On this page
In the world of business, keeping customers happy and coming back is really important. Loyalty marketing programs help with this. They reward customers for coming back, which helps build strong relationships and makes businesses more successful in the long run.
In fact, 65% of a company’s revenue comes from the repeat business of existing customers, highlighting the crucial role of customer loyalty.
Additionally, members of loyalty programs generate 12-18% more incremental revenue growth per year than non-members, demonstrating the financial benefits of these programs.
In this blog, we'll talk about loyalty marketing in simple terms. We'll start by explaining what it is and why it matters. Then, we'll look at the main goals of loyalty marketing and share some smart strategies to try.
We'll also show you how to check if your loyalty program is working well. And finally, we'll share a real-life example to prove that customer loyalty programs really do work! So, by the end of this blog, you'll understand loyalty marketing and how it can help your business grow.
What is a loyalty marketing program?
Loyalty marketing program is a business approach that businesses utilize to ensure customers continue to make future purchases with them. It is all about providing our consumers with something that they would have to consider why they would go for the product and go to the competitor again.
Here's the basic idea:
- Rewards may include points, special privileges, or even discounts that apply for the company’s products and services.
- Consumers accrue these benefits based on their usage intensity or interaction with the brand.
- The more frequently a customer uses the products associated with the brand, the more gifts they receive.
This system builds customer loyalty because it creates a sense of value and appreciation. Customers feel like they're getting something extra for their business, which makes them more likely to stick with the brand in the long run.
Why is loyalty marketing program important?
- Keep customers happy: Keep Customers Happy: Think of the following scenario: you frequently attend the café where you like to go, always expecting a free cup of coffee or a discount on the next meal. There must be something to it; that is the beauty of implementing loyalty marketing. It is just about ensuring that customers are valued because that will make them repeat a similar call.
- Customers tell friends: Among people, when they love something, the tendency that they would speak about it is very high. We have seen that happy customers, those who are in a position to benefit from the loyalty program, share their experience with friends thus bringing in new customers all without having to pay for advertising.
- Stand Out from Competitors: The best part is that with loyalty marketing your corporation is easily recognizable as it offers special promotions and freebies. This makes the customers remain engaged and make a lot of orders so that they get to taste more of whatever you are offering in the market.
- Make your brand more valuable: Loyalty marketing causes your brand to become more valuable because of the free products and good rewards that are offered to customers. It ensures satisfaction of the already existing customers and the attraction of other customers who wish to benefit from these.
- Advertise new products:Loyalty programs allow you to promote new products and even offer them for free to the members. It can also assist to sell more of the new products on the market since customers can test them for free.
What are the goals of a loyalty marketing program?
- Bring customers back: Loyalty marketing wants to make customers come back for more shopping. Customers who come back often spend more and might try new products from your brand.
- Get useful data: Loyalty programs help gather important information about customers, like their age, what they buy, and what they like. This info can help improve products and make marketing better.
- Sell more products: Consumers that are enrolled in a rewards program will be inclined to purchase products. Making these customers your target means that you’re likely to sell more and make more profits
- Make more money:.Loyalty programs can add value to companies because customers will continue patronizing a business and spend more money. While word of mouth is cheaper and more effective than advertising, it is also more expensive to retain existing clients than to source for new ones.
- Know what customers want: Loyal customers give good hints about what products might do well. This helps businesses make better products and sell more of them.
Strategies for Loyalty Marketing program to Consider
1. Get feedback from customers
To improve your products or services, ask your customers what they like and don't like. You can do this through surveys or on social media. Their feedback will help you understand how to make things better for them.
2. Make a loyalty program
Develop a customer reward program in order to show your appreciation to the customers for making their business with you. In order to create incentive to buy things, refer friends, or interact with you on social media ,give points. They can make use of these points at a later time in order to negotiate for lower prices or get products for free. This ensures they keep visiting your business time and again.
3. Personalize content and suggestions
Apply the data that you gathered about your customers into personalising their experience. For example, if a customer frequently purchases a particular type of product, they may be notified by email or see other products they may be interested in. This makes them know that you respect their choices and this acts as a plus to encourage them to purchase from you again.
4. Start a referral program
Referral system encourages clients to introduce the business to their friends. For instance, when a happy customer is recommending your business to their friend and the friend decides to buy something, the referring friend gets a treat such as a discount or a free item. This in turn compels them to continue to market your business to other potential customers.
5. Use customer information wisely
Whenever customers disclose information to you, which may be their interests, preferences or anything else, ensure that such details are used to enhance their experience. For instance, if you get a message from a customer stating his preference for a particular type of product, you can then alert him on any messages or offers on that product. It makes the customer develop some trust in the business because they feel that they are understood and appreciated.
6. Give exclusive offers
Loyalty should be rewarded and you should provide special offers or specials that are exclusive to the loyal customers. This could be in the form of a discount, an extra free product, or an early access to the new products. This way, they will feel that you are still interested in them and they will continue shopping with you.
