The 5 Top Benefits of a Loyalty Programme

1. Customer Retention

The primary motive behind a loyalty programme is to retain customers by rewarding them for their repeat purchase behaviour. In short, the customer loyalty program meis a tool to retain customers by giving them a solid motive to buy again from the company and establishing habits.

There are many studies that have explained the relationship between loyalty programs and retention rates. One European study found that customers’ relationship perception of a Dutch financial services company’s loyalty program explained about 10% of the total variation in customer retention and customer share. Annex Cloud’s own customer loyalty statistics, taken from our clients, have shown that a well-implemented loyalty program can achieve the following:

• Online rewards programs increase overall revenue by 5-10%.

• Loyalty members spend 5-20% than non-members on average, which not only covers loyalty costs but brings home surplus profits.

• Loyalty program members buy 5-20% more frequently than non-members.

The direct impact that customer retention strategies have on the bottom line of business is a well-established fact. A business with a 60% customer retention rate is losing 3-4 times as many customers as a business with 80% retention rates.

As a business owner in today’s competitive and packed marketplace, you’re hyper-focused on growth. A small change in retention can lead to big results. Hence customer retention is vital. Here are some benefits:

2. Relevant Customer Data and Consumer Trends

Consumer data gets recorded in the company’s database as soon as a shopper registers for a loyalty program. Companies can use this data for omnichannel, offline, and e-commerce segmentation, profiling their best customers and tailoring their offerings to specific groups of consumers. As loyalty program data gives the company a complete view of customer behaviour, buying habits, and preferences, the company can use this information to invigorate its inventory management, pricing, and promotional planning. This data also enables marketers to measure the results of special promotions based on additional purchases, use of additional channels, or decreased time between purchases.

3. Higher Cart Value

A company can use collected data to cross-sell and up-sell. It can offer extended warranties after an item is purchased, suggest accessories that go well with the purchased item, and provide discounts on related purchases. Moreover, the loyalty program can also bring relief by increasing demand in slow seasons. Its best example is an airline mileage program that is available only on selected flights. Due to less wastage, such targeted promotions are prone to yield more satisfactory results.

4. Reduces Unprofitable Customers

One of the less frequently considered items on this list of the pros and cons of loyalty cards and programs is that they let companies shed unnecessary weight. A well-designed loyalty program allows companies to segment customers and discover profitable and unprofitable customers. It helps them in dropping off the customers who only buy the discounted lines and avoid premium range almost on a regular basis. These customer profiles can cost more money than they generate.

Through a loyalty program, companies can reward better customers only and thereby minimize the pay-out to not-so-profitable customers. Without an iota of doubt, this is the most efficient way to retain the customers from whom the company generates the most profit.

5. Better Customer Communication

A loyalty program offers a direct line to customers, making communication much easier. Aside from announcing new products/services, promoting sales, and the like, a useful item on this list of the pros and cons of loyalty programs is that they facilitate recalls when necessary. This is possible due to the purchase date and barcode of the recalled items. The recall notice gains more weight and significance, as it is based on the consumer’s actual purchase of the affected good. Compared to a store sign or newspaper notice, the chance that this email-borne recall notice will get read by the people is high.