How To Increase Buying Power With Customer Loyalty Programs

Customer loyalty programs have increased in popularity and is critically important to retail business growth. Nielsen conducted research found 84% of consumers were more likely to choose retailers that offer programs. Around 59% even check if loyalty programs are available where they shop.  How do retailers capitalise interest in customer loyalty programs to keep members engaged and create an active customer base?

Before delving into the logistics, it is important to understand what defines customer loyalty programs. These are essentially programs for marketing products and services, that reward loyal customers with incentives for purchases. These programs incentivise and track purchasing behaviour, rewarding customers in return for loyalty to a certain brand. The basic logic is simple: the more you spend, the more you get. These programs are also effective tools for retaining customers. They also motivate existing customers to be engaged and make repeat purchases.

Why Points & Tiers Count

A tactic used by retailers is the points based customer loyalty initiative. It gives customers points for making purchases or completing other activities and actions. On the other hand, tier-based customer loyalty programs track purchases. Once customers make enough qualifying purchases, they are placed in a tier. Each level gets certain incentives and rewards, increasing in value as the customer moves through each tier. Such VIP clubs are used by airlines, casinos and even clubs.

Taking a Social Approach

Not all rewards programs are linked to making an actual purchase Some firms take a social approach. They go ahead and reward points/discounts for engagement on social media, such as likes, comments or even shares. Many brands run giveaways and contests. These reward loyal fans who like or share posts with their network.

Loyalty Programs That Are Paid

The best things in life may be free, but customer loyalty programs sometimes require members to pay a fee, ranging from one time payment to recurring payments over a period of time. Examples of these include Sam’s Club membership and Amazon Prime. Gamification like McDonald's Monopoly also fall under this category.

Benefits of Customer Loyalty Initiatives

Whether it’s cashbacks, rebates, points, free gifts or shipping, flexible return policies or even access to exclusive shopping hours or events, free services and upgrades, loyalty programs offer myriad benefits for businesses. According to research, retailers spend 5-10 times more to acquire a new customer rather than retaining an existing one. Engaging current customers could cost less and reap greater benefits in the long run.

Programs also increase customer lifetime value and returns on investment. These programs also activate word-of-mouth publicity. As per the 2016 Bond Loyalty report, close to 73% of members recommend brands with excellent loyalty programs. Satisfied customers are also more likely to make the shift to brand advocates and promote the business for free to their network.

Shaping purchasing behaviour by providing incentives for customer activities is also beneficial for businesses that want to sustain the growth momentum, like the Sephora Beauty Insider loyalty program. Winning brands understand that customer loyalty is free, but requires time, money and effort. What motivates these companies is the solid returns on investment loyalty programs inevitably trigger.