Loyalty programs are popping up in every corner of the retail space, and that’s because businesses understand the importance of retaining existing customers and increasing customer loyalty.
Loyalty programs can differ between businesses but essentially they are a marketing system that offers rewards for the purchasing behavior of your customers. For example, you may offer a points card, and after a customer accumulates a certain amount of points they can use them towards something within your store.
Implementing a loyalty program may require resources you have allocated elsewhere in your marketing, but in the long run it can have several benefits, and here are just some of them.
1. It stewards relationships with existing customers
One of the biggest misconceptions when it comes to loyalty programs is that they are expensive, but the truth is, pursuing new customers instead of keeping existing ones can be more expensive. According to Forbes, keeping an existing customer is seven times less expensive than acquiring a new one.
Loyalty programs quite simply build loyal customers, and customers want to save money, that’s why the whole spend-a-dollar, earn-a-point tactic is so popular, especially when customers see the reward after a reasonable amount of like (aka they don’t have to collect for 12 years to get one $5 thing free). But loyalty programs can be much more than this.
Shoppers want recognition that goes beyond monetary benefits. Give those within your loyalty program something exclusive or something more personalized. Let your customers be a part of your brand story and community. Let them collect points through sharing things on social media, inviting their friends, or by participating in contests. Give loyalty members a sneak peek or samples of new products before they’re released, or invite them to exclusive events that are only a perk of being a member.
2. It helps increase sales
Loyalty programs improve customer retention and provide incentives for your customers to buy. If you’re giving your reoccurring customers incentives that are in tune with what they want, you’ll be drawing them in and encouraging them to keep coming back and of course, spending money.
One study showed that customers are only 12-15% loyal to a single retailer but they represent 55-70% of total sales. This means that half of your sales are coming from a small percentage of your customers, so nurturing these relationships are important. Loyalty programs can help do this by increasing that number of repeat customers and also increasing the amount of repeat purchases.
3. It attracts new customers
How much have you spent on attracting new customers? Although traditional marketing tactics aren’t obsolete, it’s important to think about what would happen if you took even a small portion of what you spend on the traditional media and put it towards a loyalty program. Instead of putting all your money on getting new customers, you will reap the rewards of keeping your current ones coming back.
62% of consumers don’t believe that brands are doing enough to reward them for their loyalty, which increases the chances of these consumers to change their buying habits. Give customers a reason to stay and make them feel like you care! As you start to nurture these existing relationships better, it will not only give existing customers a reason to stay but also will give new customers a reason to keep coming back. And with that, we’ll all be happy, right?
Loyalty programs can be one of your most beneficial marketing tactics, and will not only help increase sales, but also help develop a brand image for yourself that will feel more like a community and less like a corporation who is only after money.