When and Why You Should Build a Loyalty Program for Your CompanyNatalia Persin
In most businesses, especially those that rely on loyalty from customers, it is difficult to know how to retain loyal customers. While it is important to dedicate time to bringing in new customers, it is equally important to retain current customers.
Knowing the reasons behind building a loyalty program and when you should develop one is not an easy task. This is because to find the best one for your company, you will need to test the waters quite a bit.
Wondering how to tell just when and why you should build a loyalty program? Keep reading to find out.
What is a Loyalty Program?
No matter what stage of business you are in, it is essential to both attract and retain customers through various activities. All of these methods have the common goal of making sure customers are happy and satisfied.
A loyalty program sets out to do just that, keep current and potential customers happy, satisfied, and coming back for more. Most of these programs are designed to retain loyal customers while also attracting new customers.
Keep in mind that the best loyalty programs exist because the various departments in the company come together to make it happen. This means that when your public relations and sales teams work together, it can result in a loyalty program that can be successful for your company overall.
Benefits of a Loyalty Program
There are many benefits to having a properly functioning loyalty program which often results in customers who are happy to come back over and over. In fact, through many of these programs, customers can become your best means of advertisement.
Check out the most commonly mentioned benefits of building loyalty programs:
1. More Customer Referrals
When companies have a loyalty program, customers tend to feel more comfortable with them and are more likely to refer them to their friends and family. Because of this, businesses gain a broader customer base from people they may not have targeted originally.
2. Customer Retention
Customer loyalty programs are more likely to result in better customer retention than anything else. This is because when customers feel like they have a stake in the company, they are more likely to continue using their goods and services.
3. Draws in More Business
Aside from the new business that comes in as a result of customer referrals, a customer loyalty program may draw in new customers. This typically happens because people, in general, like to get something out of their purchases and experiences.
4. Cost Effective
Customer loyalty programs are a cost-effective way to advertise your business, especially when you do not have the budget to do other things. Customer loyalty programs provide you with the opportunity to reach out to potential customers in a unique way that does not have to put a strain on your pocketbook.
Why Should You Build a Loyalty Program for Your Company?
Deciding whether or not to build a loyalty program for your company can be an overwhelming concept for some managers. However, the gains that you can get as a result of implementing a program can be good for business.
Check out these reasons why you should build a loyalty program for your company:
1. Increases repeat business
When it comes to being in the business world, especially when you are focused on providing goods and services, the main goal is to keep customers coming back. This can only be achieved if you are willing to give customers a reason to do so.
A customer loyalty program encourages customers not only to continue using your business but also encourages them to spread the word. This means that when it comes down to it, they are more likely to refer other people to your company.
2. Increases customer purchases
In most cases, if your loyalty program revolves around providing incentives to purchase more items and/or services, customers will do just that. This often results in an increase in customer purchases over time.
For example, when a customer is making a purchase, and they learn about the loyalty program, they may be encouraged to purchase more items. This is especially true if your program results in them getting something for free or at a discounted rate.
3. Improves customer loyalty
The overall goal of a business is to not only gain new customers but to improve the loyalty of existing customers. This can only happen if the customers are happy with the level of service they receive.
With a loyalty program, customers are more likely to stay with the company, refer other customers, and continue coming back for more. They are also more likely to talk about your business to their friends and family as well as on social media.
4. Allows you to get the word out for certain promotions
If you launch your loyalty program at the same time you are promoting a new product or service, this can allow you to increase your advertising. This is because while you are building customer loyalty, you can also advertise your new product or promotion.
Since advertising is the most important way to get the word out for your business, any time you can piggyback onto something else can be an advantage. Launching your customer loyalty program alongside your latest promotion can result in getting the word out to more customers.
5. Easier to track customer behavior
Using a customer loyalty program such as punch cards or computer-based programs can allow you the opportunity to track customer behavior. This can show you what types of products or services they are interested in.
As a result of your customer loyalty program, since you can see their habits, you may be able to create certain promotions that affect what they purchase the most. This will encourage them to keep coming back for more.
6. Improves customer relationships
When you build a loyalty program for your company, it tends to open up lines of communication with your customers. This often results in better relationships with customers which can be beneficial to your business.
