Our Guide to What is a Customer Loyalty Program
In today’s fast-paced digital world where every industry is thriving to go through digital transformation, acquiring customers and more over converting them to loyal customers are very real concerns. While customer acquisition will always remain the priority for most businesses, research shows that getting a new customer is 5 times more expensive than customer retention. Hence, it is only logical to focus your energy and valuable business resources on retaining the existing customers by engaging them and reigniting their loyalty to your brand.
There has been provable research stating that existing customers are 50% more likely to try new products and spend 31% more than new customers. Talking about customer loyalty is easy, but it can take a lot of work to accomplish a well-equipped loyalty program that effectively engages your customers and successfully retains them by forging a strong bond with your brand.
Loyalty programs offer a way for businesses to thank their frequent and valued customers and perhaps one of the best ways there is to motivate customers for repeated purchases from your brand or might we say, pick your brand over the competitors, at all times.
Rewarding your customers by giving out points, rewards, discounts, etc., and promoting them to various levels for additional different types of benefits, like a tier system, is exactly how loyalty programs work. These rewards are usually directly proportionate to the customer’s frequency of interaction and/or repeat purchases with your brand.
Loyalty programs in a way mean reciprocity or give-and-take if you may. Getting something for free or winning a coupon or even small cash rewards invokes excitement in customers. Who doesn’t like being rewarded? Studies have shown that your existing customers who are also your loyalty program account holders are 2x more likely to spend than your other customers, so investing in a good loyalty program is the need of the hour.
There are various types of loyalty programs, depending on your business needs and based on how you would like to reward customers along with your customers’ preferences, loyalty programs can be customized like how we do at Giift. For instance, we have multiple different products which are easily integrable with your existing ecosystem and can also be customized as per your requirements. Let us talk about a few different loyalty programs, shall we?
One of the most common and simple types of loyalty programs is a point-based one. It is a fairly simple technique where customers collect points for every transaction/purchase/etc., normally proportional to the size of the given transaction/purchase/etc. These redeem points can then be redeemed to claim rewards such as discounts, cash rewards, gift cards, and so on. This motivates the customers to earn more points in order to enjoy the rewards of their choice.
You should check out our Giift Marketplace for the largest redemption options ever.
This loyalty program is solely based on customer spending, the more they spend, the more they are rewarded. It is again a straightforward technique to encourage customers to spend more. Trust us when we say that we need customers’ loyalty more than they need us for their requirements, given the tough competition in every industry, so rewarding customers for their loyalty keeps them coming back.
Next up is a tier-based loyalty program and as the name suggests, it has multiple tiers for rewarding distinct levels of customer loyalty. For instance, some customers buy more often than others and they would like to be rewarded better, on the other hand, some customers buy less frequently but spend more generously, and they too would like to be rewarded differently than a regular customer. Thus, the tier-based system helps to segment customers and based on their earned rewards can climb up the tier for even better rewards.
You can always talk to our loyalty experts to find out more in-depth about the different types of loyalty programs and what type is better suited to your business.
Up until now, all the types of loyalty programs we spoke about, were offering something or the other to directly your customers, but what if we say that even if you come up with redemption options that are not instantly rewarding your customers but instead provide them with far better value for their loyalty? That is what value-based loyalty programs are. You reward your customers by donating certain portions in their names. You can choose from diverse types of charities or social work that better align your customers’ interests. This has 2-fold benefits, where your customers will appreciate the thoughtfulness, and you do something good for society.
Now that we have discussed a little about the types of loyalty programs, we can talk about how they work. First of all, it is not necessary to adopt only one type, you can have a combination program too with two or more types of loyalty programs. A customer loyalty program also known as a rewards program works as a catalyst for improving customer relationships with your brand, it lets your customers feel valued, makes them want to come back for repeat interactions, and most of all, helps you retain your loyal customers and make them your advocates.
Customer loyalty depends a lot on your brand’s relationship with the customers. The starting point must be from the first interaction itself. From the first engagement of the customer with your brand, you need to make them feel relevant, ensure that their journey with your brand is seamless and that the customer service is flawless. By being customer-centric and focusing on making their journey memorable with your brand, you can secure a quality relationship with your customers, leaving them wanting more.
Rewarding the customers at the point of sale and improving their experience throughout the customer journey secures their trust and loyalty towards your brand. Employing an effective loyalty program to reward their consistent preference for your brand is like the cherry on top, as it results in sealing their long-term loyalty to your brand.
The basic principle of a loyalty program is to give back to the customers in return for their loyalty toward your brand. Keeping that in mind, for a loyalty program to effectively earn customers’ confidence and trust, certain parameters of customer loyalty are paramount for it. Let us dig a little to explore these parameters, shall we?
First comes rewards, an essential parameter of customer loyalty. Loyalty programs are primarily for rewarding your customers and preferably choose tangible rewards, the value of which is easily comprehensible by your customers. This helps to win their trust and loyalty further for the brand. The key is to pick simple yet worthwhile rewards for your customers to keep coming back for more.
Second, comes relevance. As per the Loyalty Report of 2017, on average a customer is part of around 14 loyalty programs, however, they only end up engaging with 7 of them. The reason is the lack of relatability. Loyalty Programs should be easy to relate to and relevant to your customers’ preferences, motivating them to engage with your program and your brand. Hence, relevance is also an essential element for loyalty programs so that they can enhance their experience, and also is worth their while for repeat interactions with your brand.
Knowing your customers, especially recognizing the loyal ones is especially important. Customers like to be recognized and rewarded based on their loyalty to your brand. If a customer frequently interacts with your brands more than the other customer, then they will expect better reward options than the other customers too. Here, having a tiered loyalty program to promote the customers based on the frequency of their interactions with your brand can help you recognize their loyalty and reward them accordingly.
Customer loyalty is dynamic and evolving rapidly and the technology to support your goals to attain a successful customer loyalty program is endless. Take it from us, since inception, we have been committed to crafting innovative loyalty solutions.
Our end-to-end Loyalty Program Management specializes in acquiring new customers, building lasting customer relationships, and strengthening brand loyalty all of which are essential in your new very own customized customer loyalty program. Might we add that our versatile exposure in numerous different industries provides unique loyalty solutions like financial institutions/financial services we provide banking rewards programs that cater to bank customers, airline miles programs, gamification programs for the retailing industry, indulging hospitality programs, telecommunications, insurance, and so on to name a few, making us one of the best choices for your loyalty partner?
Let us get on a call and come up with the perfect customer loyalty program for your business.