Loyalty programs are marketing strategies that identify and reward customers that make frequent purchases. The rewards are varied and can be in the form of coupons, free merchandise, or even special access to new products. The programs are a way of retaining the existing customer base and encouraging them to make even more purchases.
Studies have shown that a business will most likely spend ten times more money and resources to acquire new customers than to sell to existing customers. The studies also show that existing customers spend 65% more than the new customers do. These kinds of statistics encourage businesses to set the customer reward systems, but does this data translate into an actual increase in sales and revenue and is it smart to employ these programs? Here are some reasons why the reward systems can be beneficial to your business.
• Increase Sales and Revenues
Statistical evidence suggests that rewarding a customer for purchases leads to an increase in the sales and revenues of the firm. This is because the reward system creates a relationship between the business and customer and consequently the customer is more inclined to make a purchase from a business, which they relate to than from one they have no emotional connection to. This kind of relationship usually translates to the customers making more purchases therefore when your business develops such a relationship with many customers then the result will most likely be an increase in sales and revenues.
• Create a Brand Name
Each type of customer reward system will have its pros and cons but the bigger picture is that the programs usually help businesses build their brand name. This happens when the customers who are rewarded begin to feel appreciated and this positive emotion leads to the customers making more purchases and even telling others about your business. In this case, the loyal customers will essentially have become brand ambassadors and it is most probable that the new customers will themselves become loyal to your business and begin to tell other potential customers about your business. Soon this cycle will help create and grow your business, which means you will have increased revenues and profits.
• A Way of Conducting Market Research
Customer reward programs especially digital ones will help you collect data and information about the purchasing trends of customers and their preferences. This kind of market research will help you develop and design loyalty reward programs that are tailor made for your customers. Through trial and error, you will be able to know which programs work and which are the most effective in terms of producing loyal return customers. The market research will also help you identify which products are profitable and which ones are performing poorly. All this information will guide you to create a business that is in tune with its customers and one that can remain relevant in a competitive market environment.
The loyalty programs are a great way to build relationships and connect customers. When customers feel that they are appreciated and are somehow a part of the business they will more likely to reward the business by remaining loyal and making more purchases.