5 Reasons a Customer Loyalty Program Can Boost Your Business - two women talking while looking at clothing

5 reasons a customer loyalty program can boost your business

Tuesday, December 09, 2014

As businesses strategize on how to generate new customer relationships through marketing campaigns and social media, it is essential to consider ways to build ongoing engagement with existing and repeat customers. Investing in ways to increase customer retention has a direct correlation to business profitability. According to the Harvard Business Review, increasing your customer retention rate at your business by 5% can translate into a boost of profits of up to 95%. 

With that in mind, businesses can benefit from building and implementing a customer loyalty solution that can include loyalty marketing, punch cards, customer loyalty program software, loyalty cards, and high quality customer relationship management (CRM) technology. Loyalty programs are beneficial to small businesses and large businesses alike in that returning customers can establish a regular and committed source of engagement and revenue. 

Just like the way businesses seek loyalty to the brand and products, customers also maintain goals and preferences for what they would like to experience with the product or service they are seeking. When a business can deliver effectively, with ways for the customer to continue to engage with their product or service, customers are more likely to return. In fact, returning or loyal customers will spend 67% more than new customers, so the benefits of an ongoing customer relationship helps both the customer and the business. 

Of course, recognizing the importance of customer loyalty is only the first step. This article will discuss how to build customer loyalty, the ins and outs of a customer loyalty program, statistics and trends related to customer loyalty, and how loyalty management and loyal customers can boost your business. 

Let's get started with how to build customer loyalty for your business. 

How to build customer loyalty 

The foundation of customer loyalty exists within the business's ability to build solid, consistent, and supportive relationships with customers. When customers know that you care about them beyond the business’s financial bottom-line, they are more apt to share about their experiences with other potential customers through a word-of-mouth referral, which is one of the most impactful marketing strategies for business growth and development. 
Here are some approaches to instill relational confidence for your customer base so that loyalty programs can be developed, established, and successful. 
Be readily available for your customers. The best customer experience can happen when it's most convenient for customers. If a customer has a question or request that can be addressed in real-time, they will feel assured that they can have their needs or concerns addressed at the time they occur. Business owners can strategize availability through a multitude of communication streams, whether via phone, messaging or instant chat, online forms, or through email.  Omnichannel communication refers to offering multiple options to customers that are integrated and connect back to assuring the customer gets what they need. When ecommerce platforms offer omnichannel approaches, customers benefit from multiple touchpoints that help them feel supported in the overall customer interaction process. 
Another technological innovation that may be helpful for the convenience of your customers during communication touchpoints is the use of application programming interface (API), whereby two different applications "talk" or work together. For example, if a customer reaches out to your team through social media, that message could be received in multiple platforms so that the customer inquiry is not missed and is responded to as quickly as possible.

Be consistent across all of your platforms and in-person. Email marketing should align precisely with information that is provided through any other channel, whether web-based or via social media. Customer loyalty begins with trust, and if your company shares information that is incongruent across platforms, your customers may question the consistency of your brand and business approach. Advanced marketing tools will help launch your loyalty program in that they can distribute the most important information directly to your customer. For example, a CRM system may be useful to track communication history of the customer with the company as well as track important information, like birthdays, so the company can be proactive in communicating with the customer ahead of time.

A good experience adds value to the customer. When customers have a positive experience with your brand and company, they know what to expect when they return for future business. Customer experience alone is a powerful incentive to promote repeat customers and a strong customer base over time. In fact, it has been reported that 50% of customers would consider switching to a new brand after a poor customer experience. Business owners may consider prioritizing customer service training so that there is a clear expectation of how employees should interact with their customers in real-time. Employees can strive for five star customer experiences that boost the company's overall reputation as well as the employees’ internal reputation for high quality service delivery.  

Implement a Customer Loyalty Program to reward your customers. Once positive and consistent customer relationships are in place, you can begin the process of establishing a formalized customer loyalty program. Customer loyalty programs enable consistent benefits for existing and new customers alike. The components and possibilities of customer loyalty platforms or solutions are outlined below. 

What is a customer loyalty program? 

A customer loyalty program is a defined rewards program that incentivizes customers to engage with a company on a repeated basis. Through their loyalty to the company or business, the customer may earn reward points, vouchers, special discounts, VIP identification, gift cards, or other loyalty rewards that encourage them to continue to business with the specific brand. Customer loyalty programs are designed to drive business with repeat customers, trusting that your customer base will continue to choose your brand over other competitors or options in that specific industry or market. 

