Companies need to understand that it’s much more effective to keep existing customers buying from them rather than seeking new ones. What are loyalty programs, and how can they help your business?
In the world of marketing, loyalty programs are strategies used by companies to both maintain and increase their customer base. To achieve this, they offer promotions, discounts, points for purchases, or rewards designed to attract both new and existing customers.
According to B2BInternational figures, over 50% of B2B marketers recognized that making customers more loyal is a challenge, but achieving it leads to a 10% increase in sales.
On the other hand, personalizing loyalty programs is crucial for increasing customer engagement with the brand. According to McKinsey figures, personalization can increase revenue by 10 to 30%, reduce acquisition costs by 5%, and improve marketing investment efficiency by 20%.
In recent years, people have become more demanding regarding brands. This demand is not just about product quality or prices but also about receiving some form of additional benefit or reward.
Therefore, the loyalty strategies implemented by organizations are intrinsically related to this aspect: rewarding and giving additional prizes to recurring customers.
Although there are many ways to create loyalty or retention programs, they all work in the same manner:
- Creating techniques for customers to make repeat purchases
- Ensuring customers remain loyal to a brand over time
- Encouraging users to recommend the company to their friends and family.
Goals of Loyalty Marketing
One of the main goals is to retain the number of customers, as loyalty programs increase retention rates. This way, users are happier, and companies can sell more.
In line with the previous item, repeat purchases allow organizations to learn more about their customers. Thus, organizations can even advance a step further by creating more personalized and precise loyalty strategies.
But ultimately, it’s about increasing revenue. In general, companies earn the largest percentages of their sales from already loyal customers.
Four Benefits of Having a Loyalty Program
1. Greater Competitiveness
One of the main benefits of “loyalty marketing” is simply selling more than the competition. Thanks to loyalty strategies, customers have incentives to buy from brands or companies that offer better promotions and benefits.
2. Lower Customer Retention Costs
As is well known, acquiring new customers is considerably more expensive than selling more to existing ones. This technique, known as upselling, is not an additional cost for companies, which can offer special benefits, such as bonuses or discounts, to create recurring buying habits.
3. Happy Customers = More Customers
A user who has been rewarded for their purchases will likely recommend the company to their friends and family. This can attract these new groups of people to buy products, translating into more customers and higher revenue for the company.
4. Create Better Campaigns
Thanks to databases and better use of information from existing customers, companies can create targeted campaigns to offer benefits at the right time through the appropriate channel.
Types of Loyalty Programs
1. Points Program
With each purchase, customers earn points that they can later redeem for more products or services. Classic and effective.
2. Multibrand Program
This involves partnerships between different companies. For example, an airline partnering with a credit card company to reward customers with travel miles for their purchases.
3. Tiered Rewards Program
This loyalty program offers different rewards based on customers’ spending levels. If the reward is attractive enough, users will choose to spend more.
Zentricx, a company with local offices in Spain, seeks to collaborate with organizations to enhance their digital transformation journey. With its cutting-edge technological solutions, retail companies can boost their businesses. To learn how these tools can grow your business, we invite you to contact Julio César Blanco, Innovation Director & Head of Spain Office at Zentricx.
