Loyalty programs are intertwined with our daily routines, even if we don’t always recognize it. When you stop by your favorite coffee shop on the way to work, you pick up a free latte because you bought ten others over the last month. After work, you swing by the grocery store to pick up ingredients for dinner, but you always go to “your” grocery store and buy “your” brands for a variety of reasons. Before heading home, you stop by Nordstrom to exchange a new shirt with no penalty for the return, and end up purchasing two more shirts because their service is “just so great.” And before bed, you find yourself engaging with your favorite sitcom online as you watch the show, earning points along the way.
Loyalty programs are everywhere. Our decisions to purchase and interact with a brand depends on the ability to be rewarded for our time and money spent, even if we don’t always recognize it.
It’s clear that loyalty programs are here to stay, and if your brand doesn’t thank its customers for their business by rewarding them, you’re missing out on a serious opportunity that your competition may be capitalizing on. Let’s look at a few reasons why your brand needs a loyalty program in order to stay competitive and win your market.
Loyalty Programs Grow Your Business
While we might not all wake up with revenue on the brain, all for-profit companies have one common goal: to make more money than is spent. Although positive cash flow is not the only reason we’re in business, it’s always a great proxy for success. Loyalty programs are one of the best ways to help your business achieve this bottom line because they encourage your existing customers to boost their loyalty toward your brand, and ultimately purchase more frequently.
In a recent retail study, it was shown that only 12-15% of customers are loyal to a single retailer, but they represent between 55 -70% of total sales (Center for Retail Management, Northwestern University). Put simply, this means over half of your current business is likely coming from a small percentage of your total customers, and those customers are making loyal purchases on a regular basis. Additionally, loyalty programs can increase a brand’s market share by 20% and improve customer acquisition by up to 10% (Aimia).
Not only do loyalty programs increase the number of repeat customers your brand receives, they also increase the amount of repeat purchases that those customers make. In a survey recently conducted by Clickfox, 54% of respondents said they would consider increasing the amount of business they do with a company for a loyalty reward, and 46% said they already have. Talk about driving sales through loyalty!
Loyalty Programs Attract New Business (and Save You Money!)
Bain & Company’s famous metric still holds true today: it costs the average business 6-7 times more to acquire a new customer than it does to retain a current one. Loyalty programs are all about keeping your current customers happy and engaged, which lowers a brand’s need for new customer acquisition while doing wonders for its retention.
Take a moment and think about how much money you currently spend on acquiring new customer through channels like PPC, PR campaigns, content marketing, social media, and others. Is it in the thousands? Hundreds of thousands? Maybe even in the millions? I’m in no way saying traditional channels are obsolete as they are still critical to customer acquisition, but I am saying that many brands will benefit by spending less on the above when a loyalty program is added to the mix. When brands take a portion of their existing budget and put it behind a loyalty initiative, the acquisition machine will begin to feed itself, which is evident across other channels.
And the acquisition benefits of a loyalty program don’t stop there. A study by ClickFox revealed that 62% of consumers don’t believe that the brands they’re most loyal to are doing enough to reward them, which increased the chances of altering their behavior to maximize loyalty benefits by 57%. Today’s customers expect more from the brands they love, and when they don’t receive a well deserved “thank you” for their time and money spent, they take their business elsewhere. Loyalty programs open the door to easy, real-time opportunities for companies to say thank you to their customers, and are an attractive perk for customers in the market for a new favorite brand.
Loyalty programs help brands say “thank you” to their customers.
Loyalty Programs Keep Your Customers Happy
Happy customers = brand advocates, and we all know how powerful brand advocates can be. Positive reviews from brand advocates can do more for your brand than many marketing campaigns can, and the more they are rewarded for their loyalty, the likelier they are to share their great experiences on your behalf.
Brand advocates also do more than share positive brand interactions; they make up the majority of a brand’s “loyal” customer cohort (check out customer cohorts in more detail here). Most customers who will refer their friends and family come out of your “loyal” customer cohort, and loyalty programs give brands a way to directly affect this cohort’s growth. Through rewards for incentivized actions, program members have the opportunity to earn points that can be redeemed for products and services that will continue to drive their loyalty. The more customers are rewarded through a loyalty program, the likelier they are to become repeat customers and move into your “loyal” customer cohort.
Additionally, happy customers tend to stick with a brand for long periods of time, and are more likely to be consider lifelong customers as the years pass. Whether you’re driving latently loyal customers who purchase infrequently but always from your brand, or premium loyal customers who purchase at a consistent, high frequency, these groups tend to thrive and multiply when a loyalty program is offered. Loyalty programs are a great way to keep your brand’s customers happy and retention metrics high.
Loyalty Programs Help You Do Better Marketing
The best marketers know that in order to drive loyalty, they must have a thorough understanding of customers at a personalized level. Customers are normal folks like you and I, and the desires and expectations needed from your brand are different for each person. If you have limited insight into who your customers are, it’s challenging to market to them effectively. Loyalty programs give marketers a way to gather large amounts of granular data around customers user paths, purchase patterns, demographics, and more in order to create complete individual profiles. Once you have a better idea of who your customers are, you can match them with personas and group them into segments and market to them more efficiently, which offers both the brand and customer a better holistic experience.
Insight gained from loyalty program data is also an opportunity for your brand to reach customers across all of the devices they’re engaging on. When brands invest in offering an omni-channel experience, shoppers have the opportunity to engage with the company wherever they go, whenever they want. This opens up the door for new ways to reward customers for their purchases and actions depending on their device(s). Through geo-targeting, in-app messaging, and unique user quests for different devices, customers can experience your brand in a variety of ways, wherever they are.
Those are just a few ways loyalty programs will help your brand achieve success. Retailers and publishers alike are participating in the loyalty building game at a rapid pace, and it’s up to your to make sure your brand enters the ring in order to win.
*Abridged from a blog-article on www.bigdoor.com