5 Benefits of Customer Loyalty Programs

5 Benefits of Customer Loyalty Programs

Coffee, Cafe

Customer loyalty programs are surprisingly simple to implement (especially online!) and can bring many benefits to your business. Beyond the simple advantage of providing satisfaction to your regular customers, here are five ways your small business can profit from running a loyalty scheme.

Customer retention

The most obvious benefit of a customer loyalty program is that it improves retention rates. Customers will want to accumulate points to get the rewards or exclusive benefits on offer, and will therefore be tempted to favour your business over a competitor’s. Since customer retention is generally cheaper than customer acquisition in the marketing world, it’s a smart business move to keep your customers loyal (and happy!)

Furthermore, as retention improves, so does the lifetime value of your customers. This metric takes into account the value of a customer since the first time they completed a purchase, instead of focusing on their current worth. By retaining customers, your business can generate maximum revenue from each customer over a longer period and improve their lifetime value, which also optimises your return on marketing investment.

Customer data

Depending on how it is set up, a customer loyalty program generally allows you to collect additional data about your target audience. Most individuals are willing to share a little extra information in return for loyalty rewards, and you can use this to improve your understanding of your customer base (make sure they are aware of this exchange, though!)

This extra information helps you to segment your customers into different categories, so as to better target your marketing campaigns and provide more relevant, valuable content.  Your loyalty program thus turns full circle: your customers give you information in return for rewards, and you give them what they want, with better marketing and the products they love – which also improves customer retention!

In 2020, integrated marketing communications are more important than ever. Mass media communications are decreasing in effectiveness and customers are learning to expect advertisement and communications that are relevant to them on a more personal level. This is why data is such a vital component for your marketing strategy – whether it be social media, traditional or digital marketing based.

Business planning

Once you have implemented a loyalty program and gathered extra data on your customers, you can use this information to better plan your business strategy. Whether the information is in terms of money spent, demographics or buying behaviour, it will help you plan your business decisions based on solid data, instead of guesses and assumptions.

For example, suppose you are thinking of starting a new product line. Your market research will provide details of your target demographic by age, gender, location, income and other factors. Comparing those to the information you have gathered through your loyalty program will instantly show you whether you have a good match or need to reconsider.

Increased customer purchases

The mere presence of a loyalty program encourages customers to spend more at each visit, to earn more rewards. You can further extend this effect by running limited-time promotions, offering extra points on specific product or service ranges (usually the ones you want to clear from stock), or even creating ‘treasure hunts’ for promotional codes hidden throughout your site. The possibilities are only limited by your imagination and your site developer’s ability!

Combining your loyalty program with marketing campaigns can also generate extra purchases. For example, you could run a simple ad that offers extra loyalty points for signing up and bonus points for spending more than a given amount on their first visit, provided they use the correct coupon code.

Competitive advantage

In a competitive global market, you need to make the most of every possible advantage to beat the competition. Having a customer loyalty program hands you just such an advantage. Indeed, the benefits are manifold, as you can see from this short list. To put it simply, the more creative you are with your loyalty program, the further ahead of your competition you will be.

These are just a few of the biggest benefits a loyalty program can offer your business. Remember to make sure the program is attractive to your target audience and kick it off with a starter bonus to entice them to sign up. Once the program is set up and rolling, it will gain momentum with every new registration and every promotion you run!


Let’s Chat Loyalty Programs!

Are you ready to set up a loyalty program for your small business? Tell us a bit about yourself below and the social media management team at The CloudSitters will be in touch soon!

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