12 Apr
The long-term prosperity of a business is based on the loyalty of the customers. Well-planned customer loyalty programs can turn the customers into brand advocates of the business. In this article, we explore everything one might need to understand customer loyalty programs and how they benefit corporations and consumers:
What is Customer Loyalty?
When a customer turns to a business for repeat purchase it builds loyalty between the customer and the brand. Customer royalty is a positive relationship that emerges between companies and their buyers. Customers who have a good experience with shopping from a business tend to come back. Also, they recommend the products to other potential customers.
Excellent customer assistance, high-quality merchandise, or brand values, might be anything that makes a consumer repeat business. Loyalty is earned after numerous positive interactions that build trust between the buyer and the business. Client support may even overcome a few negatives on the part of the business. Such faithful patrons are what a company needs during bad times in the market. To support the association and to earn loyalty for a long time, businesses use multiple customer loyalty programs. In modern times, such plans are part of business success as well as customer experience.
How do Loyalty Programs work?
Loyalty programs are designed to benefit both company and customers. These programs are a way to repay the customers for the support and confidence they have in the business. Loyalty programs operate because these make the clients feel important and acknowledged. The profits, free merchandise, discounts, referrals, and limited access to distinct commodities are examples of some successful loyalty program rewards. The more high-grade the loyalty programs of a company, the longer the customer remains faithful to the brand.
Click here to read more about How do Loyalty Programs work.
To realize the full potential of the loyalty programs let’s look into the various gains of customer loyalty programs in the next section.
Benefits of Customer Loyalty Programs
- Boost the growth of the company
Loyalty programs are seemingly one of the most reliable ways for a business to grow. Every program yields its unique results. But when we see the bigger picture, they all ultimately lead to growth in business. Current customers are certain to make purchases which means constant sales. It also helps to hold on to the customers and strengthens loyalty.
- The cost of getting new customers is low
When rewards are associated with referrals, customers go out and discuss with their contacts about the company’s products. A recommendation from a known person carries a lot of weight than any ad by the company. Therefore, designing and executing a loyalty program is a long-term investment of the company. Loyalty programs ensure customer retention which is a much lesser expense than getting new ones on board.
- A rise in transactions
Loyalty programs are improved to enhance buyer retention. Customers repeat their purchases when they are rewarded with thrilling bonuses. The longer the client stays true to a business, the bonuses get better. When the loyalty programs are personalized based on buying history, the customers generate a greater interest in further purchases. So, keeping customers happy automatically increases sales.
- A gradual increase in average order value
Loyal customers are seen placing orders of higher value with each new purchase. So over time, the average order value keeps increasing. Plans such as discount vouchers, wallet points, etc keep these consumers faithful to the business, and they trust the products enough to pay a large amount. There is an increase in sales and revenue.
- Clients sense appreciation
Loyalty programs are a means to show gratitude to shoppers for their belief and support. Programs that are customized to suit their interests paves the way to a heartfelt relationship with the brand. They will be patient and stand by the brand’s side even during some bad times in the market or overlook some mistakes of the brand. An exclusive discount on a customer’s birthday or a surprise reduction on a high valued order are some loyalty programs that always benefit the company.
- A more solid reputation
Customer loyalty programs can serve two purposes, boosting the client’s esteem and getting the customers to patronize the business. The more content the customers are, the higher is the chances of this Experience being shared among other customers. While companies entertain existing customers through loyalty programs, they advertise and get new people to be interested. It is a great way for reputation betterment. Once the company owns a big name, the tiny mishaps can be easily passed through without losing the customers. A small investment can therefore lead to bigger things for the brand.
- Interaction improves with customers
Companies can directly converse with their loyal customers through such programs. A mail recollecting a previous purchase and some exciting compensations on repeating the purchase will immediately catch the customer’s attention. On the other hand, mails with a more general approach are often left unread in the mailboxes. Giving special new user discounts can fetch you more loyal customers. Meanwhile, companies keep the existing customers engaged with upgrades to the points, vouchers, or other rewards they have earned.
