19 Nov Build loyalty and generate revenue with the right kind of customer rewards program
By Jim Techtmann
There is no silver bullet for running a successful business, but there are a few common factors among the most prosperous companies. While every enterprise is unique, those with the strongest bottom lines are often the ones with the most repeat customers. When an organization effectively takes new clients and transforms them into faithful fans with the help of rewards programs, they can increase the profitability of the business-customer relationship for all parties.
A question that many marketers may ask themselves is why focus most heavily on loyalty rather than acquiring new customers? It would seem to make sense that constantly generating new sources of revenue would be most beneficial to the bottom line. However, according to the Database Marketing Institute, there are many advantages to boosting loyalty. For example, the source pointed out that in his book The Loyalty Effect, Frederick Reichheld explained that while the costs associated with servicing the most loyal customers are lower, these individuals tend to spend more than the average consumer on the brands they favor. In addition, having loyal clients results in more referrals and stronger profits.
Loyalty is also integral to enhancing retention rates, and the impact of these improvements can be significant. Reichheld asserted that in industries such as banking, auto service and insurance, a five percent increase in retention rates can result in a customer’s lifetime value rising by as much as 75 percent. This indicator, the source noted, is not only affected by cost of service, but price sensitivity as well. Loyal customers tend to be less influenced by price changes, meaning that they are likely to keep buying a brand’s products and services even if they cost more than a competitor’s.
Shopify pointed out that loyalty programs in themselves can be seen as an incentive to consumers. Many people like the idea of collecting points and working toward earning rewards, so implementing these marketing initiatives can lead to a customer returning more often to the company. In fact, when it comes to online commerce, offering points can increase the number of annual repeat visits to a website by up to 20 percent. The more incentive a person has to visit a location, whether virtual or physical, the more likely a purchase will be made.
A special touch
Additionally, Shopify stressed that because today’s consumers are working within the constraints of tighter budgets, if a company wants to increase its revenue, it will be necessary to offer something more than just the product or service being purchased. Offering co-branded or private-labeled discount programs is a gesture that can wow any client and make them feel good about spending on a certain brand. Anyone can launch a loyalty program, but it takes a truly special one to fuel this sort of emotional connection. And in the end, this deeper connection is what drives the consumer behavior marketers are looking to inspire.
Jim Techtmann is Sr. VP of Entertainment® Rewards & Incentives