10 Benefits of Implementing a Customer Loyalty Program
Currently in the US, there are 3.3 billion loyalty memberships, says a report by Accenture. The report also confirmed that 90% of the companies have some sort or variation of loyalty program.
So why are brands still investing in the age-old loyalty strategy? Well, because 3.3 billion is a staggering number, which is only escalating and every brand knows a retained customer is more valuable than a newly acquired one.
The strategy may be decades old, but the dynamics of loyalty programs are periodically constantly evolving to appeal to the tastes of the newer audiences, cater to the need of the hour and cope with the ever-growing competition.
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!
What is Customer Loyalty?
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.
Scope of Customer Loyalty Programs
A recent study by Rare Consulting says that, according to 83% 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.
Why Customer Loyalty Programs are Imperative for Businesses?
Customer retention is not always easy, but data shows that customers spend 67% 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.
Customers Loyalty Programs –Statistics and Trends
Check the statistics below to better understand the significance of customer loyalty programs and how instrumental they are in consumer purchasing decisions:
- 69% of customers say that loyalty programsinfluence their choice of retailer
- 57% of customers join loyalty programs because they want to save money, while 37.5% go for it to receive rewards
- 50% of customers say they would change their behavior to attain a higher tier of the customer loyalty program
- 76% of customers believe that loyalty program strengthens their relationship with brands
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. 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.
How to Develop Customer Loyalty with Loyalty Programs?
Loyalty programs work because they make your customers feel recognized and special which further leads to retention, more referrals and profits. You may wonder, customer retention programs are based on what concept. The answer is simple – rewarding positive behavior. 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
- Improved Customer Engagement – Customer engagement is a very important aspect that has a direct impact on brand sustainability, especially in the long run. A brand that doesn’t connect with its audience has a low recall value and struggles with creating a reliable brand image. Loyalty program is great of way of increasing customer engagement. The customers are more open to receiving emails or other marketing content from brands when they are members of the brand’s loyalty or rewards programs. The program itself ensures complete customer engagement and helps in strengthening the bond between brand and its customers.
- Impact on Brand Affinity and Loyalty – Consistent brand engagement can help to build brand affinity, which is further strengthened by a loyalty program. Rewards, gifts and incentives help to create a satisfying customer experience, which in turns builds brand affinity. A prolonged, consistent and lucrative customer-brand association help in boosting brand loyalty which helps to stand out in the crowd and gives the brand a competitive edge.
- Improves Customer Experience – Customer experience is the aggregate experience a customer has with the brand from pre-sale to post-sale processes. Most brands nowadays are trying to create a wholesome experience for their customers and one of the easiest ways to do that is through a loyalty program. Expectations of earning a reward creates anticipation and excitement and receiving the reward significantly improves customer satisfaction, thereby creating a wholesome and positive customer experience.
- Increased Customer Retention – Data shows that, 84% of customers say they’re more likely to stick with a brand that offers a loyalty program and 66% of customers say the ability to earn rewards actually changes their spending behavior. One of the prime advantages of a loyalty program is that it has an immediate and evident impact on the customer retention rate. A retained customer is an asset to any brand, they bring more revenue, have more chances of becoming brand advocates and represent the brand as a true brand loyalist.
- Increase in Sales and Revenue– The research conducted by Frederick Reichheld of Bain & Company that states, “increasing customer retention rates by 5% increases profits by 25% to 95%” still stands true. It is a known fact that customer acquisition costs, exceeds retention costs. Retained customers will bring more profit to your company for a reduced cost and help to boost sales and revenue.
- Increased Customer Lifetime Value – The net profit attributed to a certain customer is known and customer lifetime value or CLV. A loyalty program has a direct impact on CLV and significantly improves the longevity of the brand-customer relationship. It gives the customer a motive other than the brand’s products and services to remain associated with the brand. Moreover, if the loyalty program is engaging and offers meaningful rewards it further helps in increasing the CLV which in turn ensures repeat purchases for a prolonged period of time.
- Reduction in Attrition Rate – Customer attrition is a problem faced by numerous brands across sectors. Loyalty programs help in combatting this grave issue. Since loyalty programs improve customer engagement rate, the attrition rate sees a significant decline. Customers remain associated with the brand in lieu of rewards and incentives which has a negative impact on customer churn.
- Fosters Brand Advocates – A happy customer is a vocal customer. Loyalty programs improve customer satisfaction to a great level which in turn promotes brand advocacy. Brand advocates positively influence their network of family and friends and help with brand penetration. A referral program can further help in creating brand advocates and bring in more referrals.
- Aid in Customer Acquisition – Brand advocates influence new customers and refer the brand to them. If a loyalty program offers great rewards, it aids in promoting brand advocacy and tremendously helps in widening the customer base.
- Access to First-Party Data – In 2021 and in years to come, data will remain a priceless commodity, replacing oil in its value. Loyalty programs enabled you to ethically source first-party data while adhering to general data privacy compliance rules. First-party data can help you access your standing in the market, give you a better understanding of your customers and can help you design better business and marketing strategies. Customers are more than willing to share their information while participating in loyalty or a rewards program, which makes loyalty programs the best means of extracting data.
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.
How to Start a Customer Loyalty Program?
A loyalty program is a complex business strategy that needs to be customized to suit your business aesthetics. With Annex Cloud’s expertise and experience, you can design a bespoke loyalty program that resonates with your brand personality and helps you achieve your business and marketing objectives. Click here, to connect with our Loyalty Experience Manager for a free demo.