How Does a Loyalty Program Encourage Sales and Customer Loyalty
Customer loyalty your secret weapon
If you're a business owner reading this, what kind of picture do the words "loyal customers" paint in your mind? For many business owners, loyal customers probably mean people who frequent their store or service every time that customer needs that product or service. When they want a bagel, they go to your shop, not the one on the other side of the street. When they want personal training, they go to you, and not YouTube. When they want clothing, they go to your store, and not Amazon.
With more and more businesses finding ways to be the lowest cost and fastest delivery outlet available, how can businesses ensure that their customers are actually loyal customers? The solution might be in actually expressing the business' loyalty to the customer.
Customer loyalty is a secret weapon that businesses can use to not only increase sales but also build a strong, dedicated, and happy customer base. Implementing a customer loyalty program is one of the most powerful and cost-effective strategies a business can employ. Time and time again, studies reveal that the cost to engage an existing customer is significantly less than the cost to acquire a new one, and that customers prefer doing spending money at businesses that reward them.
A customer loyalty program is not just about buy 5 things and get the 6th free. It's about creating a unique customer experience with you and your business. It's gratitude marketing - showing gratitude to your valuable customers for spending their money with you, knowing that they had other options.
Customer rewards programs encourage sales because they create emotional connection - a sense of being valued and appreciated. By offering exclusive benefits, such as discounts, freebies, and access to sales or events, businesses can keep customers engaged and motivated to make repeat purchases. Moreover, loyalty programs provide businesses with valuable insights into customer behavior and preferences, allowing the business to create a more powerful customer retention strategy, and and maintain more communication between business and customers.
In this article, we'll look at why having a customer loyalty program is such a powerful and cost-effective marketing strategy that not only increases sales numbers, but also manufactures satisfied customers for businesses of all shapes and sizes, and why investing in a value-based loyalty program should be at the top of your business' to-do list.
What is a loyalty program?
Put plainly, a customer loyalty program is a business strategy whereby the customer is offered some kind of incentive for making repeat or greater purchases. These incentives can be free items or services, discounts, exclusive perks or access, and more. customer reward system that incentivizes customers to make purchases and builds customer loyalty. The goal is to encourage customers to keep coming back to the store or business and keep spending money with them - irrespective of the type of loyalty program implemented. By providing rewards and incentives for their frequent purchases, businesses will increase sales numbers while also making their customers feel happier and more satisfied.
Why are loyalty programs important?
There are a number of reasons why loyalty programs are increasingly important for businesses. First, data shows over and over that loyalty programs boost sales, and this means more cash flow to the business. Another reason why loyalty programs are important for businesses is because of customer retention rates. Time and time again, market data shows that the cost to acquire a new customer is multiple times higher than it is to engage someone who already is a customer (and in some industries, up to 25x more expensive!). Still further, loyalty programs tend to build ambassadors out of your clients who are happy to share their positive customer experience with their family and friends, whether by word of mouth marketing or social media shares. A loyalty program is a system that rewards customers for their ongoing patronage, typically with discounts or points that can be redeemed for products or services. By offering these incentives, businesses can attract new customers and increase their sales by encouraging repeat purchases.
How do loyalty programs encourage sales and customer loyalty?
It's not magic to understand how and why customer loyalty programs are so powerful at helping a business increase sales and boost customer satisfaction. Looking at it from a customers discounts perspective, no matter what kind of program design, they are paying less for something they are buying. For instance, if the business has points-based loyalty programs, where the customer gets a free coffee every time they reach 100 points, if it takes the customer 10 coffees to reach the 100 points, in their mind they are getting 11 coffees for the price of 10.
Another powerful effect of a customer loyalty program is the community aspect. People enjoy being part of a community, and loyalty programs do just that - enroll people into your business' community. Whether it's being given insider status or being offered exclusive perks, a loyalty program creates intimate connections with customers.
On the sales side, loyalty programs can be used to create personalized rewards for your customers. By looking at customer behaviour and purchase history, you open up a level of personalization and dream up awesome incentives and cool benefits that are uniquely tailored to your customers, as a whole or even on an individual level.
The different types of loyalty programs
A customer loyalty program can be as simple or as complex as you would like it to be (although I'm willing to wager that most business owners prefer a rewards program that's simple and easy to use). Customer loyalty programs can be based on number of purchases, such as a stamps-based program (buy 5, get the 6th free); can be tier-based programs (earn 100 points, unlock this reward; earn 500 points, unlock an even greater reward); can be referral programs (bring in 10 friends, get 1 month free); can be based on discounts or gift cards (spend $1,000.00, and earn $100 discount), and more, as this list isn't exhaustive. (As an aside, the Lealtad App allows your business to create all of these kinds of loyalty programs and more!)
