Loyalty & Reward Programmes
November 23, 2023

Customer-Centric Growth: Top Benefits of Loyalty Programmes

Benefits of Loyalty Programs

Beyond the familiar promise of discounts, loyalty programmes weave a tapestry of benefits that elevate the entire shopping journey. From sales to customer engagement, join us on a journey to discover the many benefits of loyalty programmes that go beyond the transaction

There’s no denying the transformative impact of customer loyalty on modern businesses. 

However, with technology giving consumers ever-expanding choices and creating fierce competition in marketplaces, customer loyalty becomes a challenge for some businesses.

This is where loyalty programmes make a difference.

This blog will delve into the myriad  of benefits of these programmes, shedding light on their growing significance in building customer loyalty.

 



Contents:

 

 

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11 Key Benefits of Loyalty Programmes

1. Breaks the Over-Reliance on Price Cuts

Businesses often have to compete on prices to attract and retain their customers. A loyalty programme is a viable alternative to this race to the bottom.

While competing on price often results in transactional relationships, loyalty initiatives foster a sense of attachment and loyalty. Customers become emotionally invested in the brand, reducing the chances that they will fall for lower prices offered by competitors.

Rather than constantly focusing on acquiring new customers through price-based promotions, loyalty programmes emphasise the importance of retaining existing customers. Retention becomes a priority, and businesses can allocate resources to strengthen the customer relationship, reducing the need to continually entice new customers with lower prices.

Speaking of retention…

 

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2. Increased Sales and Revenue

Retaining existing customers is more cost-effective than trying to attract new customers. You can increase revenue and sales by focusing on a customer retention strategy rather than depending on customer acquisition alone.

You have a 60% to 70% chance of selling to existing customers, compared to a 5% to 20% chance of selling to new prospects.

The promise of exclusive perks in loyalty programmes encourages customers to choose your brand for their ongoing needs. This leads to an increased frequency of transactions and higher overall sales.

Many types of loyalty programmes often include exclusive promotions, events, or early access to sales for members. This exclusivity creates a sense of value, leading to a high purchasing frequency during these special promotions. This not only boosts your bottom line but also strengthens the loyalty bond with customers.

 

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3. Enhanced Customer Retention

Loyalty programmes are the unsung heroes of customer retention. By offering exclusive rewards, discounts, and perks, businesses create a bond that goes beyond a simple transaction. 

According to one study, 78% of consumers are more likely to buy from a brand with a loyalty programme.

By offering something beyond the standard purchase, you provide extra value to your customers. This special treatment becomes a compelling reason for customers to stick with your brand, as they feel acknowledged and rewarded for their loyalty.


Take Starbucks, for example. Their renowned loyalty programme, Starbucks Rewards, not only keeps coffee enthusiasts coming back for their daily fix but also contributes to an impressive 16% annual growth in revenue.

 

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4. Heightened Customer Engagement

Engaging customers is more than just a fleeting interaction—it's about creating memorable experiences. 

Loyalty programmes play a pivotal role in this by offering personalised incentives that resonate with individual preferences. Whether it's tailored discounts or surprise rewards, these programmes foster ongoing engagement.


Consider Sephora's Beauty Insider programme, where members receive personalised product recommendations and exclusive access to events. This not only boosts engagement but also creates a sense of community among beauty enthusiasts.


Some loyalty programmes also go above and beyond to engage customers with gamification. Gamified loyalty programmes leverage game-like elements like leaderboards, prize draws, challenges, and badges to add excitement to the programme. This can encourage customers to return to your brand in the future.


A study found that gamifying marketing increased customer engagement by 60%.

 

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5. Boosted Brand Loyalty

Building brand loyalty is a journey, and loyalty programmes are the roadmap. When customers feel appreciated and recognised, they become emotionally attached—and consequently, loyal—to a brand. 

Although the psychology behind loyalty is complex, effective programmes help nurture it by tapping into the innate human desire for exclusivity and recognition. These programmes often offer exclusive perks, access to limited-edition products, or special events to create a sense of exclusivity. 

A recent study found that 71% of customers will switch brands if they don’t get sufficient benefits.

Customers, driven by the desire for unique experiences, become more loyal to a brand that provides a feeling of belonging to an exclusive community.


Nike's loyalty programme, Nike Membership, goes beyond discounts. It offers access to member-exclusive products that are not available to the general public. These products may include limited-edition releases, early access to new collections, or special editions. 


By providing exclusive offerings, Nike creates a sense of privilege and uniqueness for its members, fostering brand loyalty.

 

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6. Customer Insights and Data

Loyalty programmes are not just about rewarding customers. They are also invaluable tools for collecting customer insights and data for your marketing campaigns. By analysing the data generated through these programmes, you gain a deeper understanding of customer preferences, behaviours, and trends. 

