Loyalty programs have been given new recognition in recent years for several reasons. First, because customer loyalty programs have a variety of benefits for companies, but also because they have become an expected part of the consumer experience. However, 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!
Customer loyalty refers to the act of opting for a particular company’s products and services consistently over its competitors. When customers are loyal to a certain company, their buying decision is not influenced by the price or availability. They would rather wait – and even pay more – to get the same quality service and product they are familiar with and appreciate.
A recent study by Rare Consulting says that, according to 83 percent of customers, loyalty programs make them more likely to continue doing business with certain companies.
Customer loyalty programs play a huge role in retaining customers. In this highly competitive market, where customers quickly switch their service providers or suppliers to another on facing any inconvenience, customer loyalty programs show the way.
Customer retention is not always easy, but data shows that customers spend 67 percent more when they are part of a sustained customer loyalty program. Truth to be told, customer loyalty programs are not short-term customer retention strategies. The longer the customers enjoy the loyalty programs, the more likely they stick to a particular brand and remain loyal.
Check the statistics below to better understand the significance of customer loyalty programs and how instrumental they are in consumer purchasing decisions:
Do Loyalty Programs Increase Sales?
Do loyalty programs increase sales? Yes, loyalty programs increase sales and revenue. Customer loyalty matters because repeat customers spend more on each transaction. Loyal customers are more likely to repurchase, refer more, and try a new offering. Did you know that increasing customer retention by 5% can improve profits by 25% to 95%? Loyalty programs are a proven incentive to make customers choose you over competitors and bring them back to shop frequently. A well-designed and implemented loyalty program has a high positive impact on your business and customer loyalty.
Why Loyalty Programs Work?
Loyalty programs work because they make your customers feel recognized and special which further leads to retention, more referrals and profits. Rewarding your customers for their loyalty and frequent engagement with your brand can help distinguish your brand from other competitors and also make customers feel valued. A great loyalty program that adds value can accelerate the loyalty life cycle.
Here are just some of the benefits of customer loyalty programs.
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 to 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 more than half of Generation K and Millennials reporting personalization as 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 the 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?
Effect of Loyalty Programs on Customers
A well-executed loyalty program shows that you care and broadens and solidifies your relationship with your customers leading to strengthened loyalty and patronage. Your brand is also perceived highly by customers who are a part of your loyalty program and eventually reinforces their trust in your business.
Impact of Customer Loyalty
Customer loyalty impacts all the important metrics important to running a successful business. If you have happy and satisfied customers, they continue to buy from you, spend more than others, are less volatile, and more likely to become brand advocates. New customers tend to cost more to acquire, and don’t spend as much money as loyal, repeat customers. Keeping customers coming back for more is critical to business success.
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. To decide if our solutions are right for your program, check out the top 10 benefits of Annex Cloud’s customer loyalty platform or request a demo today.
Since you are aware of the benefits of loyalty programs, why not implement one for your business? To begin, you need to make sure your customer loyalty program complements your business. For example:
Keeping these questions in mind, you can start to plan your program.