Loyalty does pay off – Why a loyalty program pays dividends

Loyalty programs make better customersWhy Customer Retention Matters

One of the most basic tenets of marketing and advertising is the understanding that it costs a company significantly more in time and resources to attract one new customer than it does to retain the business of one existing client. A company with a high rate of customer attrition is, by necessity, bleeding far more money to continue attracting new clientele than a similar business whose only difference is their ability to retain the customer loyalty of existing clientele.

How Loyalty Programs Affect Customer Retention

Of course, the ultimate bottom line in maintaining loyal returning customers is the balance between the quality of your products and services and the prices for which you offer them. No amount of gimmicks or giveaways would make up for poor quality services or over-inflated prices in convincing clients to return.

But assuming your products and prices are competitive and capable of retaining customer loyalty in their own right, the introduction of an effective customer loyalty program can tip the balance in a customer’s mind when making a decision between your business and that of a similar competitor. All other things being equal, your loyalty rewards might be the deciding factor when each consumer makes the choice about where to take their business. Ensuring that the loyalty rewards themselves are attractive and valuable to your customers will make their decision to keep returning all the easier.

What Makes an Effective Loyalty Program?

A loyalty program won’t get you far if it fails to attract and engage the consumers you wish to target. It may be worth your while to invest in a little market research among your target demographic or even among your existing customers to get a feel for what rewards would be most attractive to them. Some basic characteristics of effective customer loyalty programs include the following:

  • Rewards that are useful and attractive to customers. Even the most exciting-sounding perk or prize won’t be attractive to a client if they won’t be able to use it. A free week at a resort, just as an example, will have no value to a customer who doesn’t have the resources to travel to that resort or to take the week off work. Consider what your customers actually need or want, and let that information guide your choice of rewards. You might consider giving your clients choices, and even partnering with other businesses to offer multi-channel retailing among your reward options.

  • Balance the cost (to you) against the gain of returning customers. Sit down with your sales records and advertising costs and make a calculation of how much it costs you to attract a new customer, how much you stand to gain by drawing repeat business of an existing customer, and make sure the cost of your offered rewards don’t overbalance the benefit of that returning customer.

  • Make it easy to use the rewards. An integrated retail system allowing your customer to gauge their rewards–and use them with ease–right at the point of sale makes that customer loyalty program attractive to consumers. A reminder of their accumulating reward with each purchase, not to mention the use of new innovations in the retail sector like online logins to manage a rewards program’s benefits, add to the attractiveness of your reward program.

The bottom line with any customer loyalty program is to entice existing clients (as well as potential customers) to make your business their top choice. Retaining existing customers is far and away the most cost-effective way to do business, so reward that customer loyalty and reap the benefits!

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