Steve Bernas
Loyal customers are invaluable to any business. Implementing a customer loyalty program can be a fantastic strategy to enhance customer retention and drive recurring revenue. In many instances, such programs can significantly boost your business’ bottom line.
It’s vital to ensure you are keeping your customers happy. It has been estimated that acquiring a new customer is up to 25 times more expensive than retaining an existing one. Around 20% of customers can sometimes be responsible for 80% of a company’s revenue.
These programs foster increased customer retention by rewarding repeat customers, a crucial metric for long-term success. Encouraging repeat purchases boosts sales and provides valuable data on customer preferences and spending habits.
A study by McKinsey, for example, found customers who are members of a loyalty program are 59% more likely to choose a brand over a competitor and 43% more likely to buy more frequently. The study found customers who are members of a loyalty program are 62% more likely to spend more on the brand. Experts say three out of every four American consumers are part of at least one loyalty program.
One key to a successful rewards program is to create a need for participation. Your customers should enjoy participating in your loyalty program. You should make the process of earning points and reaching the next tier an exciting and engaging experience for them.
While a simple rewards program will not have your customers bragging to their friends and family about it, offering something out of the ordinary will. Word-of-mouth marketing is vital to the growth of any successful rewards program.
Your company’s loyalty program should be an extension of your brand. While a luxury retailer would have an upmarket loyalty program, a toy company would have a fun, less serious plan. To maximize effectiveness, you should ensure that your program’s theme is aligned with your brand’s identity.
Some tips to ensure your reward program succeeds include being creative with your scoring system.
Point programs are among the most effective loyalty programs because they increase engagement. You can take things another step further by giving your currency a memorable name or creating a visual element and unique look to your points, making them more than just a number and boosting customer interest. Be sure to keep it all consistent with the feel of your brand.
A successful loyalty program can reward customers when they least expect it, not just when they purchase in your store or website. While rewarding customers when they make purchases is an effective means of creating positive reinforcement, consider offering customers rewards on their birthdays via email and a personalized birthday wish. This technique effectively surpasses customer expectations while creating a customized experience.
And finally, allowing customers to support a charity through your program can be a big bonus for people. Most people love the idea of being able to give something back. That’s why allowing members of your rewards program to support a charity with their points is a creative and socially conscious means of making your program stand out. Make sure it’s a cause related to your product and services.
Consider creating a VIP program with multiple tiers. It can be an incredibly effective way to engage customers with the brand and encourage them to spend more money. When they reach the coveted VIP status, a physical card can perfectly symbolize the customer’s dedication to the brand and get them talking with their family and friends.
Ultimately, loyalty point systems contribute to building a solid brand image. By demonstrating a commitment to customer satisfaction and offering exclusive perks, businesses can cultivate a sense of belonging and loyalty among their customer base and become a “better business.”
• Steve J. Bernas is president and CEO of the Better Business Bureau and can be reached at sbernas@chicago.bbb.org.
