Five main benefits of loyalty programs for retailers
We’ve just touched on the benefits of customer loyalty programs – so let’s now take a look at five of the key ones.
1. Stop competing on price with competitors
Today, it’s too easy for discerning shoppers to compare hundreds of prices in just a few clicks. If they’re only thinking about the products you sell instead of your store and brand, then you’ll find yourself in a pricing race to the bottom. And it’s the larger stores like Amazon that’ll win.
One of the biggest benefits of customer loyalty programs is that they can stop you from needing to compete on price alone. By connecting with your customers’ emotions, it gives you a way to set your store and your brand apart – offering a much more enhanced (and personal) customer experience.
Let’s elaborate on that.
Studies show that when a customer makes a purchase, the decision is highly emotional. Do you sell products that people buy through desire and not a necessity? If so, it’s crucial you appeal to their emotions. Customer loyalty benefits are a highly effective way to surprise and delight those who shop with you – rewarding them for something that previously went unnoticed.
Each time you reward a customer, you’ll appeal to their emotional side. By doing that, you start building a bond. As that develops, they see you as more than a range of products. In turn, it strengthens their loyalty – encouraging repeat purchases that boost your profits.
2. Retain existing customers
Loyal consumers spend 67% more on average than new ones. That’s a stat you can’t afford to ignore. At the same time, acquiring customers could cost you at least five times more than retaining existing ones. Apply this thinking to your store and you can see the positive impact it can have.
Even in difficult times, members of a customer loyalty program can bring more value to your store. Our data from the first COVID-19 lockdown reveals how order numbers from signed-up members were far higher in April compared with March.
All this shows how retention is one of the most cost-effective ways of growing your business. A major benefit of loyalty programs is you can do more to keep customers coming back and spending more. As you start to turn existing customers into loyal ones, you’ll see the importance of customer loyalty management shine through in the long-term.
For more reasons why retention is so important, see Part 1 of our 36 ecommerce loyalty facts.
3. Increase Customer Lifetime Value
Customer lifetime value (CLV or CLTV) is the net profit attributed to the overall relationship you maintain with a customer. It tracks how valuable a customer is to you now – and how much this ongoing bond is worth in the future.
Why is this important? Well, figures show that you’ll see most of this 365-day “value” within just 30 days. Two-thirds of that is realized on the first day alone, rising to 79% by three months.
With LoyaltyLion’s customer loyalty program software, you can work out exactly what the CLV is for each of your customers. With all the stats we provide, you can inform solid strategies that retain your customers.
The benefit of a customer loyalty program here is that you have data on a person’s unique buying habits. We saw earlier how purchases are emotional decisions, so it makes this data all the more vital – helping you to better understand their needs.
After all, the data you have access to is like a pile of bricks ready to be assembled. And one of the benefits of loyalty programs for retailers is making sense of this data too. Put simply, you can see the steps your customers take before they buy.
That means you can reward them at each step of the journey – and increase your CLV too.
4. Build personal relationships
To create this emotional bond and make your customers feel loyal to your store shows how much you value them. At LoyaltyLion, we believe you can achieve this by building genuine relationships. Your customers are unique – so treat them differently.
Data is important.
We spoke about this in the section on how to retain customers. But it can’t be ignored. With the LoyaltyLion platform, you can access valuable customer data and insights such as: order history, site activity, visits or referrals. Knowing more about who shops from you is a huge benefit of loyalty programs. That’s because it means you can better tailor your service to their needs.
Often, companies only segment customers into one or two categories. This makes customers feel invisible or under-valued.
We know there is more to a customer than just generic segments. And we can also see that customers are increasingly looking to form a genuine bond with the brands they buy from. After all, we know 66% of people will join a loyalty program if it builds an ongoing relationship.
With LoyaltyLion’s data-driven platform, our loyalty program management tools give you the power to provide a unique level of service. It’ll stop your customers from feeling invisible and start feeling valued. With it, you’ll start to realize the longer-term benefits of their loyalty to you.
5. Create brand advocates
Your most valuable customers aren’t only the ones who spend money. They’re also the customers who generate it instead. We call them “brand advocates”. And they’re the ones who’ll refer your store to their friends, family or – for those on social media – their followers.
Another benefit of a loyalty program is that you can build a network of advocates. Past research shows at least 80% of people trust word-of-mouth (WOM) recommendations from friends or family more than any other form of marketing. Meanwhile, WOM is the main factor for up to half of all purchasing decisions, according to McKinsey.
In addition, 86% of consumers engage with the brand they’re loyal to by spreading the word. It’s the power of advocacy in action.
Using a two-way reward system, you show how much you value your existing customers. And you’ll get a new one too. It’s an effective benefit of customer loyalty programs for everyone.
If your customer refers their friend or relative, for example, give one point and the other could a discount off their first purchase. Each is a different loyalty program perk – but both works to bring in new shoppers and keep existing ones loyal to your brand. A win-win situation!