customers - first time buyers.
4) Prospects - on the lookout for a particular product in the research stage.
5) Leads - on the lookout for a product or service and has engaged with your brand.
The difference between prospects and the rest of the levels is that the latter each involve a form of transaction. Customers and clients make purchases, as do advocates but they also transact referrals.
But without a referral programme in place, a dedicated following or an influencer on side, much of your customer acquisition boils down to the quality of your marketing. The strength of your sales and how well you qualify leads is also vital at this stage.
A loyalty ladder can help you refine both your marketing and sales approach. It’ll help you identify which customers are more likely to convert into advocates, allowing you to invest time and resources accordingly.
You don’t want to waste your customers’ time by bugging them for referrals. Equally, you want to correctly identify clients who may need a little push towards advocacy.
We do this by applying the right strategies at every level of loyalty.
Why Knowing Where to Implement Strategies is Crucial
Grab a pen and copy the layout of the table below. Remove the five traditional points of the buyer’s journey. Bear in mind, what you put under conditions and situational traits, depends on your product or service.
For example, customers of ecommerce desire new clothing. Whereas someone who needs an online course to increase profit margins for their freelance business are probably frustrated.
Try to think from the customer’s point of view. Conditions are tied to their emotions and behaviours. Situational traits are the characteristics they adopt in response to overcoming said conditions.
The actions you want them to take for each level of loyalty is the same for every business.
Here’s our table:
|Condition||Situational Trait||Action||Loyalty Stage|
|Desirous||Observant||Engaged with your brand||
|Apprehensive||Determined||Interacted with your brand||Prospect|
|Curious||Confident||Purchased your product||
|Delighted||Trusting||Made repeat purchases & bought your other products||Client|
|Motivated||Loyal||Referred another customer to you||Advocate|
Before we focus on “which” strategies to use, we should first work out “where” to use them. The strategies we’ll use will actually be the rungs of the ladder.
You want individuals to get onboard by engaging with your brand first. Just goes to show how important a customer loyalty ladder is for customer acquisition straight off the bat!
You need to already have laid some groundwork strategies that encourage consumers to engage with your brand. This can be achieved with customer reviews, testimonials and promoted partnerships . At the very least, market your product or service in a way that leads with benefits to the consumer.
Monitor the activities of leads on your website, that way you can "guesstimate" what kind of mindset they're in. How long did they stay on-page? Which materials do they seem to be consuming more of? Which internal links did they click through?
Either way, at this stage they'll be apprehensive or determined. And that's precisely why you need content that both agitates paint points and encourages determination – to appeal to both mindsets.
Of course, the strength of your content and the quality of your products also play a crucial role at this stage. Make sure to implement customer communication channels alongside content that resonates.
The first rung of strategies is between the lead and prospect loyalty levels. Collectively, they drive and facilitate customer interactions with brands.
This is the time to use strategies that satisfy any queries that prospects may have. In addition, you need to build their confidence in your brand, by positioning it as the best option for whatever it is they’re looking for.
Bear in mind onboarding a prospect should be seamless and frictionless as possible and should be the central strategy of the second rung.
You’re also going to see a lot of questions here. This is when the prospect is at their most curious about your brand specifically. Which is why you need strategies in place to show you’ve already got an answer for every question they throw at you.
As you know, communication is key to answering queries and building confidence. Therefore, if you sense a prospect is becoming more confident, switch to confidence-building strategies to compound the effect.
Collectively, a broad range of content and seamless onboarding should encourage prospects to make their first purchase. In doing so, they become customers.
Now, the customer must be delighted with the product or service as well as the overall experience of engaging and interacting with your brand. Consistently building confidence in your customers is central for retaining them as clients.
Which is why here we use post-purchase confidence boosters in our customer loyalty ladder, to make customers feel absolutely delighted with their first purchase. This has a huge impact on first impressions. If they feel they can trust you to deliver the same experience again, what’s to stop them from a repeat purchase?
You should use strategies that capitalise on delight and reward trust at this point.
After the customer has made a second purchase, you need to factor in strategies that encourage motivation and nurture loyalty. Your central strategy should be a simple method of converting customers into advocates.
Clients will feel motivated to make purchases without incentives by now. Why? Because you would’ve exceeded their expectations every step of the customer loyalty ladder.
When you ask a motivated person to do something, chances are they’ll do it! At this point, it’d be wise to ask the client for a referral. If you’ve done a great job already, you won’t even need to ask them!
Why knowing where to put strategies will inform you on which strategies you should use and already have in place?
The whole purpose of creating the table is to put you in the shoes of your consumers.
1) You’ll have a good guess at what they should be feeling (condition).
2) The situational trait drives them towards the action.
3) The strategies in place encourage that drive or make taking the action easy.
4) The consumer is promoted to the next level of loyalty
Now let’s take a look at what type of strategies would work well with our table.
