Retail stores continually seek innovative ways to cultivate and maintain strong relationships with their customers. One way to achieve this is through loyalty programs, which not only reward loyal customers but also stimulate business growth and customer retention. Here are 14 benefits of customer loyalty programs:

  1. Greater customer retention
  2. Rewards for current customers
  3. Improved customer engagement
  4. Enhanced customer satisfaction
  5. More revenue
  6. Word-of-mouth marketing
  7. Competitive advantages
  8. Customer’s data collection
  9. Cross-selling and upselling opportunities
  10. Customers feedback and insights
  11. Brand loyalty and trust
  12. Reduced price sensitivity
  13. Building mailing lists
  14. Cost savings

In this article, we’ll explore these benefits in more detail as well as mistakes to avoid with customer loyalty programs. But first, let’s see what a loyalty program is.

What Is a Loyalty Program?

A loyalty program is a strategy companies use to encourage customers to return to their store or website. A loyalty program is designed to increase engagement and encourage customers to make repeated purchases and stay loyal over a long period of time.

With loyalty programs, stores offer incentives, rewards and perks to customers who constantly support them. Learn what a good loyalty program looks like in this article.

The main purpose of a loyalty program is to create a deeper connection between the brand and the customers by rewarding them when they buy. This connection leads to better customer retention and more conversions from occasional customers to loyal customers and from loyal customers to promoters.

Now here are the benefits of customer loyalty programs for stores.

1. Greater Customer Retention

Loyalty programs encourage repeated purchases at a store. This increases the chances that customers will stay loyal to your brand over the long term. The more a customer buys from a store, the more likely they are to return to that store in the future.

Mistake: Lack of Clear Goals

It is important to define clear and achievable goals before even launching the loyalty program. Set both short-term and long-term goals. Without goals, the program may lack direction and fail to deliver meaningful results.

It is also essential to monitor the return on investment (ROI). Without ROI tracking, it’s difficult to know if the program is truly effective and to make appropriate adjustments.

2. Rewards for Current Customers

Offering relevant rewards encourages customers to support your store. By offering rewards, you show your customers that you appreciate them and recognize what they bring to your store. Rewards also make customers feel like they’re saving money. This makes them more likely to continue buying from your store.

Mistake: Irrelevant Rewards

Irrelevant rewards do nothing to help your store: they can even harm it! Offering rewards that don’t resonate with your target audience can lead to disinterest in your store and low engagement. Make sure you offer rewards that are relevant to your customers and their preferences.

3. Improved Customer Engagement

Loyalty programs often include engaging and challenging activities like bonuses, progression levels, or exclusive rewards. This promotes a stronger emotional connection between the customer and the brand. This kind of relationship encourages customers to buy.

Mistake: Forgetting the Emotional Connection

Focusing only on transactional rewards (tangible rewards like products or money) without fostering an emotional connection can lead to superficial loyalty.

4. Enhanced Customer Satisfaction

Loyalty programs provide incentives and rewards that make customers feel valued and appreciated. This can lead to greater satisfaction with the brand.

Mistake: Negative Perception of the Store

If they think the rewards are of little value or if they’re bombarded with marketing messages, some customers might see a loyalty program as a gimmick or a scheme.

5. More Revenue

When customers strive for rewards or benefits, they spend more in your store to achieve these goals. This increases the average amount spent on each of their transactions.

Mistake: Unrealistic Reward Levels

Setting reward thresholds that are too high can discourage customers from participating and even lead to them spending less in your store. Setting reward thresholds too low can hurt your store’s profitability. It is then necessary to find a balance between attainability and reward value.

6. Word-of-Mouth Marketing

If customers are happy with your store and are loyal to it, they are more likely to recommend it to others. Positive word-of-mouth helps with the acquisition of new customers.

Looking for inspiration for your loyalty program? Click here to see 6 examples of successful and relevant loyalty programs.

Mistake: Inconsistent Customer Experience and Overpromising

If you provide an outstanding customer experience, customers will speak well of your store to their family and friends. However, it is easy to take a wrong step that will cause your customers to speak badly of your store.

Lack of consistency in the customer experience across different touchpoints can lead to frustration and erode loyalty. Also, promising rewards and benefits that you can’t actually deliver on can result in customer disappointment and erode the trust they have in both you and your store.

7. Competitive Advantages

A well-designed loyalty program helps to distinguish itself from competitors, especially if the rewards and benefits are attractive, advantageous and unique.

Mistake: Offering a Generic Loyalty Program

If your loyalty program doesn’t offer unique benefits compared to your competitors, it won’t be effective and it won’t build customer loyalty. Be creative!

