Efforts that businesses make to retain existing customers result in a greater RoI than the efforts they put in to acquire new customers. Customer acquisition can also be 5 to 25 times more expensive than retention. This shows how important customer loyalty is for a business. Recognizing the importance of loyal customers, many brands are coming up with their own loyalty programs these days.
To make your business stand out in such a competitive market, you should try to create a unique loyalty program that adds value to your customers. If executed in the right manner, loyalty programs can not only help you retain customers but are also effective in increasing overall sales. Let us help you understand what a customer loyalty program is and what are the best techniques to retain customers & increase sales:
What is a Customer Loyalty Program?
A customer loyalty program is a strategy under which businesses reward their customers for making purchases. The aim of these programs is to encourage customers to make repeat purchases and stay loyal to a brand. The more customers spend, the more rewards they earn. There are different types of loyalty programs, such as rewards-based, cashback-based, and tier-based loyalty programs.
Different types of loyalty programs are suitable for different businesses. A loyalty program works best only when you consider your business needs and run a program accordingly. If implemented effectively, a loyalty program can bring immense growth to a business.
Benefits of Loyalty Programs
The following are some most significant benefits of running a loyalty program:
- It helps you increase the customer’s lifetime value.
- Loyalty programs are the most effective strategies for customer retention
- It helps you stand out from the competition.
- It helps you increase brand awareness through word of mouth.
- It helps you increase overall sales and revenue.
- Loyalty programs help you provide better customer satisfaction.
Best Loyalty Program Techniques for Customer Retention
The following are some types of loyalty programs that you can run for better customer retention and increasing sales:
Rewards/Cashback-Based Programs
Rewards or cashback-based programs are the most popular and commonly used loyalty programs. In a rewards-based program, customers earn a certain number of points every time they make a purchase. The number of points is generally fixed against the amount spent. The higher amount a customer spends, the more reward points they earn.
For example, if a loyalty program offers 5 points for every spend of Rs. 100, customers will earn 25 points for making a purchase of Rs. 500. Along with the number of points, the redemption options and the monetary value of reward points are also decided by the brand.
Make sure that you offer valuable reward points and exciting redemption options so that your customers are interested in earning more and more points. Generally, the reward points are redeemable against the brand’s own products only. However, a better idea is to offer some other redemption options along with that. You can allow your customers to redeem the points against your products as well as against the vouchers or gift cards of some other brands.
Tier-Based Programs
Tier-based programs are the best way to categorize your customers based on their level of loyalty. Not every customer is equally loyal. Some customers really love your brand, however, your brand might be just an option for others. It is not fair to offer the same rewards to your most loyal customers as well as the non-loyal ones.
This is where a tier-based loyalty program comes into play. You can create a loyalty program with three or more tiers, each having different benefits. Here, the lowest tier is for one-time buyers and the highest tier is for the most loyal customers, whom you expect to stay loyal for a longer period.
For example, suppose you build a loyalty program with three tiers A, B, and C. Your customers enter tier A as soon as they make their first purchase. After completing 10 purchases (purchase over a certain amount can also be a condition) from your brand, they enter tier B. To enter the most rewarding tier C, they need to complete 25 purchases with your brand.
This was just an example. You can have different conditions and rewards for your tier-based loyalty program.
Loyalty Programs Aligned with a Mission
When you align your loyalty program with a mission or a social cause, it becomes a significant reason for many customers to keep purchasing from your brand. There are many people who want to donate to charity, but find it difficult for some reason. If you allow them to donate without spending any extra amount, they will indeed love it.
You can run a loyalty program where your customers earn certain points every time they make a purchase. Here, these points are not redeemable against your own products but an equivalent amount is donated to charity in your customer’s name once they accumulate a certain number of points. You can build a separate rewards portal where your customers can track their points and donate to the charity of their choice.
It builds an emotional connection between your brand and your customers. As a result, they are motivated to purchase more often and stay loyal for a longer period.
Spend-Based Loyalty Programs
How can you make your top-spending customers feel special and encourage them to keep spending? The answer is simple: Run a separate spend-based loyalty program. Under this program, you can offer some additional reward points or discounts to the top spenders of the week, month, or quarter.
To make the program more interesting, you can add a leaderboard to your website that allows your customers to track real-time top spenders. Make sure to add relevant filters to check the top spenders of the day, week, month, year, etc.
Many businesses run these types of programs to boost their sales during a particular period, especially during the off-season. But, you can even have a continuous spend-based rewards program. You can announce the prizes and rewards for the top spenders to build excitement among your customers. Make sure that the prizes are valuable and interesting enough for your customers to motivate them to become the top spender.
Gamified Referral Programs
‘Word of Mouth’ works as a very powerful tool when it comes to acquiring new customers. Studies suggest that consumers trust the recommendations of their friends more than the advertisements shown by a brand itself. You can run a referral program along with a continuous loyalty program to boost customer loyalty and encourage your loyal customers to refer their friends at the same time. You can customize these programs as per your needs and budget.
Some brands offer rewards or free gifts as soon as the customers refer a friend, however, others reward on the friend’s first purchase. You can even offer different rewards on reaching different stages of referral. For example, a brand can offer a 10% discount when a customer refers to a friend, a 20% discount when the friend signs up, and a 30% discount when the friend makes a purchase.
Choose the Right Platform to Run Your Brand’s Loyalty Program
You can find plenty of options when you search for the best loyalty solution providers in India. But, you must consider your requirements and choose a platform accordingly. For a loyalty program to work effectively, it is important to align it with your business objectives. You also need to keep the interests of your customers in mind to make the program exciting for them.
RewardPort is one of the top loyalty solution providers to consider in India. They have a team of marketing experts, who take all your business details into account and help you implement a loyalty program that works the best for your business.