Customers like options, they like experimenting, and they seek innovation. At a time when consumers’ preferences are dynamically changing with customers ready to experience new brands, the marketing effort of businesses is getting challenging. Each brand and product has their own point of differentiation and personna. It is up to the marketing manager to cater to an audience who closely aligns with the brand personna in a bid to build brand loyalty. Customer loyalty is a rare quality today. However, it is essential to invest in loyalty management programs to keep hold of customers. Customer engagement, offers, store credits, prizes, convenience, and contests are some of many tools used in loyalty management. But what benefits do organizations derive out of such programs? Is the cost spent on loyalty management justified?
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Benefits of Loyalty Programs
Better Customer Retention
Loyalty programs exist to retain the customers who can drive the revenue of the company throughout their lifetime. Stores and companies offer various kind of incentives to customers for being loyal to their brand. Discount coupons, loyalty points, and redemption are often used so that the customer doesn’t defect and purchase from a competitor. So, is the expenditure on the loyalty management programs justified? First, it increases customer retention rate, which thereby drives future revenues. Also, companies will have to spend less money on marketing and advertising to drive purchases within the existing customer base. Also, numerous research suggests that loyalty programs increase the overall revenue, member spend, and purchase frequency.
Gather Customer Data and Trends
In today’s age, data is power. Loyalty management programs offer the ability to gather customer data, their spending habits, and purchase patterns. It helps businesses to identify customer trends, their preferred shopping channels, and their response to marketing programs. Accumulating such vast customer data can assist the company with inventory management, promotional planning, and pricing. Additionally, marketers can also monitor the results of special promotions and new channels and drive the overall efficiency of their marketing programs. It is impressive how data analytics tools can know a customer as good as or even better than the traditional mom and pop store.
Increase in Share of Wallet
The data collected from loyalty management programs can be used to cross-sell and up-sell to the existing customer. For instance, loyalty programs can be used to offer customer extended warranties after an item is purchased or suggest accessories that would match the product. One of the best example of increased share of wallet is in airlines frequent flyer miles program. Once loyalty is established, customers spend more on the brand than a non-loyal customer.
Boost your Reputation
Apart from incentivizing clients to stick around after the purchase, loyalty programs also work as a useful word-of-mouth tool. Loyal clients feel that the organization is valuing them and as a result, they would recommend the company to their peers. The more a customer feels cared for by the company, the more likely they will be to support the company and recommend it to others. Additionally, any marketing promotions run by the company will also be advertised by the customers within their circle.
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Better Communication Tool
On the commencement of any loyalty management programs, customers give out their contact information and agree to receive promotions and communications from the company. It offers a direct line of contact to the customer facilitating communication. Companies can thus inform customers about new promotions, product launch, price drops, and new services offered. This way companies can drastically reduce the marketing and communication cost and at the same time increase the efficiency as well.