8. Customer’s Data Collection

One of the benefits of customer loyalty programs is that they allow you to collect very useful data regarding customer behaviours, preferences and buying habits. This data can be analyzed to gain insights that help refine your marketing strategies and personalize offers.

You can optimize your operations with the analysis of data from your point of sale software. Find out how here.

Mistake: Ignoring Data Privacy

Mishandling customer data can damage both your store’s reputation and customer trust in your store. Addressing data privacy concerns and complying with data protection laws is essential. For that, put in place strong and relevant data protection measures. Communicate these measures you are taking to your customers if necessary.

9. Cross-Selling and Upselling Opportunities

The data acquired through the loyalty program provides a better understanding of customer buying habits and what they want. With this understanding, stores can implement targeted cross-selling and upselling. These techniques increase sales.

Mistake: Ignoring Small Wins and Focusing on the Short Term

Small but frequent rewards can be just as motivating as big rewards. Don’t underestimate the power of benefits that improve and increase over time.

Also, setting up a loyalty program based solely on short-term sales goals can compromise their long-term retention potential.

10. Customers Feedback and Insights

Loyalty programs are a way for customers to provide feedback about the store. This feedback is very useful to know what you can improve and to strengthen your relationships with your customers.

Mistake: Ignoring Customer Feedback

Disregarding customer reviews can cause you to miss opportunities to improve the loyalty program or your store in general. Don’t ignore customer feedback on the effectiveness of the program or the rewards offered.

11. Brand Loyalty and Trust

When customers feel rewarded and appreciated for their loyalty, they are more likely to develop trust and loyalty towards your brand. Building this bond of trust helps you increase your long-term income!

Mistake: Complexity of the Loyalty Program and the Rewards Redemption Process

Don’t over-complicate your loyalty program. If the rules for earning points and rewards are too complicated, customers may get confused. A program that is too complex discourages customers from participating.

Also, if the process for redeeming points is unpleasant and cumbersome, customers become frustrated. They may therefore unsubscribe from the program and no longer trust you.

12. Reduced Price Sensitivity

Sometimes the most loyal customers notice price changes less than new customers. Indeed, the former value the relationship with your brand and the benefits they get with the loyalty program.

Mistake: Not Training Your Employees

If your employees are unfamiliar with your loyalty program, customers may have a bad experience with it. If customers are confused by the loyalty program because an employee didn’t fully and clearly explain to them what it entails, they won’t develop a positive, reciprocal relationship with your brand.

13. Building Mailing Lists

When customers sign up for your loyalty program, you have the opportunity to collect their contact information (name, phone number, email address). This makes it easier to send marketing emails to loyal customers. Sending them emails about discounts, specials, and new arrivals can convince them to shop in your store more often and buy. These emails also help nurture customers and keep the brand relevant to them.

Mistakes: Inadequate Communication and Non-Compliance With Anti-Spam Laws

Failing to clearly communicate loyalty program benefits, rules, and changes can lead to misunderstandings and customer dissatisfaction. Also, too many marketing emails can alienate and upset the customers you send them to. If they are overwhelmed by your emails, they will start deleting them without even looking at them, if they don’t unsubscribe immediately.

The words you use are important. Click here to find 127 powerful words to grab your customer’s attention.

When sending marketing emails, you must also ensure that you comply with the anti-spam laws in effect in your country. In Canada, you must comply with the Canadian anti-spam law. According to this law, stores cannot send commercial electronic messages without the recipient’s consent (implied or express). The email should include the sender’s contact information. The company sending it must be clearly identified inside the email.

There are also anti-spam laws in the United States of America: the CAN-SPAM Act. Unlike the Canadian law, the CAN-SPAM Act is based on an opt-out model. That means that businesses can send promotional emails unless the recipient informs the sender that they no longer want to receive that type of message from them. This law also includes some rules regarding the content of the emails. Companies must also honor opt-out requests promptly.

Stores that don’t comply with anti-spam laws can be fined. Research the laws that apply in the territory where you operate a store!

14. Cost Savings

A loyalty program helps retain existing customers. Acquiring a new customer costs up to 5 times more than retaining a customer who has already purchased from your store. Customer loyalty programs encourage repeat purchases and reduce the need for costly marketing campaigns to attract new customers.

In addition, it is possible to offer advantages and rewards in partnership with other companies. Cross-promotions and two-company rewards extend the reach of the loyalty program and allow to share costs and, therefore, save money.

Mistake: Stagnant Program

You need to evolve the loyalty program based on changing customer preferences and market trends that change with the seasons. Never changing the program leads to diminished interest over time.

In conclusion, the many benefits of the customer loyalty programs makes them essential tools in the arsenal of stores seeking to establish strong relationships with their customers. Loyalty programs have many benefits, but you need to make sure to avoid some mistakes that could hamper your customer retention efforts!

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