- Collecting valuable data
For effective communication and retailing, the company needs some data from its clients. A brand experience that has been personalized holds the highest priority as revealed by multiple observations. For this, the company requires a lot of customer data. Loyalty programs that roll out interesting gifts or coupons to the customers for finishing their profiles are an attractive way to get people involved in providing some information about themselves.
- Presence on social media
People are constantly on social media sharing a great part of their lives with the people online. Loyal customers can be given additional rewards for promoting the brand on their social media accounts. It improves the presence of the brand on social media and is a great way to attract new customers.
- Loyalty programs are self-supporting
To keep a loyalty program running there is not much effort required. These programs are self-supporting and will automatically run on the settings set by the brand. All metrics are monitored for improving or understanding the customer experience. The effort to be put in is in designing a structure that will appeal to the customers.
Types of Loyalty Program
Different businesses have different requirements. The loyalty programs should be chosen in a way that appeals to the target customers of your business. Various loyalty programs are available and here’s a list of the popular options to choose from:
1. Memberships
Multiple companies and brands offer memberships as loyalty programs. Many of these are paid while some are unpaid. For the unpaid ones, customers might have to register using an email id or phone number that gives them access to certain facilities. With paid ones, customers get to do a short free trial before they pay for a membership. After purchasing the membership, the customers are eligible for multiple benefits for their loyalty towards the brand. Multiple brands have different levels of memberships. The most expensive membership gives customers access to premium features. So, customers who have a good experience with the membership might repeat the payment. With some points for referrals, companies can get loyal customers to spread the word and fetch new customers.
Pros:
● Memberships ensure customer loyalty
● It’s a source of recurring revenue
● Customer relations developed are quite strong
Example: Better Vision Membership
Better Vision is a 7-outlet optical retail store in Singapore.
Strategy: Better Vision’s amazing membership program is a treat for their customers. Their customers can join a FREE membership to receive a $20 voucher, Grab voucher, birthday treats, loyalty points, and much more. The customers are automatically upgraded to Silver & Gold membership once they accumulate a minimum spending of a certain amount, and more get perks accordingly.
Example: Petopia Membership
Another Example is Petopia’s Alpha & Eternity membership. Petopia is Singapore’s Finest Pet Wellness Centre since 2010, offering fur parents and fur-babies the best in Styling, Hotel, Spa & Healing. Because of their amazing perks, the membership program is very famous among their customers.
2. Loyalty Points
The most ancient form of rewarding customers is the loyalty points program. Retailers give points for certain purchases that customers can redeem and avail discounts or some free products on their next purchase. For availing benefits, customers need to make a purchase first. While the points program was a popular thing in the past, in recent times people are not as loyal and do not care much for the points. Also, customers have to collect a certain number of points to be able to redeem them. The only con to this loyalty feature is that it often discourages people who have access to a lot of better options. Under loyalty points, the customer has to spend first to receive the reward later – hence, the rewards are delayed. However, there are certainly some industries where loyalty points really fit in.
According to a study by retail management platform iVend Retail, 58.7% of internet users worldwide cited earning rewards or loyalty points as one the most valued aspects of the retail shopping experience.
(https://www.emarketer.com/content/millennials-gen-z-less-inclined-to-participate-in-loyalty-programs?ecid=NL1014)
Pros:
● Easy for customers to understand
● Eliminates need to provide discounts for certain brands which do not allow discounting
Example: RS automotive
RS Automotive Pte Ltd is a fully accredited provider of one-stop automotive service workshop for car owners. Their very rewarding points program allows customers to collect points easily, and avail free services.
3. Cashback
Cash back is one of the most famous rewards program in recent times. It is usually a percentage of the amount that customer spend with the business. So after every transaction that a customer makes with their brands, they get some cash back in their account – which can be used for subsequent purchases.
The advantage for the customer is that the cashback is perceived as real cash in their account. Also, it can redeemed in the next visit. Unlike loyalty points, where the customers have to make a few visits to collect a decent amount of points first.
Cashback is also very effective for the businesses, as it brings back the customers to repeat purchases.
