Loyalty Program: Why Every Business, Especially Yours, Should Have It
For the longest time, businesses have been adopting different business strategies like a product promotion or customer loyalty reward program to cope with the ever-growing competition. But can a loyalty program really help your business thrive? How should you reward your customers and what benefits will you stand to gain?
A customer loyalty program is a marketing strategy used by many retailers and corporations to create repeat sales and maximise a customers’ lifetime value to your business. While getting new customers to your business is one of the key factors to success, it is equally important to reward your customers to turn them into your brand advocates.
1. A reward program drives repeated sales
Repeated sales happen when a customer shops with you repeatedly to get or replace the similar items or service that they purchased before. With that in mind, customers are motivated to purchase from you again by giving them coupons or discounts during their purchases.. Eventually this sales hook will convert these customers into your loyal supporters and eventually spend more in your store.
2. Optimise customers’ lifetime value
Customer lifetime value (CLV) is a metric to measure the value of your entire relationship with a customer that can bring to your business. Look at the formula below to find out more:
From the formula above you can see, a customer’s lifetime value will increase if any one of the four contributing values above increases. A good loyalty program should allows you to engage and interact with customers using the right incentive scheme, hence giving them valid reasons to purchase more (increase sale value) and return to your store to shop(increase transactions).
3. Turn your loyal customers into brand ambassadors
Brand ambassador is an excellent word-of-mouth marketing that brings you valuable and new leads at relatively lower marketing cost compared to push advertisement. This is because most people prefer to shop in a store with a reliable reputation. When your customers share their positive experience shopping at your store with their friends and family, your brandget an instant and strong publicity. Rewarding your customer on their referral certainly encourages them to do more for you willingly, resulting in this boosting more new sales and loyal customers for your store effortlessly.
4. Better sales conversion rate
Some common reasons your potential customers dropped out of their shopping cart at your store could be because your competitors offer a better price, cheaper shipping cost or charges a lower handling fees. By leveraging on a loyalty program and offer redeemable free shipping offers, points redemption during checkout, birthday coupons, or points redemption for products will entice your customers to shop at your store and this will mitigate the issue of abandoned cart rates.
5. Collect customers data for better marketing plans
A customer data is required to be put on a record whenever a shopper registers for a loyalty program. By having a set of compiled data, you could turn it into useful analysis like:
- Who are your customers?
- Where are your customers from?
- How can you better connect with your customers?
- What are the products your customers interested in?
- What is the spending power range of your customers?
- What kind of coupons or discounts your customers prefer?
Accessing these important data helps you understand your customers better so that you can design a better special offer, an enhanced customer journey and even improves the targeting ofyour digital ads.
6. Improve customer's satisfaction
Customer’s satisfaction is an utmost important factor when it comes to influencing a consumer’s purchase intention. It supports a positive impression of a business which plays an important role in business sustainability. Since loyalty programs collect important information from customers, you could use this personalised data to design a customised customer journey with suitable perks and rewards to engage and delight your customers.
7. Avoid the nasty price war
Big discounts usually bring more sales transactions but this also results in the thinning of your profit margin. Here’s a fun fact:The discount-oriented customers often switch if your competitors offer a greater discount. Joining into a price war is not ideal for a business in the long run. All we want is a win-win solution that will nurture a loyal customer that loves your brand, appreciates your service and your products. Instead of giving more discounts, giving small discounts with loyalty points help customers hit the reward tier and encourage them to purchase again because they can purchase with loyalty points too!
8. Improve customer's average order value
The idea of spending more to get more rewards always encourages customers to purchase more because it gives them the idea that the earned points or discount vouchers will save them money in their future purchase. Hence, you can promote the slow-moving products or attract higher traffic to your store during the off-peak period by incentivizing those who purchase your slow-moving product or shop at your store during a specific timeframe.
9. Cultivate a positive customer relationship
When you are connected with your customers via a tiered reward system, you are establishing an exclusive experience to your customers in each tier. Treating your customer like a VIP, offering multiple flash sales and promotions to each tier and sending them first-hand offers or new product updates will give them a sense of belongingness and premium. On top of that, you should know that rewarding your customers for leaving a comment or feedback will certainly be helpful for your business, whilst you can adjust your business strategy better to cater to the niche segment of your targeted market.
10. Cut unnecessary advertisement cost
Studies have shown that acquiring new customers is at least five times more expensive than keeping an existing one. Getting a new lead requires a lot of effort to convince them to try your product, and undoubtedly, that means advertising, time and manpower whereas an existing customer that is constantly enjoying your loyalty program tends to stick around and remain loyal to your brand. In that case, you might want to consider relocating the same budget from not only attracting new customers but also develops a stronger relationship with the existing ones.
Are you ready to set up your own loyalty program?
Other than the valid reasons discussed above, another solid factor to push you to go for a loyalty program is the length and sincerity you are willing to put to show your appreciation towards your customers and make them stay engaged and hopefully convert them into your brand’s ambassadors. When you are focused on the long-run, time and money will definitely be on your side.