How a Loyalty Program Can Boost Your Business
The concept goes by many names, including:
● Rewards programs
● Bonus programs
● Loyalty programs
The basic idea is the same. After successfully finalizing a sale with a customer, you keep that relationship going with well-timed messages, benefits, and perks.
Provide enough value and that shopper will hopefully become a “loyal” long-term customer. This is key, since acquiring new customers is five times as expensive as keeping existing ones.
However, the advantages don’t stop there.
4 Hidden Ways Loyalty Programs Can Help Your Business Grow
The promise of repeat business is reason enough to launch a loyalty program.
But there are less obvious ways in which this marketing strategy can help make your business more profitable.
1. Converting first-time shoppers
Customer retention is cheaper than customer acquisition. But if you are going after new customers, an enticing loyalty program can help tip the scales in your favor — converting fence-sitters into actual sales.
Of course, those first-time shoppers are now on the path to becoming long-term customers.
2. Word-of-mouth marketing
One thing people like more than getting a great deal is sharing that deal with others. Being the bearer of “good” news makes us feel like we have an ownership stake. This explains why nearly 75% of loyalty [WU2] members are more likely to refer friends and families to businesses with solid bonus programs.
If you provide enough value, customers will evangelize on your behalf. This helps you generate more sales. Word-of-mouth marketing improves your reputation, as well.
3. Loyalty programs = higher margins
Not only can loyalty programs help you generate more sales, but they can also help increase the value of each additional sale.
This is because repeat customers spend up to five times more per transaction than newer ones do. Existing customers also are more susceptible to upsells, add-ons, and other extras that further increase the purchase amount.
4. Feedback and analytics
Since you already have ongoing relationships with “loyal” customers, you can easily solicit reviews and request feedback.
This information allows you to refine messaging to make your loyalty program even more appealing to future customers. You also can use this feedback to improve other areas of your business.
These benefits are very real, but how do you actually launch a loyalty program for your business?
Starting a Loyalty Program
There are many strategies you can follow when implementing a loyalty program, but the bare minimum requires:
● Collecting email addresses (or phone numbers)
● Sending well-timed benefits via email or SMS
Although there is some preparation involved, the cost of getting started is essentially zero — with the only real investment being time. It’s possible to automate much of the above, which reduces the number of hours required to manage a program.
Here are some best practices to get you started.
1. Offer real value
Whatever benefits you offer have to be enticing enough to keep customers coming back. Some merchants start with cash-back incentives. After all, just about everyone responds to “free” money.
A more affordable approach involves offering discounts, exclusive information, or “free” shipping — none of which requires payment directly out of pocket.
2. Make enrollment easy (for customers)
If you sell online, you likely collect email addresses during the checkout process. You can add those customers to your loyalty program.
If you’re a brick-and-mortar merchant, however, acquiring email addresses is a bit trickier. Therefore, you may need to:
● Publish two prices for inventory (with discounts attached to your loyalty program)
● Train your cashiers to “invite” signups at the point of sale
● Keep your application form as short as possible
● Offer a perk the customer can use immediately
3. Make management easy (for yourself)
Some merchants still provide loyalty cards that customers must present at checkout each time they shop. It’s easier, cheaper, and more ecological to manage your program electronically via a customer relationship management (CRM) platform. Digital offers can be linked to each customer’s phone, email, or name.
Rather than send each message by hand, consider using an auto responder that periodically “drips” messages on a predetermined schedule — without requiring any direct intervention.
The Most Important Loyalty Program Tip of All
Your customers already like what you sell, which means they need only a slight nudge to keep buying from you. That’s where your loyalty program comes into play.
If you’re new to this marketing concept, however, it’s easy to become obsessed over the setup or worried about which perks to offer. That’s natural. The single most important tip is simply to get started. Once your loyalty program is up and running, you can iron out wrinkles along the way.
Kristen Gramigna is a Senior VP on the Digital Marketing Team for First Data Merchant Services, a global leader in payment technology and commerce solutions. She brings 25 years of experience in the bankcard industry in direct sales, sales management, and marketing.