For any business, the ability to keep its customers is key if at all there is to be an increase in profit margins. Statistics show that it costs a business considerably more to acquire a new customer than it costs to sell to an existing customer – up to 25 times more. As a result, businesses have become more innovative in their quest to ensure that they are able to retain their favourite customers. It is for this purpose, that the loyalty program was developed by businesses.
A customer loyalty reward program, is a marketing tool that works to incentivize frequent customers to buy more from the business. It is essentially a rewards program that a company offers to its frequent customers. Loyalty reward programs may give customers coupons, free merchandise and other rewards. Various companies have come up in a quest to aid businesses with their customer loyalty programs. Customer loyalty reward programs may not be cheap. Their cost may be as much as 6% of the sales revenue. However, if well executed, their benefits far outweigh the costs.
The Importance Of Loyalty Reward Programs
Firstly, the program enhances positive customer experience. Customers will easily move to a competitor if they don’t feel appreciated by a seller. For this reason, it is paramount that as a business, you are able to make the customers feel valued. A loyalty program enables you to communicate your appreciation to the customer for buying from you. The idea that a customer is able to get more for their money aside from the product by getting points endears them to the business and they are sure to buy from you again. This draws hugely on the concept of power of reciprocity- if a customer gets a positive treatment from a seller in this case through the loyalty program, they are highly likely to return the favour through more purchases as well as referrals.
Secondly, the loyalty reward program communicates to the customer that it is worth it to come back and buy more products. This is because, the customer is aware that with more purchases, there are more rewards. In addition to these monetary rewards, special treatment also serves to make customers loyal. The knowledge that they will get a smoother and more personalized experience when shopping at your business will surely lure them to keep coming back time and again.
Another key benefit to you as a seller as a result of the loyalty program is referrals. The importance of referrals to any business cannot be overstated. Customers are highly likely to refer your business to their friends if they had a positive experience at your business. You may also design a reward program to customers based on referrals- if they refer someone to your business, you reward them. Referrals can generate as much as twice the sales generated by paid advertising. Referred customers also have a high retention rate as shown by studies.
Loyal customers possess the ability to grow a business faster than sales and marketing. Loyal customers will buy from businesses they like often and will communicate their positive experiences with family and friends. This kind of marketing has proven over the years to be more effective in attracting new customers than paid advertising. These customers who have been referred to the business will then become loyal customers. The importance of loyal customers to a business is huge. This is because, according to statistics, revenues in excess of 40% for online retailers in the USA are generated by repeat customers who make up 8% of the visitors to the online sites. As such, customer loyalty reward program is a sure way to enhance customer satisfaction and increase your business revenue.