7. Celebrate with special rewards
Let your customers know that you are appreciating them by going an extra mile especially during events such as their birthdays. This could be in terms of a price cut, free product with purchase of a product, or even a word from the company to the customer. It makes them feel wanted and thus working on their loyalty to your company and thus bringing about the aspect of loyalty.
How to check if a loyalty marketing program is working
Measuring the effectiveness of a loyalty program is crucial for ensuring that it is delivering the desired outcomes. Here are two key metrics to evaluate whether your loyalty program is working:
1. Customer retention rate (CRR)
Customer Retention Rate (CRR) helps you see how many customers keep coming back to your store over a certain period, such as a month, quarter, or year.
To calculate CRR, follow these steps:
- Count the number of customers you had at the beginning of the period.
- Add up the new customers you gained during that time.
- Determine how many customers you have at the end of the period.
Use this formula:
CRR = ( Customers at the end − New customers / Customers at the start ) × 100
A higher CRR means your customers like your store and keep coming back.
2. Redemption rate (RR)
Redemption Rate (RR) measures how many points customers are using compared to how many points you've given them. If customers aren't using their points, they might not be interested in the rewards.
To calculate RR, use this formula:
RR = (Points redeemed / Total points given) × 100
Most programs have a redemption rate between 13% and 15%. If your rate is above 20%, that's excellent. If it's below 10%, you might need to investigate why customers aren't using their points.
3. Repeat purchase rate (RPR)
The Repeat Purchase Rate (RPR) shows how often customers come back to buy again. A good RPR means your loyalty program is working well.
To calculate RPR, follow these steps:
- Count the number of customers who made repeat purchases in a set time frame (month, quarter, year).
- Divide this number by the total number of customers during that same period.
Use this formula:
RPR = ( Customers who made repeat purchases / Total customers) × 100
A good RPR usually falls between 20% and 40%. It’s important to note that the RPR grows slowly, so be patient while tracking it.
4. Loyal customer rate (LCR)
The Loyal Customer Rate (LCR) measures how many of your customers make regular purchases, specifically more than four times in a year.
To calculate LCR, follow these steps:
- Count the number of customers who made four or more purchases in a year.
- Divide this number by the total number of unique customers in that year.
Use this formula:
LCR = ( Customers who made 4+ purchases / Total unique customers ) × 100
A higher LCR means more of your customers are becoming loyal, which is a positive sign for your loyalty program.
5. Participation rate (PR)
The Participation Rate (PR) shows how many of your new customers are actively engaging with your loyalty program. This metric tells you if your customers are excited about your program or if they find it uninteresting.
To calculate PR, follow these steps:
- Count the number of members in your loyalty program.
- Divide this number by your total number of customers.
Use this formula:
PR = ( Members in the program / Total customers ) × 100
A higher PR indicates that new customers are finding it easy to join and are actively participating in your loyalty program.
Case study: Jack’s family restaurants
Jack's Family Restaurants, a well-known dining chain, faced significant challenges in enhancing customer retention and increasing loyalty transactions. To tackle these issues, they integrated a platform to improve customer engagement and streamline data management across all touchpoints.
Challenges
- Lack of control over promotions: There was insufficient control over offers, discounts, coupons, and campaigns, leading to suboptimal promotional strategies.
- Missing metrics and insights: Jack's lacked crucial metrics and insights on customer information and the success of their loyalty programs.
- Challenges in campaign management: The inability to efficiently run multiple campaigns simultaneously limited marketing effectiveness.
Solutions
- Loyalty and Coupons: Utilization of loyalty coupon management tools to create targeted promotions that drive customer engagement.
- Designed mobile app: Launch of a mobile app, enhancing customer interaction and providing personalized user experiences.
- Integrations with POS and online ordering: Integration with POS (SICOM) and online ordering system (Onosys) ensured seamless operations and data consistency across platforms.
Results
- 56% Increase in YoY Loyalty Transactions: A significant year-over-year increase in loyalty transactions following the implementation of integrated technology and strategic enhancements.
- 12% Increase in YoY Average Check Size: The targeted promotions and personalized rewards led to a notable increase in average check size among repeat customers.
- 40% Retention Rate YoY: The retention rates saw a substantial improvement, reflecting enhanced customer loyalty and satisfaction with the new program initiatives.
Conclusion
Loyalty marketing is among the many techniques that any business can use to ensure that customers visit the business and increase over a given period. Loyalty marketing therefore entails awareness of what it is, why it is essential, establishment of effective goals and the use of intelligent plans and actions to actually make the intended loyalty programs effective.
It is also possible to look at the results of such programs and any feedback from customers to make sure these programs are functioning properly. This assists organizations looking at ways of enhancing their programs to increase benefits to its customers.
The case we’ve focused on confirms that loyalty programs do drive more sales and help develop loyal buyer-partner relationships and brands.
To sum up, the concept of loyalty marketing is useful, and, when applied correctly, such an approach may become a source of substantial profit for companies and stable customer relationships.
