Decoding the Concept of Loyalty Marketing

by Natasha Ambavle |

Have you ever tried to collect sand in your palm? The more sand you try to accommodate, the more it slips through your fingers; much like acquiring and trying to retain customers.

Just like sand, the logic behind customer retention is simple; focus on retaining the sand in your hands than trying to accommodate more.

Loyalty Marketing is the science of retaining customers and making the most of existing customers by increasing their customer lifetime value. Let’s explore the concept, its impact and significance and learn about crucial strategies to amplify the scope of loyalty marketing programs.

The Concept

Loyalty marketing focuses on retaining customers and fostering brand loyalty through the means of rewards and incentives. The concept may seem simple; however, loyalty cannot be inculcated by simply offering rewards to customers. Loyalty marketing is a well-thought-out strategy that reinforces behavior through rewards. Using positive reinforcement encourages customers to repeat their actions, continue their association with the brand for a prolonged period of time and develop an affinity towards it. Long-term, lucrative engagement coupled with great customer experience turns retained customers into loyal ones.

However, with loyalty marketing campaigns, there is no one-size-fits-all policy. What works for one brand won’t necessarily work for the other. Loyalty strategies are designed bearing in mind, the brand guidelines, marketing and business goals, and most importantly customer profiles.

The Need

  • Depleting Loyalty – Two decades ago the customer psyche was much different than it is now. Customers had strong brand preferences and were loyal to brands they liked. Today, in the era of consumerism and fast fashion, customers have a lot of options to choose from and prefer to jump brands frequently rather than staying loyal to a particular brand. This is why loyalty marketing is more important now that it was ever before.
  • Increasing Competition – eCommerce has opened the door of opportunities to various business endeavors and entrepreneurs. With the increasing competition, sustaining a business is a challenge. Loyalty marketing gives the customers an added incentive to prefer you over your competitor while giving you a competitive edge.
  • Budget Constraints – It is common knowledge in the business arena that retaining customers is more cost-efficient than acquiring new ones. With limited resources and budget constraints, it has become imperative to retain customers in order to improve brand sustainability. Loyalty strategies help you with retaining customers in a cost-efficient manner and also aids in acquiring new ones with customer advocacy and referral programs.

The Impact  

Loyalty marketing programs and strategies have a massive impact on various business aspects. Let’s explore a few crucial ones.

  • The Retention Rate – The immediate impact of your loyalty marketing program is on the customer retention rate. Customers that are enrolled and engaged in a loyalty program remain associated with the brand for an extended period of time, in order to leverage maximum benefits off the program. Retained customers have a high customer lifetime value and bring more profit to the company, throughout their customer journey, than an average customer would.
  • The Acquisition Rate – Loyalty strategies are diverse; you could have a standalone loyalty program or a referral program or even a combination of both. Referral programs improve customer advocacy. In a referral program, customers are rewarded for bringing in new customers, which significantly improves brand reach as well as customer acquisition rate.
  • Data Mining – Data is the new currency and extracting authentic, legally sourced, first-party data is easier with loyalty marketing programs. With a loyalty program in place, customers are more willing to share their personal information. Zero and first-party data mined through loyalty programs can help to improve marketing strategies, customer experience and overall brand perception.
  • Brand Promotions – Word-of-mouth publicity is a strong marketing strategy. A loyalty program improves overall customer satisfaction and experience. Happy customers share their experiences with friends and family and positively influence their network. A referral program further helps in promoting the brand organically and in a cost-efficient manner.
  • The Sales and Revenue – According to a recent report by HubSpot, 40% of online revenue in the U.S comes from repeat purchases. Another report reiterates the fact that a loyalty program increases the average order quantity by up to 319%. Since loyalty strategies are aimed at improving retention rate, it has a direct impact on sales and revenue.


  • Defining your Objectives – Loyalty marketing strategies can help you accomplish various marketing and business goals, but you need to have concrete reasons and objectives before you start your programs. Having predefined goals can help you formulate better and result-oriented strategies and help you can focus all your marketing efforts on achieving your goals.
  • Identifying Your Loyal Customers –Analyze your database and trace purchase patterns of customers to identify your loyal customers. A quick survey will help you identify loyal customers and aid in designing a loyalty program that is best suited to the taste and preference of your target audience.
  • Soliciting Feedbacks – Customer feedback can be your guiding light. It will help you analyze what’s lacking and what’s working for the audience in your programs. Encourage customers to share their genuine reviews and if possible, show appreciation through rewards and incentives. It will also help with engagement and customer experience.
  • Consulting a Loyalty Partner – Consolidating with a loyalty partner is crucial. A loyalty partner has the experience and expertise to design and execute your loyalty strategy for you. It is a complex undertaking that requires time, resources and technological capabilities and a loyalty partner like Annex Cloud can help you maximize your returns.

The Loyalty Partner

Your Loyalty Partner plays a key role in the success of your loyalty marketing strategy. With Annex Cloud’s technological prowess, you can upscale your business considerably through the latest innovations in loyalty marketing.

In the new Forrester Report, Annex Cloud scored the highest possible scores in various criteria -from loyalty management to user experience, execution, innovation, performance, integration and partnership. If you want to leverage the maximum benefits of loyalty marketing, you need to connect with our Loyalty Experience Manager.

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