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Common Questions and Answers
Acquiring a new customer usually costs more than retaining an existing customer; hence, many businesses focus on customer retention as well as new customer acquisitions. A customer loyalty program incentivises customers to buy again from an organisation, as it offers rewards to match the customer’s purchases.
Done correctly, a loyalty program will cater to both:
The buying rationale of the consumer — ie. the logical, rational side of a buyer which takes into account savings that are made and the low risk involved in being part of such a program
And the buying psychology of the consumer — ie. their emotions, ego and attitude.
Here are some of the key benefits of customer loyalty programs:
One of the key reasons for having a loyalty program is the difference these programs can make to the organisational bottom line. Loyalty programs can have a powerful impact on sales volumes and the profitability of a business. A mutually rewarding program builds sales by encouraging customers to spend more. It also often convinces customers to become advocates for the company with their friends and family.
Leverage existing relationships
A loyalty program takes a long-term approach to customer relationships and focuses on retaining customers for repeat business. By building this crucial foundation of customer-business relations, a corporation is encouraging a habit-forming act on the part of the consumer. According to Psychology Today, these habits will persist even when when consumers’ preferences or needs change.
Engagement and marketing
Loyalty programs are novel ways to engage with your customers. They can build customer satisfaction with the right types of incentives for the target market, which can be determined through the information provided when your customer initially signs up with your program. When targeted effectively, these incentives can then be used to reinforce the overall value proposition of the business.
Encourage and guide spending
One of the many reasons businesses maintain customer loyalty programs is because these programs can be used to guide customer spending through built-in incentives. Programs can be structured to promote purchases of high-margin products, repeat purchases, referrals or complementary products.
One way of guaranteeing a higher success rate in guiding spending both with members of your customer loyalty program and with potential future customers is to use an external marketing expert like PRTA to provide you with targeted market intelligence.
Build customer database
Loyalty programs also offer an exceptional advantage for businesses seeking ways to know customers better. Customer messages can be tailored and personalised, and the business can capture useful data about customers’ purchase habits and history.
Loyalty portals such as a website with login capacity can be used to roll out surveys and to obtain detailed feedback from customers. Hence, a loyalty program can provide a solid foundation for two-way customer communications and enable you to build up detailed customer databases.
Supporting platform for new promotions
Having a customer loyalty program means businesses can have access to a ready platform when the time to launch a new product or service arrives. Loyalty-program members make up a great target market for new products.
The business could also connect with specific loyalty members or segments within the group for direct marketing if their purchase history shows that they are likely to be interested in the product.
Types of loyalty programs
There are numerous ways to incentivise customers through a loyalty program. Common examples include:
Points-based and voucher programs – These programs allow customers to accumulate points, vouchers or other credits. These credits or vouchers can be used in store for purchases, be redeemed for other products and services, or cashed in as part of cash-back program.
VIP programs – VIP programs are offered to high-volume customers who are likely to spend more. They provide benefits such as first looks for new products, exclusive benefits such as free delivery, and special events.
Partnership programs — Partnership programs are joint loyalty programs maintained by two or more businesses to reward customers with discounts, points or other benefits.
Discount programs – Discount programs can be used in conjunction with other types of loyalty programs. They offer members special discounts to encourage repeat purchases.
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