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Customer loyalty programs are not a new concept. They’ve been used as a key marketing tool for a number of years, and the UK’s biggest brands have utilised them to both reward their customers and boost their reputation within the industry.
There are a number of different types of programs, all of which will be geared towards suiting a certain audience or selling a certain product or service. But what exactly is it that consumers look for in a loyalty program? What will make them choose one over another? Read on to find out more.
What are the benefits of a loyalty program?
For the consumer, the advantages can be vast and varied and will likely depend on the nature of the program. But what about the benefits of a loyalty program for the brand itself? Let’s take a look at five of the main ones:
- No longer competing on price alone
- Retaining existing customers
- Increasing customer lifetime value
- Building personal relationships with consumers
- Creating brand advocates
Loyalty programs: The key facts and figures
Recent research from More Than Accountants threw up some telling statistics around loyalty programs, their importance to brands and how they can deliver a return on investment. For example:
- Four-in-five companies believe retaining loyal customers is more cost-effective than acquiring new ones
- 80% of profits will come from just 20% of a loyal customer base
- Chances of selling to an existing customer are typically around 60-70%, compared to 5-20% to a new prospect
- Increasing customer retention by as little as 5% can help boost profits by as much as 95%
- More than one-third (34%) of consumers say they would be less loyal if it wasn’t for rewards programs
What are the drivers of customer loyalty programs?
Every customer is a unique individual, which is why it’s so important for brands to treat them as such. A one-size-fits-all approach is unlikely to inspire much loyalty, as a large proportion of the target audience may feel their needs are not being catered for. Past research into the drivers of customer loyalty revealed that:
- 64% of people are likely to enrol if the brand offers good value for money
- 52% will do so if they trust the brand
- Half of people will become a member if they believe the brand offers the best product/service
- Great customer service is a major driver for 41% of consumers
- Convenience is a key factor for more than one-third (36%) of customers
More recently, surveys have suggested that being able to save money has become an even larger driving factor for consumers choosing their loyalty programs. Brands can therefore shape their offerings accordingly, but it’s important that they don’t become too blinkered in their approach. They must continue to offer incentives and rewards that serve a wide scope of their audience.
