Loyalty Program – All You Need to Know

A loyalty program is one of the most popular and effective methods of sales support. It is a long-term and planned marketing activity aimed at building and strengthening relationships with customers by rewarding them for their purchases. According to a study conducted by Harvard Business Review, it is 5 to 25 times more expensive to acquire a new customer than to retain an existing one. That’s why most brands realize the need to create their own solution and reward customers once acquired.

Loyalty programs are designed to build long-term relationships, giving the customer a sense of value and rewarding them for their loyalty. In the past, loyalty programs came in the form of a stamp card and rewarded mainly for regular visits to the store. Today, plastic loyalty cards have moved from wallets to smartphones and are increasingly found primarily in the form of mobile apps, and their role is evolving into a customer activation center.

Types of loyalty and incentive programs

Companies use different types of loyalty programs in their strategies, depending on their individual business goals. Among the most popular we can distinguish:

– Points-based programs

A points-based program involves customers collecting points for purchases they make. The points accumulated in the program can then be exchanged by customers for various benefits or material rewards. This solution motivates purchases within the same brand in the long term and ensures high loyalty.

– Programs based on offers

Under an offer-gratification program, customers participating in the loyalty program receive discounts or vouchers in exchange for registering purchases on the loyalty card. Access to attractive and limited offers motivates customers to show their loyalty card every time they shop.

– Status/level-based programs

In a status-based loyalty program, as customers make purchases and engage with the brand, they advance to higher and higher levels of membership and discover associated benefits. This program helps strengthen customer ties and keeps them interested for a long time.

– Cashback-based programs

A cashback program offers customers a partial cash refund for their transactions. Cashback most often comes in the form of a discount that can be used on subsequent purchases. In this way, the brand encourages repeat visits to its point of sale. This type of program is very popular among customers.

– Programs based on gamification

Gamification is a popular way to increase customer engagement with a brand. Participants must complete regular tasks to earn a reward, reach a goal or move to the next level. Completing set tasks gives club members a sense of satisfaction and increases purchase motivation, while making it easier for the brand to achieve its business goals.

– Hybrid programs

A hybrid loyalty program allows for any combination of different mechanics. Combining multiple elements can be the key to creating the most attractive solution for club members. Introducing a hybrid loyalty program is the optimal solution to attract the greatest number of customers with different tastes.

– Multibrand programs

Multibrand programs combine the benefits of multiple brands in one place. This increases the number of potential customers, as the program creates many different marketers at the same time. The solution reduces service costs and systematically increases the customer base.

Regardless of the type of program, an attractive reward must still await at the end to convince the customer to sign up and actively participate in the program.

Types of rewards and benefits for consumers

– Discounts and rebates

One of the most popular types of rewards are discounts and rebates, which allow customers to save money while shopping. This allows them to enjoy lower prices or special offers available only to loyalty program members.

– Material rewards

For this reward, club members have the opportunity to redeem accumulated points for products or services offered by the company. In-kind rewards can include various gadgets, gifts, electronics or in-house products from the store’s offerings.

– Privileges

Among the popular benefits for club members, it is worth mentioning privileges, which can include preferential service, access to exclusive events, advance notification of promotions or additional services that are not available to regular customers.

–  Charity assistance

Charitable giving is one of the benefits of loyalty programs that is gaining popularity. Some programs allow customers to donate their points or rewards to charity, allowing them to participate in socially responsible activities, support the needy or non-profit organizations.

Each reward or benefit is designed to build a bond with customers, encourage repeat purchases and increase commitment to the brand relationship. Often, the type of benefit offered largely depends on what industry the company is in. Other rewards may work well for retailers where customers shop frequently and systematically, and others for companies whose services consumers use occasionally, once a year – and here loyalty and brand loyalty also need to be nurtured.

A loyalty program is a great example of a “win-win” situation, in which both the consumer-participant and the company-organizer simply gain. The customer gets rewards and benefits for his purchases, and the company gets a better understanding of consumer behavior. What benefits can a company count on?

Benefits for the company

A loyalty program provides both financial, business and image benefits for a company. Among the key ones, it is worth mentioning: increasing the value of the shopping cart, increasing the frequency of purchases, generating recurring revenue, acquiring customer data or increasing brand awareness.

Loyalty programs encourage customers to make more or more frequent purchases. Additional benefits can convince customers to increase spending, add additional products to their shopping carts or take advantage of other services offered by the company. Based on the principle of “I lose nothing, but I can gain”, customers register their purchases on a loyalty card to earn more points, unlock a higher membership level or simply get closer to a reward.

Another aspect is to help retain existing customers. By offering rewards and benefits, organizers can increase retention of customers who prefer the same brand instead of moving on to competitors. However, it should not be forgotten that loyalty programs also attract new customers and are an argument to encourage them to choose a particular company over a competitor that does not offer a loyalty program and additional benefits.

Loyalty programs enable organizers to collect data on customer preferences and purchasing behavior. The data is valuable for further analysis and enables better understanding of customers, customization of offers and personalization of experiences. Thus, they contribute to even greater company success. Having a loyalty program also influences the perception of the brand as committed and caring for customers, which builds a positive image of the brand.

How to prepare a good consumer loyalty program?

Creating a consumer loyalty program requires proper planning and implementation in terms of team commitment, securing adequate financial resources and time. It is important to focus on customer value and build a long-term relationship based on benefits. Any program should provide convenience to customers at a reasonable cost on the part of the organizer.

Loyalty activities must be the essence of the company, not one of many projects carried out as part of product promotion. The involvement of the entire organization is a key element in the success of a loyalty program. The implementation of a loyalty program should be based on an interdisciplinary approach. The entire company must understand the idea of running a loyalty program. Project managers, consultants, developers, administrators, but also salespeople in stationary stores should strive for a common goal – to offer the target group the greatest value from using the offers in the loyalty program.

The ideal model of cooperation should first and foremost assume proper empowerment on the management side, so that the venture is considered in the category of investment, not cost. In this way, the company maximizes the value of the project, ensures stable revenue and holistically implements the strategy of building a loyal customer network.

The future and trends

An effective loyalty program provides invaluable data on customer behavior and becomes a sales growth engine for the company. Customer loyalty is at a premium and its role will continue to grow. In light of increasing unpredictability and, at the same time, the growing advantage of companies that accurately identify customer needs through loyalty programs, every day you put off the decision to implement your own loyalty program could prove critical. At Loyalty Point, we offer a comprehensive approach to cooperation in the implementation of loyalty programs and meet the expectations of a company planning to launch a project. Contact us and find out how to create long-term relationships with your consumers.

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