Living in a digital age where companies are commonly vying and competing for market share to gain higher profits, differentiation has become a common practice used. Whether is it product differentiation or service differentiation, these methods has allowed companies to thrive, to varying degrees, in the competitive business environment. In this post, I would discuss the importance of loyalty programs.
Loyalty Programs or Reward Programs, are created to increase customer retention and hence higher profits from increased sales. According to statistics, the probability of selling to an existing customer is 60 to 70 percent while the probability of selling to a new customer is 5 to 20 percent. This makes it increasingly important to attract return customers, which can be made possible through loyalty programs. Below is a more in-depth analysis of the importance of loyalty programs.
Firstly, the implementation of loyalty programs can help businesses collect valuable consumer data. By knowing the taste and preferences of each consumer, including when they buy and how much, especially if they are accumulating points and redeeming rewards on a regular basis, more targeted advertising can be carried out, decreasing the amount spent on wasted advertising. On the consumers’ perspective, more targeted advertising can allow for more effective delivery of desired goods; On the retailers’ perspective, more targeted advertising can allow for more efficient marketing campaigns and more effective use of advertising resources. This thus allows both retailers and consumers to benefit from the program.
Secondly, loyalty programs can help enhance consumer experiences, showing customers that their money spent is worth and increasing the chances of returning customers. This relates to concept of perceived value, where customers experiences can help add to the level of satisfaction they get from buying a certain product or service. As such, customers will feel inclined to visit the shop more often to gain more interesting and fulfilling encounters.
Thirdly, loyalty programs can help customers maximise brand advocacy as customers feel more engaged with the brand and are more likely to promote to others. This is done through the commonly used Word of Mouth Advertising, an extremely powerful tool that any business can have. In fact, according to statistics, 74% of customers identify word of mouth as a key influencer in purchase decisions. Therefore, loyalty programs can help consumer base to increase at more rapid rates.
Looking into a case study, the Starbucks Loyalty Program has been one of the most successful implementations of a loyalty and customer retention strategy. It has been instrumental in propelling Starbucks to 16 billion in revenue. Reasons that customers like the Starbucks Reward Program include: Firstly, customers can get something for free, whether is it free drink refills or free birthday drink. Secondly, high spenders can get elite gold status. Thirdly, their mobile application provides a fun and engaging user experience.
All in all, loyalty programs can help maximise customer retention, increasing consumer base, and hence business profits. This allows the more successful businesses to emerge from the strong market competition. Recognising the importance of this, Aimazing created loyalty programs for businesses all over the world, tailoring our loyalty programs to the needs of customers. Refer to this link http://www.aimazing.co/loyalty-rewards-program/ to find out more about our loyalty program.
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