For example, by analysing the redemption patterns and preferences within the programme, businesses can create detailed customer profiles. This insight enables more targeted marketing efforts and personalised experiences tailored to specific customer segments.

60% of customers will remain loyal to a brand after experiencing a personalised shopping experience.


Amazon Prime, for instance, uses customer data to enhance the overall shopping experience. The result? A seamless blend of personalisation and convenience that keeps customers coming back.


Additionally, loyalty programmes provide a mechanism for identifying and segmenting high-value customers among your target audience. 

By analysing spending patterns, you can identify customers who contribute significantly to your overall revenue. This insight allows for targeted retention efforts, exclusive offers, and personalised communication to further solidify loyalty among this valuable segment.

 

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7. Drive Repeat Business

The primary goal of any business is to secure repeat customers, and loyalty programmes make this possible. From exclusive discounts to members-only events, these programmes create a compelling reason for customers to choose a particular brand for their next purchase.

Over 83% of customers say that joining a loyalty programme makes them more likely to make repeat purchases.

Implementing points or tier systems within loyalty programmes encourages customers to accumulate points over time. As customers purchase products, they progress through different tiers and unlock additional benefits and rewards. This tiered structure not only fosters a sense of achievement but also provides an ongoing incentive for customers to continue engaging with the brand.


Take airline loyalty programmes like Delta SkyMiles, which offer everything from free flights to airport lounge access. Such perks not only encourage repeat business but also turn customers into brand advocates.

 

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8. Lower Customer Churn Rate

Reducing customer churn is a critical objective for businesses aiming to achieve sustainable growth. Implementing a well-designed loyalty programme can be an effective strategy to prevent customers from leaving.

For example, loyalty programmes can introduce elements that create barriers to switching. This could include the accumulation of points or benefits that customers would forfeit by leaving. This will make customers think twice before considering a switch to a competitor.

Additionally, regularly updating and improving the loyalty programme based on customer feedback and market trends keeps your offerings fresh and appealing. This continuous evolution ensures that customers find ongoing value in the programme, contributing to sustained loyalty and reduced churn rates.

 

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9. Greater Customer Lifetime Value (CLV)

As customers make repeat purchases to earn rewards or maintain their loyalty status, their overall spending tends to increase over time, positively impacting CLV.

Loyalty programme members bring in 12% to 18% more revenue each year than non-members.

Loyalty programmes also create opportunities for strategic cross-selling and upselling. You can tailor rewards and promotions based on customer preferences and purchase history, encouraging customers to explore additional products or upgrade their purchases, thereby boosting CLV.

 

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10. Word-of-Mouth Marketing

Loyal customers are your best advocates. When customers feel a genuine connection to a brand, they become natural ambassadors, spreading positive word-of-mouth on review platforms. This organic form of marketing is priceless, reaching potential customers through trusted recommendations.


Dropbox encourages its existing users to refer their friends, family, and colleagues to join the service. The idea behind this referral programme is simple but powerful. Both the existing user and the referred user receive additional free storage space as a reward. This incentive creates a win-win situation, motivating users to actively participate.

 

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11. Boosted Average Order Value

Like we mentioned earlier, loyalty programmes often include tiered structures where customers can unlock higher levels by spending more. Offering exclusive discounts or bonus points for reaching these tiers encourages customers to increase their order value to attain additional benefits.

Implement a points-based system where customers earn more points for higher order values. This incentivises customers to spend more in a single transaction to accumulate more points, which they can redeem for rewards or discounts.

You can also introduce limited-time promotions within the loyalty programme. Use this to offer bonus points or additional discounts for orders that exceed a certain value. This creates a sense of urgency and encourages customers to maximise their spending during the promotional period.

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Overcoming the Common Challenges

Implementing effective loyalty programmes comes with challenges, such as the risk of customer disengagement, programme complexity, and concerns about data privacy. 

To tackle these issues and enjoy the benefits of loyalty programmes, you should: 

  • Prioritise clear and regular communication, 
  • Simplify programme structures, 
  • Address data privacy concerns transparently, and 
  • Differentiate your programmes with unique and valuable rewards. 

Additionally, striking a balance between attractive rewards and programme profitability and regularly adjusting the programme based on customer feedback contribute to the long-term success of loyalty initiatives. 

By proactively addressing these challenges, you can create loyalty programmes that not only attract customers but also foster lasting connections and drive customer retention.

 

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Loyalty Programmes — The Gift That Keeps on Giving! 

Loyalty programmes are not just about offering discounts; they are about building lasting connections with customers. From improving retention and the customer experience to collecting valuable data insights, the benefits are countless. 

You too can unlock these benefits for your business today.

Download our Customer Loyalty and Reward Programme guide to learn which type of loyalty programme works best for your business. Explore how nurturing loyalty can supercharge your ROI and drive sustained growth for your business.

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