Customer loyalty programs are different from business to business, but usually include a point of sale (POS) system whereby customer data, like phone numbers, can be stored. POS loyalty systems enable automation for customer transactions so that rewards systems can be easily implemented and followed. For example, a business may offer a "stars-based" reward system where the customer receives a free product after earning 20 total stars. POS systems can track the earned stars, the stars needed for the reward, and automatically communicate these reward updates through the integration of customer loyalty software. 

Customer loyalty programs should be clear and communicated effectively with the customer base. Customers should be aware of the functionality of the program, that is, how it works and how it benefits them. Whether communication occurs via a mobile app or via SMS, the parameters of the program should be easy to follow, easy to understand, and add value to the overall customer experience. 

What are different loyalty programs a business could implement? 

As mentioned, a loyalty program or loyalty solution at your company can be customized and tailored to the customer experience you would like to provide. Companies of different sizes offer different aspects of their rewards program in order to encourage customer retention. 
Here are a few examples of rewards programs that companies can offer and implement with their customer base:

  • Points-based systems. For a coffee or tea shop, it may be helpful to establish a loyalty program based on purchases made. The shop could offer points for each purchase that can be added over time. Then, at a later date, the points can be redeemed for items like a free coffee or muffin. With this type of loyalty reward system, companies can often run "specials" where customers can get double the points for specific products or services that the company selects ahead of time. 
  • Benefits-based systems. Some companies may implement a rewards program through membership. By joining, customers would have access to membership-only discounts and exclusive offers. For example, a retail store may offer a "Birthday Club" as part of the program, and members can then receive a 50% off one item coupon for their birthday. Members could present their rewards card or input their phone number during each purchase so that their membership would be confirmed. Additionally, this type of loyalty system can be implemented through marketing automation where customers receive notifications for upcoming benefits that they can take advantage of. 
  • A non-purchase-based system that rewards interactions. Brands can offer loyalty options that may not be purchased-based. Instead, rewards can be offered through different engagements or interactions with the company. For example, a grocer may offer a special discount or voucher if the customer completes a review online, posts about the business online, or even provides a private survey so that the brand understands what aspects of the customer interaction went well and what aspects may indicate a need for improvement.

Statistics and trends with customer loyalty programs 

As your brand and company strategize for how to use a loyalty reward program to generate increased revenue and business engagement, it is essential to understand existing statistics and trends related to customer loyalty. Below are the most important statistics and trends to consider in the design, implementation, and delivery process with your customer loyalty program. 

  • 57.4% of customers join loyalty programs to save money while 37.5% of customers join loyalty programs to earn rewards. It is important for businesses to understand why customers are motivated to join loyalty programs. The two primary reasons are to save money and earn rewards. Consequently, earning rewards directly influences the goal to save money and so the more benefit the customer sees in saving money with their rewards program, the more likely they will continue to engage and utilize the loyalty reward program in place. 
  • 64% of retailers say that their loyalty program is the best way to connect with customers. Loyalty programs utilize a plethora of options for communication, whether using marketing automation, social media, or instant chat. Loyalty programs can integrate customer loyalty program software that tailors connection for the customer. As a result, the loyalty program software enables ongoing connection points from the business to the customer. 
  • 69% of customers say that rewards points or loyalty options influence their decision and choice in engagement with a particular business or retailer. When customers maintain loyalty through rewards points, businesses can consider the benefit of having customer lifetime value as long as they continue engagement with their brand. 
  • 49% of customers acknowledge that they spend more after joining a brand's loyalty program. Once a customer joins a loyalty program, they understand the ways in which they can earn rewards in real-time. Customers have an increased chance of returning to brands they have loyalty programs with so that they can boost their rewards points. For example, if purchasing a new clothing item, a customer will likely first frequent the establishment by which they can earn points rather than a different establishment that they have no previous relationship with. 
  • 83% of customers say that loyalty programs make it more likely that they will continue to do business with a particular company. This statistic highlights the clear relationship that loyalty programs have with ongoing business. When a loyalty program is in place, you are setting up your business to build up customer retention. 
  • Restaurant loyalty programs increased visits from patrons by 35%. Restaurants stand to benefit the most when implementing a loyalty program. Customers are highly motivated by rewards and perks related to discounted or free items from frequent visits. 
  • 67% of customers report that surprise gifts are a significant part of a reputable loyalty program. Customers appreciate the experience of a surprise reward to incentivize their ongoing loyalty to a business. This extra perk adds value to the company's ability to maintain strong customer relationships. 
  • 44% of millennial customers report loyalty to the brands that they buy from with 52% of millennials noting that they will choose quality over price when considering their shopping patterns. Interestingly to note, brand loyalty has increased over time with younger generations and this trend is expected to continue into 2022. 