Pros:
● Easy to understand and keep track of
● Cashbacks drive customers to additional purchases.
● More effective than loyalty points
Example: Gadget Mix Cashback
Gadget Mix is an electronic retail business with more than 30 outlets across Singapore. They name their rewards as ‘Fancy Rewards’, where they have 3 membership tiers according to the customer spent. As the customer spent increases, so does the reward – the basic member receives 5% cashback, premium receives 7%, and gold receives 10% cashback. There are other member benefits as well, such as birthday treats and additional discounts.
This program is also a hit as the members get additional cashback on their purchases, which makes them feel rewarded. This increases the brand loyalty as they are motivated to constantly earn and redeem cashback.
4. Vouchers
The voucher system of the loyalty program is a procedure designed to safeguard the cash of the company. Cash is susceptible to theft and fraud. Studies reveal that vouchers are one of the most used loyalty programs that are running successfully in multiple companies. When customers make a purchase, they become eligible to earn vouchers. These vouchers can give some cash value or a discount on certain products. Many companies give out other brand vouchers to their employees or customers to encourage business. While the same company vouchers will improve sales of the company, vouchers of other brands will bring back customers for repeat purchases in the hope of getting rewarded. This way customers can make purchases from different businesses. It helps to strengthen customer-business relationships as well as inter-business relationships.
Pros:
● Vouchers attract new customers to the business
● Digital coupons can be personalized to suit specific requirements of customers
● Voucher upgrades can bring back old customers and with them some new as well
Example: Cococane’s Digital vouchers
Cococane specialises in very refreshing & delicious coconut and sugarcane drinks. They have 5-outlets across Singapore, and a rewarding loyalty program that attracts customers. They offer free membership and reward the customers with vouchers that can be used to purchase their favourite drink. The best part of this strategy is that the customer doesn’t have to be in their store to get the voucher. They can scan the QR code anytime and anywhere, and a voucher is pre-loaded into their account – to be enjoyed at their convenience.
5. Prepaid Items
Prepaid items work really well in the industries where the product / service remains same. Such as, coffees, haircut, manicure, lash & eyebrows, foot massage etc. The brands can sell a package at a discount. Example, a hair salon can sell a package of pay for 5, get 6 haircuts. It’s a win-win for customers as they get a free haircut. At the same time, the brand gets some advanced money as cashflow. Also, there is a surety that the customer will make visits in the future as the services are pre-paid for.
Pros:
● The payment for the item is received before the actual delivery which proves helpful
● The rewards are personalized that makes customers feel important
● Customer retention is improved
● Loss on revenue in case of refunds can be avoided
Example: Olive Garden Pasta Pass
It is a restaurant that gives Never Ending Pasta Pass to the customers. This is a brilliant marketing scheme that brings back the customers frequently. It is a prepaid gift option that gives unlimited pasta every time you visit the restaurant. The offer is limited to a period during which the foot traffic increases. Customers have to pay for the pass-first to enjoy some unlimited food. The pass lets customers bring in their family and friends as well.
6. Birthday Treats
Making a customer feel special on their birthdays is one of the best ways to ensure loyalty. Birthday emails or messages have much more impact than promotional emails. Brand loyalty has been seen to increase dramatically when customers receive exclusive rewards on their special day.
Compared to general promotional messages, birthday messages have higher transaction rates, click rates, revenue, and open rates. Special discounts, free products, extra points are some birthday treats the customers absolutely love. However, these rewards can be given only on birthdays. So, customers look out for the rewards once a year. The chances that they make purchases otherwise are less.
Pros:
● Birthday treat loyalty programs are highly personalized
● Customer retention is better
● The brand stands out by offering birthday treats as loyalty programs
Example: Nimisski’s Additional discount & Saute-San’s Birthday vouchers
The best thing about birthday treats is that the businesses can reward the customers in many flexible ways. Some examples are:
1. Nimisski, a women’s fashion retail brand gives additional dollar-value discounts (in additional to their regular points and cashback)
2. Saute-San, a green dining F&B business gives dollar-value vouchers, that the customers can redeem when they dine-in.
