Yes, loyalty programs do work, provided the brand has been diligent in designing the program to sync with the goals and aspirations of its customers. The key to a successful loyalty program boils down to ease of earning points/redemption, personalized rewards, non-transactional incentives, clear communication and achievable reward thresholds.
Loyalty programs can generate significant growth in recurring revenue for your business through higher Average Basket Value (ABV) and repeat sales. Customer loyalty programs also contribute to revenue growth by reducing your overall acquisition costs.
Before setting up your loyalty rewards program, it's vital to analyze how your customers view your brand/product and their online/offline behaviour, your customer acquisition costs, identify key stakeholders who will drive the program, set a budget for the program along with measurable goals.
A customer loyalty software is a platform which allows you to manage, track and analyze all aspects of a loyalty program like points earned/redeemed, engagement rates, online/offline sales, customer behaviour insights, tier segmentation etc.
A loyalty card is essentially a punch card with a magnetic strip or a barcode that can be read by the POS software. It syncs with a CRM or data platform to record and track sales, store visits, loyalty points, product preferences etc of a customer. However, loyalty cards are quickly being replaced by digital and app based loyalty programs as cards usually get lost in the wallet and are cumbersome to carry around.
A critical and often overlooked benefit of loyalty programs is their ability to reduce customer acquisition costs. This is especially true for Ecommerce businesses where high acquisition costs has cost several brands to incur heavy losses. Loyalty programs can boost customer retention as well as maximize their revenue contribution through repeat sales and higher Average Basket Value.
The loyalty of your customers is determined by two metrics : Customer Lifetime Value (CLV) and Repeat Purchase Rate (RPR).
Customer Lifetime Value (CLV) = Customer Value x Lifespan
Repeat Purchase Rate (RPR) = Repeat Customers (Annual)/ Total Customers (Annual)
Loyalty programs fail primarily due to these factors : impossible reward structure, too complex for customers to understand, lack of proper promotion and marketing.
A coalition loyalty program is a type of group loyalty program where multiple brands join hands to allow customers to earn/redeem points across all participating brands. Brands within a coalition loyalty program enjoy the benefit of higher customer engagement, access to new customer data and increase in brand mindshare
In a market with seemingly endless choices, a great loyalty program helps your brand to stand out by offering better value, higher brand recall and greater customer satisfaction.
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