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Four ways a customer loyalty program can benefit your business

Four ways a customer loyalty program can benefit your business
  • Retaining an existing customer is around five to twenty-five times cheaper than winning a new one
  • A small investment in a loyalty program can translate into much bigger increases in customer spending
  • With a loyal customer base, your business is much more likely to benefit from word-of-mouth marketing

Read time: 4 minutes
It’s common knowledge in business that it’s cheaper to retain an existing customer than it is to win a new one. In fact, there is evidence that it could be up to five to twenty-five times less expensive. [1]

That’s why excellent customer service is an essential part of any successful company – every customer that goes away happy is likely to return in the future and may act as an advocate for your brand, selling it to others on your behalf.

But there is an even greater prize on offer to those who take the right approach to managing their existing customer base. If you can turn a one-off purchase into recurring revenue, you can start to build a following you can rely on, with income that is easier to forecast.

So, beyond delivering an excellent experience to customers every time, how do you keep them coming back? One proven tactic is a well-designed customer loyalty program.

Here are four key ways your business could benefit:

1.     Win repeat business

Studies show that familiarity with a brand resonates strongly with consumers, with 60 per cent of people across the globe that have internet access preferring to buy from a brand they know rather than trying somewhere new. [2]

This is why an increase of just five per cent in loyalty program spend can lead to an increase in the average profit per customer of between 25 and 100 per cent. Rewarding customers, by introducing loyalty points and incentives for every purchase made, can also motivate them to spend significantly more over time. [3]

2.     Gain a competitive edge

In a competitive business world, it can be hard to distinguish your products from those of competitors.

If your products are only being chosen based on price, you are in a vulnerable position, as a competitor with a lower cost base could easily steal your business.

Customer loyalty programs can be a great help here, as they can influence a customer’s buying decision based on factors beyond just cost. According to a 2017 survey by technology services firm Capgemini, 82 per cent of customers prefer to buy from a brand they have a high emotional engagement with. [4]

So, if you are offering a similar product to your competitors but have a better customer loyalty program in place, you’re more likely to be top-of-mind.

3.     Cut your marketing costs

The opinions of your existing customers can be the most compelling form of advertising you can get. In fact, more than 80 per cent of customers trust the recommendations of friends and family when making a purchase. [5]

One of the major benefits of a customer loyalty program is its ability to boost word-of-mouth recommendations, especially in this digital age, and they are one of the most powerful persuaders when it comes to consumer decision-making.

This can also help you retain customers, by enhancing your brand’s reputation and reassuring existing customers that they are in the right place.

4.     Generate actionable insight

Constantly evolving what you’re offering your customers is the only way to avoid being overtaken by competitors.

The buying behavior of your customer base and their feedback on your products or services should always be the basis for making changes to your offer.

Loyalty schemes can allow you to track your customers’ buying patterns and respond to better meet their needs.

Building a loyal customer base can also lead to a positive cycle, as these customers tend to generate more useful insight than passing trade. They’re more likely to talk about their experiences, and share posts or reviews about your business or products. Tracking this feedback can help you be confident you are getting key decisions right in all kinds of areas, from product design to pricing.

If you’d like to learn more about the customer loyalty programs Arvato can deliver, you can find out more here.

Author: Editorial team Future. Customer.

1 The Value of Keeping the Right Customers
2 The Nielsen Global Survey of New Product Purchase Sentiment
3 Prescription for Cutting Costs By Fred Reichheld
4 Loyalty Deciphered -How Emotions Drive Genuine Engagement – Capgemini
5 Nielsen Global Trust in Advertising Report



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