Many businesses struggle to stay profitable while dealing with increased local and online competition. Markets saturated with companies that offer similar products and services should offer a loyalty program that will increase customer retention and satisfaction.
The Monetary Benefits of Loyalty Programs
There are proven benefits to customer loyalty programs. For example, they help acquire new customers and retain old customers. In fact, loyalty programs and data analytics go hand in hand because sales, marketing and customer service data is beneficial for understanding to and adapting to customers. Loyalty programs are also a useful tool to win back customers who have defected or temporarily turned to a different brand. Loyalty programs also companies to focus on profitable customers and weed out unprofitable customers. That is, business owners can simply select the highest spending customers for their loyalty program.
The Conceptual Benefits of Loyalty Programs
The benefits of loyalty programs aren’t just limited to financial rewards. Loyalty programs are a great marketing tool that will raise awareness of the brand and company. As a result, the company will enjoy a good reputation among customers and competitors alike. Additionally, the company will gain exclusive marketing data and insight into which incentives work best. A loyalty program will help build mutually beneficial relationships between the company and lifelong customers. In the end, a loyalty program will increase the customer lifetime value (CLV) rates.
The Most Popular Loyalty Program
A simple point system is one of the most popular loyalty programs. For example, many grocery and retail stores offer membership cards that allow the users to collect points which can be redeemed for discounts or free items. In fact, all major credit companies offer cash back benefits using the simple point system. The most effective point system allows consumers to choose their reward category. For example, credit card owners can choose target spending categories, such as gas, groceries or restaurants. Keep in mind that consumers are often confused by complex reward systems that equate points to money or percentage discounts for future purchases.
Tiered Loyalty Program
There are obvious differences between a silver and platinum membership level. A tiered loyalty program helps companies reward both low and high spending customers. For example, low spending customers can receive short-term base offerings while big spenders can receive long-term, lucrative benefits. Tiered loyalty programs work well with industries with higher prices and commitments, such as hotels, airlines and insurance companies.
VIP Benefits with a Price Tag
Sometimes, loyalty programs can come with a basic membership fee that opens the door for exclusive benefits. For example, many wholesale retails, such as Costco, offer membership cards that come with unique discounts and rebates. This system is most effective with businesses that require frequent purchases. The membership fee removes standard inconveniences that regular customers must experience. For example, Amazon Prime is an excellent of how paying customers are rewarded for their membership.
To recap, loyalty programs are very beneficial for sales, marketing and customer service purposes. The two most popular loyalty programs are point systems and tiered programs.