The Future of Customer Loyalty in 2023 & Beyond
Today’s consumers have more choices than ever. Couple that with their brand expectations that are higher than ever—it’s no wonder why driving growth in your enterprise is more challenging than ever.
Loyalty programs can be instrumental in significantly improving your key performance indicators (KPIs) while also delivering more rewarding customer experiences. In fact, KPMG reports that mature brands derive more than 85% of their growth from their most loyal customers.
Mature brands derive more than 85% of their growth from their most loyal customers.
KPI #1: Retention
Customer retention is a critical KPI for any enterprise, which makes sense since most companies lose 60% of their new customers annually. And a higher retention rate is directly connected with higher profits. Did you know that increasing customer retention rates by just five percent can increase your profits by up to 75% (Bain & Company)?
Loyalty programs are designed to build a loyal customer base that interacts with and purchases frequently from your brand. A well-designed loyalty program can significantly reduce customer churn and improve your retention rate.
Here are a few ways loyalty helps improve retention:
Collecting customer data
Customer data is essential for knowing what your customers care about—then using that data to give them meaningful reasons to keep coming back. Your loyalty program enables you to collect robust zero- and first-party data with consent at scale. The more you know about your customers, the better your ability to deliver unique value they can’t find anywhere else. And the right loyalty technology empowers you to quickly and easily act on that data to deliver relevant, personalized offers, rewards, promotions and more.
Enabling omnichannel experiences
The right loyalty solution not only helps you collect customer data, but it also enables you to push that data across your enterprise, so you can personalize every touchpoint no matter where your customers choose to interact.
Companies with extremely strong omnichannel customer engagement retain on average 89% of their customers, compared to 33% for companies with weak omnichannel customer engagement.
Enabling a value-based relationship
Most customers drop off after the first one or two purchases, which is called early-stage churn. Keeping customers engaged and delivering value from day one is one of the most effective ways to minimize early-stage churn. Loyalty programs give you the perfect opportunity to engage and reward your customers, starting from their first interaction. By using their data to serve up meaningful value between interactions, you’re showing them you care while keeping your brand top of mind and building lasting emotional bonds.
69% of customers leave because they believe you don’t care about them.
(RightNow’s Customer Experience Impact Study)
KPI #2: Customer engagement
Increased customer engagement leads to growth. The more customers engage with your brand, the more they’ll feel invested and will, in turn, invest in you. Today’s loyalty programs go beyond just engaging customers to transact. Modern loyalty platforms allow you to recognize and reward members for a wide range of engagement options—including interacting on social media, surveys, gamification, referrals, reviews, receipt scanning and more. Equally important, the right loyalty solution enables you to engage, recognize and reward your customers in personalized, relevant ways no matter where they interact.
Customers who interact with your brand, in addition to those that regularly transact, will spend 250% more than those customers who just transact.
Companies with extremely strong omnichannel customer engagement see a 9.5% year-over-year increase in annual revenue, compared to 3.4% for weak omnichannel companies. (Aberdeen Group)
KPI #3: Average order value (AOV)
Many brands are searching for ways to improve their customer experience, with improved personalization being a key component. Your brand’s ability to serve up personalized, relevant and timely offers makes a big difference in how much they actually spend. According to Boston Consulting Group, there’s a 110% increase in the likelihood of a shopper filling their basket with more items if their experience is personalized.
Unique, deep loyalty data enables you to hyper-personalize member interactions both during and between purchases. And by truly knowing your members, you can serve up meaningful incentives for spending more. Your loyalty program can be an effective way to help close your customer experience gap while driving sustainable growth.
Loyalty programs enable your brand to collect robust zero- and first-party customer data with consent at scale. And Annex Cloud’s loyalty solution comes with 125-plus prebuilt integrations that allow that data to seamlessly flow across your tech stack. This enables you to personalize your customers’ experiences at every touchpoint.
Loyalty members spend up to 18% more per year than non-members.
KPI #4: Purchase frequency
Loyalty programs are designed to keep customers coming back—both to interact and purchase—as well as incentivize profitable behaviors. And, with the right loyalty solution, you can recognize and reward members for engaging and buying no matter where they choose to do that. How about creating a promotion, for example, that rewards them for buying again in the next 30 days?
Loyal customers make purchases 90% more frequently. (Squarespace)
A returning customer purchases 30% more and brings in up to seven times more revenue per order (Inc.com)
KPI #5: Customer lifetime value (CLTV)
Increasing AOV and frequency as noted above are just a few of the ways your loyalty program can drive a higher CLTV. When you combine these with your ability to improve retention, personalize rewards and offers that members can redeem across any channel, increase engagement and drive advocacy—the net result is increased customer lifetime value.
Loyalty programs are proven to increase customer lifetime value by up to 30% or more.
KPI #6: New customer acquisition & increased market share
Your cost of new customer acquisition has risen between 60 and 70% in the past six years alone—and acquiring a new customer is five to 25 times more expensive than retaining an existing customer.
Your loyalty program not only drives more revenue from members, it’s also an extremely cost-effective way of acquiring new customers at a lower cost. People enjoy sharing things they love with others. Your loyal customers develop an affinity toward your brand and can become strong brand advocates, especially when you reward them for referring others. And the customers they refer typically stick around.
86% of loyal consumers will recommend a brand to friends and family. (KPMG)
Customers that come through referrals have a 37% higher retention rate and 18% lower churn rate. (Forbes)
KPI #7: Margin
Costs are rising across the board, so anything that can maintain or improve your margins is a plus. Not surprisingly, it costs more to market to new customers. But did you know it costs 16 times more to get new customers to the same spending level as current ones (MarTech Zone)? And the reality is that new customers who spend the same as existing customers bring in less profits when you consider the acquisition costs.
Keeping an existing customer costs 5X times less than acquiring a new one.
Why leave money on the table?
Your brand should be leveraging loyalty to not only supercharge your growth and performance but also tackle many of your other key challenges. Today’s loyalty programs go way beyond ‘buy stuff get points’. Let’s explore how loyalty could help you move the needle on some of your enterprise goals.