Many businesses I talk to have an immediate reaction to loyalty programs. Why would I give out something for free when people are willing to pay for it? The short answer is simple. It is because you will make it back with a multiple by increasing the number of people that remain loyal and/or increase their frequency of visits. Keep reading to find out how a loyalty program can help your business and why the short term thinking of “why to give out free products” is counterproductive.
By running a successful loyalty program, you incentivize your customers to increase spending and frequency of purchases. According to Harvard, companies can boost profits by almost 100% by retaining just 5% more of their customers. So even you already have loyal customers, running a loyalty program can easily increase your customer retention by a few percentage points.
Couple the above point with the ability to remarket to your existing customers, for the fraction of the cost of traditional marketing channels, and you can see how you can significantly boost the average customer lifetime value (the money a customer will spend on your business over his lifetime).
Grow your business
There are two ways a loyalty program can attract new customers to your business. Firstly, potential customers can discover the offering of your loyalty program and get enticed to try your business. This is especially true if you have a special reward for new registered members to your loyalty program.
Secondly, by having a loyalty program you increase the connection of your brand with your existing customers making it more likely that they will share with their friends the amazing experience they had on your business. With Yollty, you can take this even further. By activating the referral program, you can reward your existing customers with an extra point when they refer their friends, as well as, proving new users with a special discount for their first purchase, increasing the chances they will make their first purchase.
Cheap compared to alternatives:
To attract new customers to your store you spend money in some way or another. It can be in the form of an advertisement, the rent you pay for the premium location of your store, etc. This is your customer acquisition cost (CAC). This amount is fixed regardless of how many purchases a customer makes from your store over his lifetime as it refers to the amount spend to make a customer aware of your business. According to Forrester, it costs 5 times more to acquire a customer than to retain and enrich existing customers. So, spending money to convert your new customers to loyal repeat customers is one of the most effective ways to cut on costs.
Better understand your customers:
A loyalty program can help you better understand your customer habits and preferences. By connecting your sales data with individual users you will be able to better understand customer demographics, buying behaviors, top spenders, etc. Once you know the buying behavior of your customers it makes your job of running successful promotions to them much easier, as you can predict what customer segments are more likely to engage with a specific promotion and eventually lead to a sale.
Another way that you can utilize your loyalty solution, to better understand your customers, is by collecting their feedback. As you have already created a communication channel with your customers it is much easier to ask for their feedback. At Yollty, not only you have the option to request the feedback of your customers directly through the app but you can also reward your customers with extra points for their feedback.
Super easy to run
With Yollty, running a loyalty program is like a walk in the park. You can have your loyalty solution up and running in minutes and after the initial effort to onboard your customers into your loyalty program you can reap the benefits for as long as you run the program with a minimum involvement moving forward. Compared to running advertisements, creating marketing content, renovating your store, etc. is by far the easiest way to increase your bottom line and maintain a healthy business for the long term.
Although this point is very interlinked with the growth of your business, we wanted to bring to your attention two extra reasons why a loyalty program can help you reduce your churn rates. By creating an emotional connection with your customers and by having them engaged with your businesses with a loyalty program you create a locking effect as customers have something to lose (their collected points and a place they feel appreciated) if they decide to leave your business for a competitor.
Additionally, as customers are deeply engaged with your business are less likely to compare your product/prices with the ones of your competitors. Helping your business to avoid the price games that more often than not lead to disaster.