Loyalty programs have been in existence for a long time in different forms. It is until recently that businesses have started utilizing them more than ever before. As competition continues to thrive in the business world, entrepreneurs are embracing the importance of retaining the existing customers. What is a loyalty program? Well, it is a marketing incentive that is used to reward purchasing behavior and is aimed at encouraging shoppers to return. Research has shown that only 3% of new customers return after making their first purchase. On the other hand, a study by Loyal Report indicates that 66% of consumers are likely to adjust their purchasing behavior to maximize on loyalty points. Below are some advantages of enrolling loyalty programs in your business and why it’s important you know how to implement a loyalty program.
Retention of Customers
Customer loyalty is a very crucial asset to any business. The primary aim of loyalty programs is to retain regular customers by rewarding them for their repeat purchases. Studies have shown that the probability of selling to an existing customer is higher than a new prospective customer. Also, a significant percentage of the profits come from regular customers. According to the Harvard Business Review, leveraging on returning customers provide a considerable return on investment compared to traditional strategies. An appropriately implemented loyalty program can increase overall revenue. For instance, according to Bain and Co., a five percent increase in customer retention can boost profits by up to ninety-five percent.
Provide Customer Data and Trends
Due to increased competition in the business world, the use of data analytics has become very popular. Most businesses are relying on consumer data to make decisions. The consumer’s information is recorded as soon as they register for the loyalty programs. Entrepreneurs can use the data to invigorate inventory, pricing and tailor offerings to meet the specific needs of clients. The data can also be used to determine the viability of promotions based on the consumer purchasing behavior.
Higher Cart Value
Most businesses utilize the data collected from customers to cross-sell and up-sell. Through loyalty programs, entrepreneurs can extend the warranty period, suggest new products and provide discounts on a range of products. Some of the incentives provided help to keep the business afloat even during low seasons. For instance, airlines offer mileage programs to their clients that keep them in business even during low season.
Apart from retaining the existing customers, loyalty programs can also lure new clients to come again after making their first purchase. Instituting a loyalty program in your business will help to improve customer appreciation and a likelihood of referrals. As the reputation of your services continues to spread, your company will continue to achieve growth.
Increases Customers Satisfaction
Although the incentives offered through loyalty programs may not have any effect on the goods and services, they increase customer satisfaction significantly. Furthermore, rewarding your customers will set your business apart from the rest that do not participate in loyalty programs. The programs indicate to the client that you are not only interested in their purchases, but also in establishing a lasting relationship.
Eliminate Unprofitable Customers
One of the less considered advantages of loyalty programs is the ability to recognize unprofitable customers. Some customers have the habit of making purchases only during discounts and avoid other products altogether. In the long run, these customers cost the business more money than they generate. A well-designed loyalty program can differentiate customers based on their purchasing behaviors. Therefore, the program is the most efficient method of dealing with unprofitable customers.
In conclusion, there are various ways of rewarding customers. Some of the most common methods include punch cards, loyalty apps, incentives, etc. It is advisable to choose a plan that suits your customers. How to implement a loyalty program will also depend on the nature of the business
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