It feels good to be recognized and rewarded. Think of that coffee shop that knows its customers’ orders by heart and has their favorite cup of coffee ready as soon as they walk in the door. Maybe you’ve experienced dining at a restaurant where the wait staff calls you by name. Feels good, right? That’s how your customers want to feel. They want recognition and special treatment for their loyalty. Multiple new studies show engaging and rewarding your customers matters. Think discounts, special deals or even shout-outs. Here’s the proof that loyalty programs and promotions increase sales and revenues:
- 20% of your customers today will make up 80% of your company’s revenue in the future. (Zinrelo).
- A 5% increase in customer retention increases profits by 25% to 95% (Harvard Business School).
- Companies with strong loyalty marketing programs grow revenues 2.5 times faster than their competitors and generate 100-400% higher returns to shareholders (HBR).
So, there you have it. Loyalty programs and promotions keep customers coming back, where they will spend 67% more than new shoppers, refer others, and try your new products and services. It’s recurring, sustainable income with little effort on your part.
The real clincher though is the bottom line. The Harvard Business Review says acquiring a new customer costs 5 to 25 times more than keeping an old one. Also, 17% of businesses report their loyalty programs cost less than advertising for new customers.
Without a loyalty program, you lose current customers, future income, and the competitive edge. According to AnnexCloud, 63% of Millennials and Gen Z shoppers won’t commit to a brand that won’t commit to them.
Remember Who Got You Here
It’s a mistake to offer new customers 10% off without also giving your bread-and-butter customers something for continuing to do business with you. Consider offering them a special 5% off code to enter with every purchase. Make sure they always get free shipping. Or team up with a company like Rakuten that gives customers cash back every time they revisit a store and $25 when they refer a friend. Stores like Macy’s allow customers to earn points on every purchase which adds up to cash back. American Express is now paying cardholders cash back when they spend designated amounts at participating retailers. Other credit cards offer frequent flier points.
Businesses can surprise customers on their anniversary with the company by offering them a free gift or a huge discount. The ways to reward shopper loyalty are endless. The effort is worth it because data shows customers will almost always (77%) choose your brand over your competitor’s.
The top six programs and promotions to motivate, reward and retain customers.
- Noncash rewards – The Aberdeen Group has found non-cash rewards, like free shipping and points, are three times more cost-effective than discounts or cash prizes.
- Travel rewards – If you want sales growth and the highest customer retention rate, offer group travel rewards, according to the Incentive Research Foundation.
- Level-up rewards – People like exclusivity. A Technology Advice survey found Consumers are 56% more likely to join customer loyalty programs that offer tiered rewards and exclusive treatment for top customers.
- Gift Cards – While most shoppers do prefer travel, at least 36% of customers say they prefer gift and debit card programs.
- Photo and Video Contests – Your customers can be your best word-of-mouth. Capitalize on that by holding a contest and offering prizes or shout-outs for the best user-generated content. The company Boden posts the best photos of customers wearing its clothing on the website’s home page.
- Surprises – To make consumers really feel appreciated, include surprise points or reward dollars on birthdays or other special occasions. It’s a great way to build an emotional connection with your brand.
There is one downside to the programs for consumers. It’s no secret businesses are gathering their data to create targeted marketing campaigns and personalize their experience. Shoppers know in order to get the rewards, they must give retailers their emails, create passwords, provide addresses, phone numbers, sometimes stored credit numbers, and even dates of birth for verification purposes. Only one-third of adults are comfortable exchanging their personal information for a few bucks off. Shoppers read and watch the near-daily headlines reporting the latest data breaches, like Digital Ocean on April 28, 2021, that exposed customer billing information.
If businesses are going to convince the remaining two-thirds of adults to trust them with private information, they’d better have extra security measures in place. One way to do that is with Red Maple’s Clever Division solution. Unlike any other software out there, Clever Division protects companies and their customers from theft, fraud, and data breaches with a remarkably simple solution. Clever Division divides up customer data and stores it in separate locked vaults. So, even if cybercriminals hack one vault, they only get partial data that is worthless to them.
After guarding customer information, retailers can use that data to communicate directly with them about items and services they might enjoy based on past purchases, and for urgent matters like product recalls and deficiencies. Also consider using your database to tell customers about special events, sales, and new products. Your loyalty program database is a virtual gold mine because loyalty program emails have up to a 55% open rate and 17% click-through rate – which is two and eight times higher than Mailchimp benchmarks, according to Incentive Solutions.
While it’s critical to shower your current customers with attention, you can also use rewards programs to attract new customers. Businesses can appeal to new customers by offering points, dollars, or discounts for signing up to loyalty programs. In fact, a loyalty program survey found 65% of businesses are trying to entice new customers, while 57% of businesses are trying to build stronger emotional brand connections. Half of all businesses with programs use them to gain insight and data about their customers.
Whatever your goals, loyalty programs are a win-win for businesses and customers. Businesses can generate more sales and revenue, and customers can get the special treatment and discounts that will keep them coming back.