Irrespective of the kind of program deployed, an effective customer loyalty program must align and promote your business objectives, which means increased revenue and happier customers.
The benefits of loyalty programs for customers and businesses
Successful customer loyalty programs accomplish a number of different things all at the same time. Benefits to customers include an increased sense of value for the money they spend with you, discounts and perks for the products and services they were in the market for, increased appreciation from your business, and the feeling of being part of a community, among others.
A well-executed loyalty provides lots of ongoing benefits for the business, as well. The most immediate and impactful benefit will be an increase sales and revenue. Another benefit will be more regular and consistent traffic and contact from your customers. Another benefit is the spread of goodwill as your customers become ambassadors, helping to market your business to family and friends by word of mouth and by social media. Still yet, another benefit is that you learn so much more about your customers and their buying habits, allowing you to adapt product or service offerings to better suit the needs of your customers.
How to Design a Customer Loyalty Program Effectively
In the past, designing a successful loyalty program required careful thought and planning, from how to enroll your customers, to tracking and redemption. These steps traditionally required hard costs (such as for those reward punch cards or plastic tags) and a lot of manual effort from both the business (to keep track of rewards earned and redemptions) and customers (keeping those cards or tags on their person at all times).
A well-designed program should be easy to use for both the business and the customer, offer compelling rewards that actually encourage your customers to take action, and help to foster an amazing customer experience. Moreover, with more and more business being done online, it should be a program that can be executed virtually, without the need of any physical cards or tags, or even for the customer to be present at a location (unless that is a goal of the program). Fortunately, with an innovative customer loyalty program solution like Lealtad, you can launch an easy to use campaign that incorporates all of these design elements in minutes.
How to market and promote your loyalty program
Marketing and promoting your loyalty program is key for increasing sales and customer loyalty. Here are 3 ways your business can quickly market and promote your loyalty program:
- Post signs at the front door and point of sale: if you have a brick and mortar business, simply, put up signs in the front of your location, at or near the point of sale, on tables (if you have). Take a few sheets of paper and let your customers know that your business has a rewards program.
- Post on social media and website: create posts for social media your website letting your customers know that you've launched a rewards program. You can make this a seamless experience by having a signup form online, and allowing your customers sign up right then and there (which, by the way, it's how its done when you use the Lealtad App).
- Incentivize your customers to join the program and share it with others: let your customers know that by joining your rewards program, you'll help them get started by adding points, and that they can quickly earn extra points by sharing with others they know who would make great potential customers.
How to Measure Your Customer Loyalty Program Effectiveness
Measuring the success of a loyalty program is essential for businesses to know whether their investment in the program is paying off. There are several metrics that businesses can use to evaluate the effectiveness of their loyalty program in encouraging sales and customer loyalty.
One of the first metrics a business may use to determine whether their loyalty program is working is whether there is an increase in sales and revenue. Another metric might be reduced customer acquisition cost (since business is being driven by your current customers, and less budget has to be spent on new customers). Another metric might be an increase in the average level of spending of your customers (an increase in their average order value). Still another metric to measure the success of a campaign might be customer purchase frequency, and how much foot traffic has increased. While this list is not exhaustive, you can easily see that there are a multitude of ways for your business to measure the success of a customer loyalty program.
To measure the success of such a program with your customers, you can start by asking for customer feedback (and maybe reward your customers for taking part in a customer satisfaction survey!). Another metric might be to ask for customer interviews to share on your website or social media channels. Finally, just look at your overall customer engagement, however that works. Are they showing up to your business more frequently? Are you seeing more activity on your website and on social media? These are all signs that you are offering good loyalty program benefits, and that you are using effective customer loyalty program practices.
Conclusion
A loyalty program is a great way to boost sales and build customer loyalty. Loyalty programs enable businesses to reward customers for repeat purchases, encouraging them to return and purchase more products or services. Through loyalty programs, businesses can offer exclusive deals, discounts, bonuses, or rewards to loyal customers. Loyalty programs also give businesses valuable insights into customer preferences and behaviors which can be used to customize offers.
The Lealtad App makes it incredibly quick and easy for any business to create and launch a great customer loyalty program. There are a number of different program types of available, you can customize the campaign elements (like sign-up form and digital loyalty card) with your business logo and color scheme. Best of all, the entire program can be set up in minutes, and everything is run virtually in the cloud - no paper card or plastic tags, no expensive bulky hardware. Set yourself apart from the competition, start generating more sales and making happier customers with the Lealtad App. You can get started to today for free with a 14 day risk free trial.