It’s thought that increasing your customer retention rate by 5% can increase profits by as much as 95%, while some have argued that retaining consumers is at least five times cheaper than acquiring new ones.
With this in mind, it should come as no surprise that businesses are increasingly inclined to operate brand loyalty programs, which look to incentivize repeat purchases and optimize the value of individual customers.
But what are the primary benefits of brand loyalty programs, and what should customers look for when appraising individual schemes?
The Benefits of Brand Loyalty Programs (for Both Customers and Brands)
From a business perspective, operating successful brand loyalty programs enable companies to build their consumer base without having to compete directly on price with competitors.
Instead, they can offer rewards to recurring and returning customers, which in turn negates the need for customers to compare potentially hundreds of real-time prices in a short period of time.
By not having to compete on price alone, firms can also optimize their profit margin without compromising on sales volumes, while also creating an extended sense of loyalty across the board.
This also leads to improved retention rates, with loyal customers thought to spend around 67% more on average than new consumers. This is another advantage that suits both entrepreneurs and customers, thanks to the cultivation of trust and an improved consumer experience.
These are some of the most striking benefits of operating a loyalty program, whether you consider the perspective of business owners or customers.
What to Consider When Opting into a Loyalty Program
In the modern age, a growing number of businesses are now operating loyalty programs, making it hard to distinguish one from another in some instances.
However, there are at least some key considerations to keep in mind before opting into a loyalty program, including the following:
- Is the Offer Exclusive?: The best loyalty programs have clear and well-defined incentives, which create identifiable value propositions and a compelling case for customers to participate. You should definitely seek these out when comparing loyalty programs, with exclusivity one of the most common incentives used by brands. This will enable participants access to offers and deals that they otherwise wouldn’t receive, creating tangible value across the board.
- Are There Multiple Engagement Points?: On another note, it’s also important to engage in loyalty programs that offer multiple points of entry. This will depend on the underlying model of the business in question, of course, but the development of multiple engagement points will enable customers to participate without having to change their shopping or purchasing habits.
- Is There Relevant Content?: While incentives may be key to a successful loyalty program, firms should also keep their customers engaged through the publication of insightful and relevant content. This is definitely something that customers should look for when appraising potential loyalty programs, as brands that publish relevant and regularly updated content are usually focused on engagement and the needs of their individual consumers.
The Last Word
Whenever you look at or appraise loyalty programs, you’ll see numerous types of models available. One of the most popular is the points-based model, which is utilized by brands like Blume and sees customers accumulate points that can be subsequently redeemed for freebies and cashback.
Some brands also operate tiered loyalty programs, where customers earn direct benefits depending on their rank. This is best epitomized by underwear brand ThirdLove, which creates a clear incentive for customers to spend and look to optimize the value of individual consumers.