In the business and marketing circuit, talks of brand and customer loyalty are a common occurrence. Decades after its inception, global brands are revisiting loyalty marketing, to renew their customer’s faith in the brand, especially after the market disruption caused by the 2020 pandemic. A loyalty business model can help a brand to reinstate its position in the market, sustain and thrive by getting its audiences’ vote of confidence and most importantly their irrefutable loyalty.
With more and more brands leaning towards loyalty marketing, the concept has generated much curiosity. In this post, we aim to answer some of the pressing queries and most frequently asked questions, you may have about loyalty business models.
Table of Contents
Question 1: What is a loyalty business model and how is it different from a generic business model?
Answer: In simple terms, a generic business model is an outline of the plans and strategies the company intends to adopt in order to increase revenue and sales. The driving force behind the conception of a business model is to make money. While a loyalty model also shares similar objectives, the main goal remains to retain customers and create a base of loyal followers, that eventually does have a considerable impact on overall sales and revenue. Loyalty models are customer-centric, the approach is to increase customer engagement and satisfaction, so the probability of repurchase increases. The aim of loyalty marketing is to surge the average order value (AOV) as well as the customer lifetime value (CLV).
Question 2: What are the key aspects of a loyalty model?
Answer: A loyalty model is a systematic, long-term engagement and marketing strategy, with a diverse mix of various tactics that improve brand affinity and secure the customer’s trust in the brand. A loyalty and rewards program are among the most important aspects that ensure long-term engagement and a mutually beneficial customer-brand relationship. To increase the efficiency of the loyalty model, many brands also combine their loyalty program with a referral strategy to help with customer acquisition. A strong program, a good support team, great customer experience and a strong resolve to offer the customers better value for their money, are among the key aspects of a loyalty model.
Question 3: Do rewards really create loyalty? If yes, then does reward-based loyalty actually work?
Answer: A loyalty program positively reinforces customers’ actions. For example, if a customer is rewarded for bringing in a new customer, a reward will encourage him to repeat his action. A loyalty program accelerates the customer’s journey with the brand. With exciting rewards and an engaging program, even new customers become as involved with the brand as seasoned customers would. Also, loyalty programs have a ‘trophy value’. Customers yearn to achieve more points to earn the anticipated reward, it gives them a sense of accomplishment. A loyalty program becomes a medium to encourage customers to continue their association with the brand which gradually turns into brand affinity and eventually gives birth to unflinching loyalty. Long-term association, positive customer experience and mutual value exchange help to create strong brand evangelists and advocates.
Question 4: Does a loyalty business model focus only on retaining customers?
Answer: Did you know that 80% of your revenue is generated by 20% of your customers. Loyal customers are also the most profitable for any brand or company. But loyalty marketing does more than just improve customer retention rate. An appealing and exciting loyalty strategy can attract new customers. It can significantly improve brand image and brand equity in the market. Running a loyalty program increases brand credibility and customers’ trust in the company. It can help to expand the brand’s reach through referral campaigns as well as generate hype through word-of-mouth promotions.
Question 5: What is the process to design a loyalty model that suits my business requirements?
Answer: Your brand guidelines are a very important aspect of your brand and your loyalty business model must exemplify it. Predefined marketing and business objectives help you formulate a model that’s more profitable to the company and also give you a concrete goal to work towards. The next and the most important step is to find the right loyalty partner. A loyalty partner like Annex Cloud can design a model that suits your brand aesthetics and that appeals to your demographic. With the right loyalty partner in tow, you can focus your attention on improving customer experience which is an extremely crucial aspect of loyalty marketing.
Question 6: Is there scope for upgrading and customizing a loyalty model?
Answer: A 100%! Although it is a good practice to upgrade your program and customize it for better returns, avoid frequent changes and tweaks. The simpler the program to comprehend, the higher the participation rate. This is why it is important to rope in an experienced loyalty partner like Annex Cloud that takes into consideration various details during the program designing phase. With over 100 integrations, Annex Cloud can help you optimize your resources and create a bespoke model for you that speaks to your customers and encourages them to actively participate.
Question 7: What is the best way to design a suitable, high-efficiency loyalty model?
Answer: Annex Cloud’s expertise and experience in loyalty marketing can help you design the best fit for your brand. Loyalty models and programs need to embody the brand’s image and persona and motivate the customers to answer the program’s CTA in order to earn rewards and incentives, Annex Cloud understands this and is dynamic Rewards and Incentive Engine has also been recognized by Forrester for its efficiency, along with its omnichannel loyalty. To know, how you can leverage loyalty marketing and amplify your business growth, explore our Loyalty Experience Platform.