Loyalty Building Strategies for Your Customer Loyalty Ladder
First rung strategies
Most marketers make the mistake of focusing on features when leads are always on the lookout for benefits. Let’s take it back to the e-commerce store – the lead wants new trainers. They’ve read how comfy, and durable they are a hundred times already…
Those are just features! How about instead you promote a free bottle of waterproof spray?
Not only is “free” a BIG benefit in the eyes of leads, you’ve shown them that you understand their problem. That their jogging shoes are often worn out too easily by the weather but with additional protection against the elements, they can last much longer!
Brands have never been perceived more untrustworthy than today. But by leading with the benefits, you show leads that you understand their problem, and that makes a great first impression.
In fact, the waterproof spray could come from a partnered brand. By co-creating value you both stand to enhance your unique value propositions. That way, you’re delving into benefits, accessing a wider pool of leads, and building trust via brand association.
Second rung strategies
Connecting with leads in direct interactions converts them into prospects. Set up chat bots and social media channels that open up potential forums to dialogue with customers.
Orientate half of your marketing materials around pain points. A good rule of thumb is to think back on what benefit your product serves. Is it to increase productivity, improve financials, streamline processes, or optimise support?
Think of the problems associated with these categories. Create compelling and authoritative content, backed up by research and stats showing the cost of leaving these issues unresolved. Wrap it up with how your product helps prevent these pain points. This compounds the effect of leading with benefits in the previous step; that you understand them.
In the other half of your marketing push, create positive and results-based content that encourages determination in the lead. Positive reinforcement is empowering and motivates them to fix their problem. In this case, switch your brand voice to a more agreeable tone as opposed to a more authoritative approach.
The whole point of altering tone in content and marketing is to appeal to leads in different states of mind. So that eventually you can make them adopt the desired situational trait and act. It also gives you insight as to how a lead is engaging with your content. If your material is compelling enough to make them interact with you, you’ve just got yourself a prospect.
Third rung strategies
The way in which prospects communicate with you and how you respond is vital for turning them into customers. Look back at the table. Are they asking questions in their interactions with you? What type of questions? Curious prospects may ask for a case study. Whereas a more confident prospect might ask about delivery ETAs.
Take due diligence to the fact that the prospect is determined to find a solution. They’re just wondering whether you’re the right fit.
Like we mentioned earlier, you need sources of reliable information in place at this stage of your customer loyalty ladder. FAQs, customer support, communication channels that clearly and quickly answer their queries – all this builds confidence in the prospect, that you’re reliable, attentive and equally as determined as they are to fix their issue.
Fourth rung strategies
A prospect becomes a customer once they make that first purchase. However, should they lose confidence after the sale, they can always cancel their order. It’s natural for customers to change their mind. Sometimes they can even revert back to a prospect once again. At which point it becomes so much harder to regain their confidence.
This is why you need to keep on using confidence-building strategies after the first purchase too. Send confirmation emails with excellent copy. Give them access to delivery trackers so they can check the status of their order at any time.
When they receive their order, follow up with an opt-in for them to give feedback. This gives you a chance to hear firsthand what the customer feels towards your brand.
Upon receiving positive feedback, gauge as to whether the customer would trust you to deliver the same experience next time. Simply end your survey asking if they’d shop with you again. Regardless of the answer, always, always reward them for their rapport and loyalty-based actions.
Say you offered them an incentive for giving feedback, that’s already one way in which you’ve delighted them. Now, keep the momentum going. A great way to do this is to reward actions with discounts. Of course, you don’t want to hand out discounts to just anyone.
Consider how the customer has engaged and interacted with your brand. Is their rapport high with you? Did they give you feedback? If so, then drop a discount code in their email. Delighting them unexpectedly with a surprise continues to build trust.
Better yet, give them early access to a new product. It shows you trust their opinion, whilst giving them an air of exclusivity. If the product is great, they’ll more than likely buy it. Trusting you to deliver the usual high standard they’ve come to expect across the whole range of your products. Upon making their second purchase, the customer becomes a client.
Fifth rung strategy
We’ve covered a lot of ground here. There’s so much to consider in addition to strategies when building a customer loyalty ladder. Luckily, there are options to streamline this process, particularly useful when you know which strategies to use and where.
Take for example customer loyalty platforms. These are a great way of keeping clients motivated to stay with you, through use of innovative rewards that stand out, during the process of which, customer loyalty is nurtured. They also help you to track customer behaviour and actions at every level of loyalty. Giving you useful data when creating your next conversion strategies.
As customers shift from motivated buyers into loyal customers, you can begin to introduce even more complex loyalty programmes. Like introducing social status in tiered loyalty programmes or encouraging engagement outside of purchases with gamified content.
Referral programmes simplify the process of identifying clients leaning towards advocacy. With the right platform in place, you can create powerful incentives, giving loyal clients that little bit of a push to becoming your very own brand ambassadors.
We’re happy to help
You’re more than welcome to contact us for free advice about how a loyalty programme can help you build your very own customer loyalty ladder.