Does your company currently have a customer loyalty program in place?


If not, you might want to think about implementing one. Not only does it help strengthen the relationship between your customers and the company, it can help your bottom line as well.


In today’s post, we delve into the logic behind a customer loyalty program and show you how implementing one can help your business succeed.


customer loyalty program


What is a customer loyalty program?

So what is a customer loyalty program?


According to Ivana Taylor it is a marketing tactic that utilizes a structured rewards system for customers in exchange for desired behaviours.


This means that every time a customer completes a desired task (such as making X number of purchases in a year or spending X number of dollars with your company) they receive a reward of some kind.


The reward system helps to reinforce the types of activities desired from your customers. Additionally, it positively affects how customers feel about the company. The company gives them something positive in return for their business, thus making the overall transaction a gratifying experience for the customer.


Customer loyalty programs can also be seen as a customer service function. One study found that 93% of customers who received excellent customer service would make repeat purchases with that company. Since loyalty programs are part of a company’s customer service function, this means that companies with loyalty programs can expect to see additional purchases made by its customers.



What is the value of a customer loyalty program?

You may think that the costs of a customer loyalty program far outweigh the benefits. This is definitely not the case. If an appropriate program is put in place, companies can expect to see numerous benefits. Let’s explore some of them.



Customer Retention

One of the functions of a loyal program is to retain customers. And based on the numbers, it can do just that. One study found that a 5% increase in customer retention correlates with a 25% minimum increase in profit. This makes retaining customers a very important function.


Now, you may be wondering why loyalty programs can help profits. It is largely the result of customers becoming comfortable with the type and quality of the products or services you sell.


If you are an unknown company, new customers tend to make smaller purchases to test the waters. If they like what they get, they will become more comfortable with the company and 60% will purchase more frequently from your company. Those that decide to make frequent purchase may also feel inclined to start making larger purchases because they have learned your company delivers a quality product.


In the end, the combination of larger and more frequent purchases all help to increase company profits.



Earn New Customers

If your customer loyalty program focuses on offering great customer service and allows users to leave ratings and reviews, you have a winning combination. On average, customers who receive great service tell 11 people about their experience.


This is important because customers like to hear independent reviews of products and companies before they themselves become customers. If they can see others’ positive experiences or hear positive experiences from their friends and family, they are more likely to make a purchase.



Increase your sales potential

Customer loyalty programs reward people for making purchases. So, just by having a loyalty program you are encouraging customers to make purchases to get rewards. But it doesn’t end there.


Loyalty programs also encourage customers to try new products and services. We’ve all seen these types of ads, “Buy this item and earn 100 more points”. For those focused on collecting the reward, trying new items is worth the risk.


Loyalty programs can encourage customers to try new products and services. Click To Tweet


Helping customers branch out from their preferred brands can help your company down the road. If a customer is only interested in a single product or service that you offer, you run the risk of losing that customer if that item is ever discontinued. However, if the customer regularly purchases a diverse range of products or services from you, they are likely to stay with you even during times of product line changes.



Learn more about your customers

A final benefit of customer loyalty programs is the ability to learn more about your customers.


No matter which loyalty program you use, there will be some sort of mechanism in place that allows you to track purchases. This data is very important as it tells you what products are being purchased, the frequency in which they are purchased, and the demographics on who purchases them.


This information is very important as it allows you to identify where your company’s strengths and weaknesses lie. You can see who resonates with your company and what segments of your target market are not connecting with your company. This information helps guide your marketing decisions so you can be as effective as possible in your messaging.



Final Thoughts

A customer loyalty program is a great addition to your marketing and customer service strategies. It allows you to positively reinforce your customer’s purchasing behaviour and it gives you greater insight into the purchasing behaviour of your customers. The result is a better bottom line for your company. Why not start one today!




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