Note: This is article #4 in the The Ultimate Guide to Creating Repeat Customers
Customer loyalty is the foundation of a company’s business. Loyal customers return over and over again, refer people to you, and consistently choose your brand over your competitors. They’re your company’s #1 fans who love and support you no matter what. You’re not even paying them to advocate for your company--in fact, they’re paying you!
In the 1700s, loyalty programs first started to emerge. Back then, loyalty programs were as simple as giving customers tokens to be used as credit on their next purchase.
Throughout the years, loyalty programs stuck around and transitioned from tokens to free food to airline mileage. The moral of the story is, customer loyalty programs have been around for a long time. But do they actually work?
If you have a customer loyalty program, you probably already know the answer as it applies to your company. If you’re eagerly nodding yes, great -- you have a customer loyalty program that’s successful in increasing your customer retention rate. If you’re scoffing and saying no, that’s fine, too. Customer loyalty programs may not be not for everyone, but let’s look at some some of the benefits of having one.
1. Loyalty programs give customers a reason to come back.
You don’t have to try as hard to get your customers to make a purchase. Loyalty programs that provide long-term purchase goals encourage additional purchases in future periods (Hanover Research). According to a research study about the influence of loyalty programs on customer retention, loyalty programs effectively increase repeat-purchase rates. This means that customers are coming back and making bigger and more frequent purchases. Loyalty programs have been proven to be profitable.
2. Loyalty programs allow you to interact with your customers on a personal basis.
Because customers are the ones who sign up for loyalty programs, they’re explicitly giving you permission to contact them about new products and offers. This means that you don’t have to use the generic new customer pitch anymore--you’ve already gained these customers’ trust. Use this to advantage by sending special promotions such as holiday cards, birthday presents, and congratulatory gifts for major events (think: graduations or weddings). Tailoring your messages and even discounts to customers in your loyalty program will really help your customers realize that you truly care about them, which leads to increased levels of brand loyalty.
3. Your competitors have loyalty programs.
“If your friends jumped off a cliff, would you?” Just because your competitors are doing something doesn’t mean you have to do it too, right? Right. You have to do it better. If your competitors jumped off a cliff, you should grab a parachute and arrange for a luxurious memory foam pad to catch your fall at the bottom. The same goes for loyalty programs. According to Colloquy, 91% of companies have a customer engagement or loyalty program, yet 54% of customers are unhappy with the reward options offered by their favorite brands--this is your call to action! Don’t be discouraged by the fact that your competitors already have programs; American consumers are members of 10 loyalty programs on average. This means you and your competitors might have the same customer in your loyalty programs--you just have to do it better!
If you don’t have a customer loyalty program, you should consider creating one. Contrary to popular belief, loyalty programs don’t cost a fortune to make! Even if you already have one, be sure to check out the follow-up article about how to design your own loyalty program to maximize its effectiveness.