Loyalty programs have been given new recognition in recent years for several reasons. First, because loyalty programs have a variety of benefits for companies, but also because they have become an expected part of the consumer experience. In today’s market, simply having a traditional loyalty program is not enough. In fact, a 2015 survey found that 42% of Americans will stop shopping with a brand that they are loyal to after two bad experiences.
In order to increase loyalty program ROI and overall consumer retention, companies have taken to expanding their loyalty rewards to incorporate social and behavioral actions, such as referral rewards and points for user-generated content, while also attempting to provide their customers with a more personalized experience. The expansion depends on a combination of careful planning and the right customer loyalty software. But is it really worth the effort?
Many would argue yes! Here are just some of the benefits of customer loyalty programs.
1. Increase revenue: Increasing customer retention helps boost profits simply because loyal customers already have trust in your brand and therefore are likely to spend more. According to the research referenced above, increasing retention by just 5% through customer loyalty programs can boost revenue by 25-95%.
2. Save money: While creating and implementing a loyalty program is an investment, customer retention strategies are often less expensive than attracting new customers. Acquiring new customers can be 25% more expensive than retaining current customers.
3. Gather valuable data: Most modern consumers prefer a personalized experience, with over half of Generation K and Millennials reporting personalization is a high priority. By encouraging your customers to fill out profiles as part of your loyalty program, you can get the data so you can not only personalize customer experience, but to also create targeted marketing campaigns, increase your bond with customers, and even implement your referral program.
4. Make consumers feel appreciated: A comprehensive, personalized loyalty program will make your customers feel like they have an emotional connection with your brand and will increase customer patience in case of mishaps. You can increase appreciation by incorporating “surprise and delight” points or rewards for special occasions such as a customer’s birthday.
5. Increase sales: By personalizing the consumer shopping experience through gathered data, you can make better suggestions to your customers, which will then increase the likelihood that your customers will purchase a suggested product.
6. Measure loyalty through engagement: Program data allows you to track analytics and view reports, measuring the efficacy of customer loyalty on your sales. Measure important retention metrics like program engagement, repeat customer rate, and purchase frequency.
7. Better communication: Loyalty programs give you a direct way to communicate to customers, which can be particularly useful in an emergency such as a recall. By matching purchase dates, you can email relevant customers about a recalled product instead of sending out a generalized email which will be ignored. In addition, you can utilize your loyalty program to promote sales, special events, and showcase new products.
8. A good program is self-sufficient: While it takes a bit of work to structure a strong loyalty campaign and to find the software that fits your needs, the program itself is self-sufficient. While it is advised that you monitor its metrics, the program will continue to run on your chosen settings.
9. Attract new customers: A good rewards program can attract new customers in several ways. First, if you offer points or discounts for signup, you will automatically be able to add new customers to your mailing list simply because customers want to take advantage of discounts. Meanwhile, if a customer sees a good loyalty program where rewards are within reach, they are more likely to try your brand simply because the rewards are easily accessible. On the other hand, customers who are satisfied with your brand may share their experience with friends even without a referral program. Of course, it is fairly easy to incorporate your loyalty and referral rewards into an omni-channel platform in order to further boost referrals and attract new customers.
10. Plenty of room for growth: A good loyalty program doesn’t need to be stagnant. While loyalty programs are fairly self-sufficient, you can also change and improve your loyalty program by incorporating even more marketing aspects, including referral marketing and visual commerce. For instance, if your company needs a stock of customer photos featuring a new product, your loyal customers will be your go-to source. After all, who better to promote your brand in a photo than someone who is already familiar with your products? By creating a comprehensive loyalty program that allows for modern marketing techniques, you can turn your customers into advocates for your brand. Since modern consumers trust peers over advertising, fostering loyal customers who will then speak out on your behalf is simply a smart business move.
While loyalty programs do take a bit of work and planning, they are certainly worth implementing and will help ensure future business success.