5 Advantages of A Loyalty Program
There are many benefits to a loyalty program in terms of financial and non-financial. Here we focus on five advantages.
1. Stop competing on price with competitors
Discerning shoppers compare hundreds of prices in a few clicks. If shoppers think of products instead of your store and brand, you may find yourself in a pricing race to the bottom, where online wins. A loyalty program stops you from competing on price.
A better way to surprise and delight your customers is by rewarding them with loyalty program which was previously unnoticed. By rewarding customers for their shopping activities you can start building connection with them.
2. Retain existing customers
According to a statistic loyal customers spend 67% more than new customers. Customer acquisition costs between 4 and 30 times more than customer retention and a mere 5% lift in retention can increase your profits by a staggering 85%. It highlights that retention is one of the most cost-effective ways of increasing your profit margin.
3. Increase Customer Lifetime Value
Customer Lifetime Value (CLV or CLTV) is the net profit attributed and measures how valuable the customer is and can calculate projected value of all your interactions with them in the future. CLV of each customer is calculated with loyalty program for implementing solid strategies to retain your customers.
It also helps in identifying behavioral data of buying habits of customers. A loyalty program can guide you to use this data on both macro and micro levels. Monitor the steps of customers and reward them in each step to increase your customer lifetime value.
4. Build personal relationships
Show your customers that you are truly loyal and value them which can be achieved by building genuine relationships with your customers. You can have customer’s data such as order history, site activity, visits, referrals stats etc. which can help you tailor your service according to their needs.
Customer needs can differ from day to day, month to month, from a different location or another season or any change of personal circumstance. A loyalty can help to identify these changes and help your customers start feeling valued.
5. Create Brand Advocates
Never think you are the only valuable customer spending money, some may not spend but generate it. These type of customers are referred as brand advocates who refer your store to their friends or relatives. 73% millennials feel as a responsibility to help out their friends and relatives in smart purchasing. Word-of-mouth is the primary factor for 20-50% of all purchasing decisions.
A two-way reward system which is proven to be the most effective way in which customer who refers will earn points and the other a discount off on their first purchase. It helps in improving customer acquisition and increase loyalty towards existing customers.