According to industry experts, continually striving to acquire new customers is five times more expensive than retaining existing ones. Statistically, more than 60 percent of businesses find it very difficult to maintain customer loyalty. One very popular strategy that has enabled companies to promote customer retention is the incorporation of customer loyalty programs. Loyalty programs provide frequent shoppers with unique benefits like discounts, coupons, free merchandise, and access to special events and trips. As a result, loyalty programs have assisted retailers in promoting customers to purchase frequently from the companies.
Importance of Loyalty Programs in Retail
Loyalty programs are crucial for companies as they assist in increasing profits earned by the company. According to research, loyalty programs will witness an increase of at least 50 percent in the profit generated per customer. More than 70 percent of customer list loyalty programs as one of the key influencers in their purchase decision. Over 50 percent of the customers list deduction in prices as a crucial indicator of a successful loyalty program. Whereas, 40 percent of the shoppers state rewards as a significant reason to opt for the loyalty programs offered by the retailers.
According to experts, 40 percent of shoppers will share positive experiences received through loyalty programs, thus becoming brand advocates. In addition, the positive recommendations and reviews from existing customers will also assist businesses to acquire new customers. According to research, over 75 percent of shoppers are prone to be brand loyal provided they receive good loyalty programs. Moreover, 50 percent stated that the amount of money they spent on purchases after joining a loyalty program rose significantly.
Cost Benefits to Retailers
Loyalty programs have even helped businesses connect with other companies. Companies now form alliances in offering joint loyalty programs; these programs allow customers to spend money across any of the brands in the coalition loyalty program and can receive rewards for the same. In addition, this program has assisted brands in reaching a wide range of audiences and acquiring customers with ease.
Loyalty programs have also enabled firms to achieve a strong competitive standing in the market. Companies can now analyze the frequency of purchase per customer and transfer them to various levels of the loyalty programs (for instance; silver, gold, and platinum level) and offer rewards according to promote more sales.
Advancements in Technology
With a rise in technology, businesses must ensure that they provide convenience in the use of loyalty programs. Moreover, retailers must offer convenient access to programs across different mediums such as tablets and mobile phones. According to market research, around 35 percent of customers list seamless experience as a crucial factor for selecting loyalty programs.
According to a recent market study, 80 percent of the customers who are offered rewards in addition to the benefits provided by the loyalty program will continue to purchase from the same company. Whereas, over 55 percent of the customers are more likely to switch brands if they are not satisfied with the loyalty programs offered by the company. Therefore, businesses offering loyalty programs must be flexible and monitor market trends to adapt their offerings according to market demands. In other words, companies should keep track of market opportunities and threats to achieve growth and prolong survival in the market.
Written By: Vic Bageria
CEO – Xpandretail