Loyalty programs are everywhere these days and in every industry, from restaurants to beauty brands, to travel and B2B businesses, and the numbers keep growing. This isn’t a coincidence - loyalty programs are having a bigger impact than ever on attracting and retaining customers. With 75% of consumers revealing they would switch brands for a better loyalty program, more brands are finding out that loyalty programs are quickly moving from the ‘nice-to-have’ list into the ‘must-haves’.
So if you’re still wondering whether or not a loyalty program is right for you, here are some tell-tale indicators that your brand needs a loyalty program:
1. Purchase Rates Are Falling Due To Customer Attrition
When your purchase rates start to decline, what's the typical course of action? Offer discounts? Slash prices? Those are all temporary fixes that won’t solve the long term issue of getting customers to buy. And some of these tactics might even have the opposite effect of what you’re trying to achieve.
Loyalty programs help brands combat falling purchase rates due to customer attrition by:
Providing immediate rewards or benefits
Loyalty programs can give customers immediate gratification through earned points or on-the-spot rewards, which inspires customers to continue purchasing from you
Acquiring high-quality customers through valuable referrals
Research shows that referred customers are more profitable and have lower churn rates compared to other types of customers. In one study 73% of customers said they were more likely to recommend companies with strong loyalty programs, so having a loyalty program increases the chances that your best customers will promote your brand or your products to others.
Providing useful behavioral data
Loyalty programs capture a significant amount of useful customer data such as buying patterns, shopping habits, and basket insights. You can identify incentives that resonated well with specific customer groups and which promotions or engagement opportunities were especially high-performing among your ideal customer profiles. This data can lead you to create more effective promotional marketing and product offers that lead to higher purchase rates.
2. Your Customer Acquisition Is High But Customer Retention Is Low
If you’re seeing a lot of new customers but aren’t getting a lot of traction from existing customers, you have a problem. Research shows that companies overwhelmingly focus on customer acquisition but it’s repeat customers that fuel a significant portion of a business growth: increasing customer retention rates by just 5% can boost your profits by 25% to 90%. That’s revenue you’re losing out on if your customer retention is close to non-existent. Furthermore, if the cost of acquiring new customers starts overtaking the amount of money they spend, pretty soon you’re going to run into sustainability issues.
Loyalty programs are a central aspect of a solid retention strategy because they provide multiple opportunities to strengthen and increase customer retention. One survey of incentive and B2B loyalty program experts reported that 82% of programs increased retention by 5%-10%. Loyalty programs help brands create the rewarding and personalized experience that keeps customers hooked after the initial purchase while motivating them to return to purchase again.
3. Customer Engagement Is Stagnant Or Declining
Customer loyalty is no longer determined by the amount of transactions made; instead loyalty has become relational, meaning it’s about the 1:1 relationship between a brand and a customer. Like any good relationship, it needs substance and the easiest way to do that is by creating opportunities for customer engagement. At its core customer engagement refers to the times and ways customers interact with your brand. If the only times a customer interacts with your brand is during checkout, then you need to do something to up your customer engagement. Otherwise there's nothing to keep the brand-customer relationship alive when the customer has a chance to buy somewhere else.
Loyalty programs help drive customer engagement in 3 ways:
- Providing opportunities for customers to engage, such as interacting with content, gamification, promotions, or completing surveys, questionnaires, etc.
- Rewarding customers for their engagement through points or others incentives, which helps motivate them to continue engaging with the brand
- Being able to track and measure different types of engagement for effectiveness
Which brings us to our next point:
4. Understanding And Using Customer Data Is A Struggle
You most likely already have access to certain customer purchase data. But do you know how many times that customer has visited your site or physical store? Are they following the brand’s social media accounts? Do they read your newsletters or blogs? Have they ever referred your products to anyone or been referred by others? When they made a purchase did they buy during a special promotion or shop with a preferred partner?
While you might be able to manually collect this customer data from various organizational silos, putting it into understandable and more importantly, usable formats takes an enormous amount of time and effort. An integrated loyalty platform like the one provided by Brandmovers does that work for you by integrating directly into the brand ecosystem and seamlessly collecting customer loyalty data into one central hub. Utilizing all these types of actionable customer data can give you a more holistic understanding of your customers and the important loyalty drivers along their customer journey. You can then keep building on your successes by incorporating that information back into your loyalty program’s earning rules and automation capabilities to create more loyalty driving touchpoints for your customers.
5. Your Competitors Have A Loyalty Program
Finally, the last indicator that you need a loyalty program: if your competitors have one.
Loyalty isn’t a passing trend or even an old-fashioned notion -- it’s real, it works, and now more than ever big brands are starting to devote serious attention to their own loyalty strategies. If you find that your competitors are creating their own loyalty programs, you need to starting making plans to launch your own program.
All of our previous points come down to this: loyalty programs aren’t just discount programs. They're carefully designed and executed strategies that help brands build actual emotional connections with their customers. The work you put into creating loyalty drivers and building a customer relationship gives that customer more incentive to shop with you and less motivation to seek out other options. Whether that’s because they want to accumulate points towards a goal, take advantage of program member benefits, or because they have a deeper level of brand trust and alignment with your brand values, a loyalty program helps to create those connections that influence purchase decisions.
So even if a competitor drops a price on a product, your customers still have stronger reasons to stick with you.
Now that you know the top indicators that your brand needs a loyalty program, what are the next steps? Whether you’re looking to start a program for the first time or refresh a current program that’s struggling, Brandmovers can help! Get in touch with us today to learn how we can help you tap into the power of customer loyalty.