It is at least five times more expensive to acquire a new customer than to retain an existing one. Therefore, investing in customer loyalty is one of the best decisions a company can make as a loyal customer is a business’s most valuable asset.
What are Customer Loyalty Programs?
A customer loyalty program is a marketing strategy that recognizes and rewards customers who frequently purchase from a business. These programs are primarily designed to attract new customers and motivate the existing ones to continue patronizing and engaging with a brand.
Loyalty programs can take many forms. However, the most popular one is the points program, where businesses award points to customers based on how much they spend. Customers can then accumulate these points and exchange them for any loyalty benefit that the business offers.
Benefits of customer loyalty programs
Loyalty programs offer a wide range of incentives to customers. Typical benefits include:
- Exclusive discounts
- Free Merchandise
- Personalized content
- Early access to new products
- Access to special services, such as free or expedited shipping
Loyalty programs help companies capture and retain customers
The 2016 Report found that over 70% of customers are more likely to recommend brands with good loyalty programs. This proves that loyalty programs can turn your most dedicated customers into brand advocates, who’d freely publicize your business to friends and family. This advocacy can send your customer acquisition rate through the roof and assist with brand penetration while reducing your marketing budget. Studies have also shown that loyalty programs have a positive impact on customer retention. Additionally, Rewarding customers for their loyalty to your brand makes them feel valued and appreciated, which fosters brand affinity and leads to higher retention rates.
Loyalty programs encourage repeat business
On average, repeat customers spend 67% more than first-time shoppers. Loyalty programs incentivize repeat purchases by offering perks, such as exclusive discounts, freebies, reward points, and many more. These programs also encourage customers to increase their purchase frequency and order volume, which translates into more revenue for your business.
Loyalty programs increase a business’ revenue via three channels:
- By increasing customer retention rates: Loyalty programs help create a positive brand experience, strengthening the bond between you and your customers and getting them to keep supporting your business. And according to research conducted by Frederick Reichheld of Bain & Company, increasing customer retention rates by only 5% can yield an increase in revenue by 25-95%.
- By encouraging repeat purchases: Repeat customers spend more, thereby bringing more profit to your business. Loyalty programs encourage repeat purchases by giving customers more reasons to buy from your business rather than a competitor.
- By reducing marketing costs: Customers are far more likely to engage in brand advocacy for e-commerce businesses with great loyalty programs. Having brand advocates that are happy to share their positive experiences can save you a significant amount of money. By influencing their network of friends and family to patronize your small business, brand advocates can widen your customer base without you spending a cent on marketing.
Increases the customer lifetime value
Customer lifetime value (CLV) refers to the average amount of money a customer will spend with your business throughout their relationship with your brand. It measures the total potential revenue that can be derived from a single customer over a lifetime of purchases. The longer a customer continues to patronize your business, the higher their CLV will be. Implementing a loyalty program with attractive perks encourages customers to keep spending their money with you. This will further increases their lifetime value. Additionally, it gives you an edge over your competitors. Consumers are more inclined to stick with a brand that offers benefits they wouldn’t find elsewhere.
A loyalty program fosters the brand image
Brand image is the perception of a brand in customers’ minds based on their interactions and experience with it. It comprises the beliefs and impressions a customer holds about a brand even before making a purchase. Offering a customer loyalty program can positively shape your brand’s public perception. It communicates how much you value your customers and the extent you’d go to show your appreciation for their continued patronage. If your potential customers get the impression that their patronage will be valued, your business becomes a lot more attractive to them.
Launching a customer loyalty program holds numerous benefits for both you and your customers. However, without an effective shipping strategy to tie in the experience, all your efforts to boost customer satisfaction and improve retention rates may be futile. Fortunately, GoShip can help prevent this from happening. GoShip helps small to mid-sized businesses find professional and affordable shipping solutions without the services of a broker. Our self-service platform connects you with over 42,000 pre-vetted freight carriers to ensure that you always find the right fit for your shipping needs. Enter your shipment details in our online quotation tool to get the best rates from carriers around you today.