Loyalty Program | 3 mins read

Benefits of a Loyalty Program

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Cynthia Vespia

By Cynthia Vespia

What is a Loyalty Program?

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A loyalty rewards program is used by large and small businesses to encourage repeat business. Customers are incentivized to spend money to get free or discounted opportunities. Through every purchase the customers earn program rewards. The more that's spent, the better the rewards that can be redeemed.

Most businesses build customer loyalty programs as a way to increase customer retention. The retention rate is often a direct reflection of how hard a business worked at building brand loyalty.

Typical loyalty program incentives include-

  • advanced product information
  • early sales access
  • discounts or free merchandise
  • free or expedited shipping
  • discounts for loyalty card holders only
Signing up for a loyalty program, or rewards program, can be done in store or online. Customers will give some information such as an email address and phone number. They then become part of a system where rewards are offered to their unique identifier. Every purchase made using the loyalty card will earn points towards program rewards.

Purpose of a Loyalty Program
The programs work by offering to reward customers for repeat business and providing the company with consumer data that can be used when developing marketing programs.

Using a loyalty program offers additional details on customer engagement when it comes to purchase transactions. Case studies have shown the program works best with high-volume businesses. When the customers become loyal to the brand, it helps add value that will not only attract repeat customers but recruit new customers.

To make sure brand loyaltybrand loyalty is built, the rewards customers are able to achieve should become part of their customer experience. When customers get invested in the loyalty program they will stay with it to make sure they can redeem points earned.

  • Loyalty programs are offered by businesses to retain existing customers and attract new customers.
  • Loyalty programs offer incentives like discounts or rewards that the customers get free through repeat business where they earn points with every purchase.
  • Loyalty programs are beneficial to companies by building customer loyalty and gaining the ability to profile their average buyer.

Benefits of a Loyalty Program

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A loyalty program is simple in theory, but with so many options on how to proceed with developing one it can be confusing. Here are some best practices for creating a successful customer loyalty program.
Customer loyalty programs offer several benefits. Including-

Increased revenue
Case studies from Accenture shows customers signed up for a loyalty program increase revenue by 12-18% more than those customers who aren't.

Customer retention
Building brand loyalty is important to business. Loyal customers will remain loyal when incentives are offered. Retaining customers is a lower cost than trying to acquire new ones. The financial savings for customer lifetime value is also a benefit of having a loyalty program.

Competitive advantage
Having a loyalty program offers an option of conversion for new customers. Any type of rewards program would be enticing for the customer to choose one business over another. Having a program in place is an advantage when the difference between businesses isn't significant otherwise.

Customer relationship
Loyalty programs have an added bonus for the business offering them as they help collect data on the shopper experience. Gathering information on personal preferences and shopping habits helps when it's time to create marketing strategies.

A better customer experience
Loyalty programs make sure customers feel a connection with the brand. Because they are rewarded for their continued business, it gives them a better overall experience.

  • Points system or Points program
  • Tiered loyalty and threshold-spend
  • Punch-car or loyalty card
  • Fee-based

Conclusion to Loyalty Program

  • A loyalty program is a marketing strategy used by companies to encourage repeat purchases from customers through incentives.
  • Loyalty program examples include points program, fee based, tiered loyalty and punch loyalty cards.