Top Benefits of customer loyalty programs.

According to Invesp, a conversion rate optimization company, 69% of consumers say choice of retailer is influenced by where they can earn customer loyalty / reward program points. Similarly, 83% said that loyalty programs make them more likely to continue doing business with certain companies.

Needless to say, these are pretty large number and deserve due consideration.

A customer loyalty program seeks to reward frequent (read, loyal) customers with cashback, free merchandise, rewards, coupons, etc, thereby ensuring their future loyalty.

In other words, a customer loyalty program can be defined as an investment in customer retention, which makes a lot of sense for any business, considering the fact that the cost of retaining an existing customer is much less than the cost of acquiring a new one.

To arrive at a strategy for a successful customer loyalty program, it is imperative that the program be viewed as a sort of two-way communication between a brand and its customers, mutually beneficial to both.

For gaining this perspective, we can look at the benefits of loyalty programs for each two parties involved in them.

Benefits for the businesses

For a business the benefits of a loyalty program are directly translatable into benefits of customer loyalty.

Apart from the obvious outcome of existing customers sticking to a brand they are loyal to, in return for periodic rewards of that loyalty, a loyalty program also encourages the customers to shop in a greater volume than they would in the absence of it.

This is further encouraged by tier-based nature of many loyalty programs: as the customers keep shopping more and more, their status, and the corresponding perks offered by the program, increase proportionately.

A good example of a brand successfully boosting the spending habits of their customers is Dunkin' Donuts who expanded their DDPerks program to increase program members' year-over-year spend by 40%

Moreover, for an attractive enough program new customers might also start preferring a particular brand over another, Jet Airways being a good example of this with their JetPrivilege rewards program.

Also, it can lead to lower marketing costs as a result of word-of-mouth evangelism by loyal customers who will suggest a business they like to their friends and family. Customer behavior insights can also be a useful by-product of loyalty programs.

Benefits for the customers

Effect of loyalty programs on customers can be gauged simply by focusing on the benefits offered by them to customers--the more value a program adds to customers’ experience, the better chance it has of affecting their loyalty in a positive way.

The primary benefits that a customer expects from a loyalty program are, of course, monetary, cashbacks, redeemable points, discounts, free products, and such.

A successful loyalty program delivers an effortless and seamless process of collecting rewards to the customers; the time they spend reaping the fruits of their shopping should only be a fraction of the time they spend reaping them.

Respect and feeling important are also major, if less tangible, benefits of loyalty programs for customers.

Many brands, like Sephora, achieve this by making the rewards personalized for each customer, while others convey the sentiment through ease-of-use and good marketing.

Another benefit of loyalty programs, shown by studies to be much appreciated by customers, is the ability to use reward-points or cashbacks with multiple merchants instead of being restricted to just one.

Do loyalty programs work?

Well, the answer to this often-asked question in marketing circles is conditional but simple: a well-executed loyalty program works, a poorly-executed one does not.

For a customer loyalty program to achieve is objective, i.e. build customer loyalty, it is important that the business design its program with its customers in mind: their specific behaviors, spending habits, socio-economic backgrounds, money vs. value preference etc.

Of course, this is easier said than done--for a customer loyalty program to be tailor-made for a business’s specific needs and parameters, it needs data on which to base the planning and strategy.

Specialized solutions like Epsilon’s Agility Loyalty be the solution to achieve all the necessary objectives for executing a successful customer loyalty program.

However, regardless of how close a loyalty program comes to achieving its objectives, there is no denying its benefits for businesses and customers alike, making it a very good idea for you to start thinking about planning one as soon as possible.