Having a great relationship with your customers means that they are more likely to speak up about things that are working and those that are not. They are also ones you can count on while you are in the process of building your loyalty program.
7. Increases revenue
As a result of customer referrals and new customers coming in because of your loyalty program, you will be able to see an increase in your overall revenue. This is because with new customers comes more sales, which also means more profit for your business.
Because of your loyalty program, you should keep in mind that you will likely need to increase your on-hand product base since more customers are coming in. Although you will be spending more to get more products in, it will balance out in your favor due to the new customer base.
8. Keeps customers talking about your brand
The best advertisement for any business is word of mouth. This is because when customers are talking about your company, it can result in a broader scope of new customers coming into your business.
As you are building your business, the more people that are positively talking about the company, the more people will be drawn to your company. This is advertising that you do not have to pay for, so it is extremely cost-effective.
9. Impacts customer experience
Loyalty programs do not only affect your business, but they also impact your customers’ experience with your company. This is because, in any business, a customer can have a good or bad experience.
When you show customers that you value them and their business, you can create customers for life. What keeps customers coming back to a business is the experience when they are dealing with business.
10. Better overall brand recognition
Since building a loyalty program can result in customer loyalty, referrals, and a new customer base, your business tends to rate better as a brand overall. This is because the more customers that are positively talking about your business, the better your business will be.
Since the best advertisement is word of mouth, this can either make or break your reputation. When you provide a loyalty program that people like, your overall brand recognition will increase.
When is the best time to Build a Loyalty Program for Your Company?
When it comes to deciding when the best time to build a loyalty program for your company, the truth is anytime. This is because whether you are just beginning or have been in business for years, anytime you start doing something for your customers, you will reap the benefits.
Many businesses will start their loyalty program from the beginning, which shows customers that they value not only being successful but their customers as well. Because of this, they tend to have a better launch and gain customer loyalty from the get-go.
Other businesses may start their loyalty program when they begin to see a slump in their overall revenue. This is a way for them to gain customer loyalty and potentially bring in new customers to recoup any losses.
No matter when you decide to start your loyalty program, it can result in a gain in your overall customer loyalty and referrals. This also means that your business will also see an increase in revenue and profits overall.
How to Build a Loyalty Program for Your Company
As you consider building a loyalty program for your company, you should keep in mind that this should include your staff. This is because for the program to be successful, it will need the buy-in of all people involved.
Here are some things you should keep in mind as you are building your loyalty program:
- Brainstorm ideas with staff
- Put a name to it
- Define what actions will be rewarded
- Outline how the program will work
- Initiate the loyalty program
Each of these steps is crucial to building a program that is cost-effective and has the best potential to be successful. When you bring others together to create a program, you will build customer loyalty that goes beyond any other advertising you may do.
The Downside to Loyalty Programs
It is important to keep in mind that while loyalty programs are a great way to take your business to the next level, there are also potential pitfalls. Understanding these downsides can help you to ensure that your program is free from what may seem to some like a scheme.
Check out these downsides to creating the perfect loyalty program:
- Loyalty program expiration dates are one of the most common pitfalls that you can have and can result in less customer loyalty. This is because while you want to encourage a sense of urgency, it can seem to some as a downside.
- Programs that are used to collect personal information about customers can be seen as schemes. With the likelihood of potential hackers in the world today, if you collect private information on your customers, it can get into the wrong hands.
- Loyalty programs that don’t save customers money or time can often result in them feeling like they have been scammed. This can be detrimental to not only their experience but to your overall reputation.
Nothing can be worse for your company than a negative reaction to a loyalty program that is supposed to build your reputation than bad reviews. If your loyalty program does not meet customer expectations, they will often tell many people about it, which can be detrimental to your company.
Thinking of Building a Loyalty Program for Your Company?
If you are thinking about building a loyalty program for your company, you should keep all of the tips, benefits, and potential pitfalls in mind. This will often result in a better overall experience for your customers and better overall benefits for your company.
As you are building your loyalty program, you may want to consider collecting customer testimonials that can be included on your website. Since the best advertisement is word of mouth, testimonials can provide potential new customers with peace of mind when deciding to work with your business.