How does a customer loyalty program boost your business? 

Now that major trends and statistics have been reviewed, it is necessary to consider the ways in which a customer loyalty program can boost your business and positively impact the bottomline of your business. The 5 primary ways that a loyalty program can boost your business are outlined below:

  • Customer Engagement: Loyalty reward programs instill an emotional connection between the business and the customer. Loyalty can go both ways: the customer will remain loyal to the brand, and the business will remain loyal to the customer. As a result, the business remains at the forefront of the customer's mind and will be the brand that stands out when it comes to brand engagement and selection.
  • Customer Loyalty: Your business will grow when you have a customer base that is dedicated to your product or service. When loyalty is rewarded, customers will want to come back, meaning that they are choosing your business above other options in the marketplace. Securing regular customers translates into securing regular revenues over time.
  • Brand Impact: With a loyalty program, your brand will have more recognition and visibility than without one. Some companies create names for their program that are recognizable to customers and competitors alike. Additionally, a loyalty rewards program offers a competitive edge by increasing customer satisfaction through incentives and rewards. Consider what rewards most benefit your customer base while assessing other rewards programs that exist within the industry of your business. 
  • New Customer Acquisition: When rewards programs intertwine with referral programs, your business is able to widen the customer base significantly. Not only are loyal customers rewarded for expanding the customer base, but your business is able to connect with new customers and build new relationships for ongoing loyalty.
  • Increased Sales and Revenue: As the statistics and trends show, loyal customers are not only likely to come back to your brand repeatedly, but they will also likely invest more money into products and services with your business with the assurance that they will receive good service and a reward for their engagement. The customer lifetime value cannot be understated as this is where a business can thrive with ongoing customer loyalty.

How to implement a customer loyalty program

So, you are interested in pursuing and implementing a customer loyalty program, but where do you begin? Below are some initial steps to consider in the early phases of developing your customer loyalty program at your business. 

  1. The first step in implementing a customer loyalty program is evaluating your goals of your loyalty program and the incentives that will target the goals you've outlined. For example, it is necessary to consider if you want more referrals, more visits, increased spending, or feedback from your customers. For large companies, it may help to assess the launch of a rewards program at a large-scale. For small businesses, it may be important to consider how you get the word out about the loyalty program and how existing customers can adopt the program right away. Thus, establishing goals for your loyalty program also includes defining the strategy of your overall approach to implementing a loyalty program solution. 

  2. Start simple. You can always add elements to your customer loyalty program. So, when getting started, make sure that your rewards system is clear to understand so that users and customers can adopt it quickly and with ease. It may be useful to consider adding different touchpoints for your customers to learn about the program, whether when completing a transaction or through a marketing email they receive. Some companies offer hard or digital copies of rewards program information, including frequently asked questions, so that customers have a resource to learn more about the benefits of the customer loyalty program. 

  3. Determine the structure of your loyalty program. Will you use rewards cards? Will visits or spending be tracked? Will customers sign up for the program through established software? Building an outline for your program will help ensure that you and your team are on the same page as well as providing consistent and clear communication with your customer base. At this point in the development process, it is recommended that the structure of the program includes rules, expectations, and guidelines. There may be situations or challenges that need resolution in the future, and having a written procedure or guidelines helps enforce the structure that your business establishes at the beginning of launching a loyalty program. 

  4. Find the right software with the right tools. Customer loyalty programs are most successful when the right loyalty program software is in place. As mentioned earlier in this article, integration of loyalty program software and POS systems help businesses optimize all aspects of rewards programs. With this software, the most important data points can be tracked and assessed so that the rewards program is consistent and effective. Loyalty program software allows for automation and ease of implementation for the rewards program while also saving employees time. Instead of having to focus on manual tasks related to the loyalty rewards program, employees can continue to focus on instilling positive customer engagement and customer experiences for every transaction. 

  5. Once you launch, be sure to assess the program closely. There may be necessary changes or updates that you will discover, particularly when considering feedback from the customer experience. Allow the iteration process of the loyalty rewards program to be nimble and flexible until you find the perfect formula for driving customer loyalty and boosting business at the same time. 

Ready to get a customer loyalty program in place at your business?

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