If someone tries to take a lazy approach to calculating the exact return on investment (ROI) of loyalty programs, they’ll probably be in for a surprise. Customer loyalty and loyalty programs in general have their own specific metrics and KPIs used to grade and evaluate program performance. Measuring the financial impact and effectiveness of loyalty programs is important to finding where improvements are needed, and for assessing if the program is economically sustainable currently and for the long-term.
Yet there are hidden ROIs to investing in customer loyalty that aren’t always easy to measure or even notice. Often these little ROIs get lost amongst other sectors or departments of the brand. That doesn’t mean their impact isn’t valuable or important. On the contrary, you’ll be able to further advance your own loyalty-growth efforts once you can identify and recognize key areas where improving customer loyalty in turn helps your brand be more successful.
1. Lower customer acquisition costs thanks to customer referrals
- It's pretty universally understood that customer referrals contribute to lower customer acquisition costs. Loyal customers are one of your best forms of advertising. While several brands offer incentives for referrals, a brand's repeat customers give referrals to their friends, families, and networks more often. Since people are likely to trust recommendations from people they know, loyal customers (who are already more cost-efficient customers ) contribute even more to help lower cose.
2. Loyal customers will forgive mistakes
- Every company makes mistakes. One of the benefits of investing customer loyalty is establishing a foundation for quality products and service over the long-term among more high-value customers. When mistakes do inevitably happen loyal customers are more likely to readily forgive the brand or brand employees because of their previous positive experiences. If the brand is able to quickly and gracefully correct the mistakes made they can potentially grow loyal feelings in their newer or less dedicated customers.
3. Loyal customers can easily become advocates
- There are times when word of mouth has more impact than high-powered publicity efforts. Books, films, and other media that become “cult classics” achieve such labels because of the time and attention from consumer advocates. Where normal promotional efforts can fall flat, endorsements from loyal customers help cement your brand’s reputation in areas like customer service, product quality, and appreciation benefits.
4. A brand with loyal customers often has loyal employees
- Employee recognition and appreciation is an industry all its own, and for good reason. Loyal employees who are engaged in their work and genuinely believe in the products and services of their employer not only result in lower hiring and training costs - they also help companies build customer loyalty. Loyal employees stay with companies longer, and thus are more knowledgeable and better equipped to recommend specific products or services, resolve customer issues, and identify where beneficial improvements can be made. Loyal employees can also serve as company advocates to help reaffirm the company's values and worth to customers who take corporate reputation into account when choosing a retailer or vendor.
5. Greater loyalty helps drive business innovation
- Research has shown that companies with high levels of customer and employee loyalty are also known to have higher levels of innovation than their competitors. Loyalty leading companies benefit from having dedicated customer bases who are more likely to try out new initiatives and give recommendations because they know their time and attention is appreciated by the brand.
6. Loyal customers provide beneficial feedback
- Truly loyal customers want their favorite brands to succeed. They posses a greater understanding of brand products and processes, and can act as sources of genuinely beneficial feedback. Brands can greatly benefit from the insights, suggestions, and reviews of their more loyal customers by using that data for process improvements and development efforts. In turn this feedback-improvement loops will help attract and retain even more customers.
If you're looking for ways to benefit from customer loyalty and improved customer retention, get in touch with us today!