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Loyalty Programs: Do They Really Help?

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One question that keeps cropping up time and time again has to do with customer loyalty programs. Do these programs really work? Are they worth the cost? How can they help a business to move to the next level? It is important to weigh the benefits against the cost of the implementation of any loyalty program. It is equally important to continue to measure the results of a loyalty program to see what kinds of results are being achieved.

  • rewards-300x135  Loyalty programs can encourage brand loyalty. They are a way to convince consumers to choose your product over your competitorโ€™s product for a certain reward. By rewarding your customers for purchasing your product, you can instill hard core loyalty to your brand. This kind of loyalty is long lasting and far reaching. It can also help your customers to share with their friends and family by letting them know about your loyalty program. As your customer base expands and sales increase, the cost of the loyalty program can be absorbed better, improved more, and written off as an expense in the cost of doing business.
  • loyalty-300x110  Customers who join a loyalty program have a sense of belonging in an exclusive club. This can help to increase sales and reduce โ€œprice sensitivityโ€ when your brand has a loyal following. This means that your business can adjust your prices upward and expect to retain the same customer base due to its involvement in your loyalty program. It is important to ensure that rewards are attainable and that you start off your customers with a certain base benefit that makes them feel that the โ€œnext levelโ€ is achievable.
  • A loyalty program can give one business an advantage over their competitors. Customers are more likely to choose one company over another if they have a good and interesting loyalty program. Locking in a customer with an accumulating benefit tends to be the common approach for a loyalty program. In other words, the consumer must make a commitment to a certain brand and continue to purchase from them to get their reward in the long run.
  • Businesses can encourage more spending by the customer by promoting add ons. If a consumer purchases up to a certain level, they gain a certain benefit. If they spend an additional amount, they automatically reach the next level and reap more benefits.

customer-loyalty  Each business needs to decide several things. First, is the program affordable for them to implement and maintain? Does the loyalty program offer enough benefits that people will want to continue with the program and become dedicated to it (a loyal customer). The loyalty program can be a double edged sword in that it limits the customer base of a business. Once a loyalty program is in place, it is up to the business to continue to weigh its benefits.

Loyalty programs do work, but they can be a lot of work for the business owner to implement and maintain. You need to ensure that the program is worthwhile and gives both the business and the customer some kind of a mutual benefit.

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