Loyal customers are the only thing other businesses cannot copy or fake from your company. Let’s learn about the customer loyalty program in the article below.
Customer loyalty program is a tool to retain customers
What is customer loyalty program?
A customer loyalty program can be broadly defined as all the benefits, incentives, and promotions that a company offers with the hope that customers will continue to create value for them in the long run. The customer loyalty program can be traced back to the 1890s stamp collection program.
Customer loyalty programs are designed to encourage repeat purchases, drive sales, and maintain brand loyalty. To take advantage of all the advantages of customer loyalty programs, businesses should build an operating plan for these applications in a loop: customers come back to the store, they spend more, and the rewards of the customer are bigger.
That’s one reason companies invest in loyalty programs and get a lot of value out of a well-executed loyalty program. While the customer loyalty industry was worth $8.6 billion in 2021, industry experts see it adding another $10 billion in value by 2026.
Customer loyalty programs repeat purchases and recurring revenue, build familiar patterns, and make investments a conversion cost. When those patterns become habits, your competitors have to work harder to break them.
But when most Customer loyalty programs appear to be purely transactional and people in your niche are offering the exact offers for repeat purchases-coupons and referral codes-you need one. Customer loyalty programs deepen your relationship with your customers by aligning values and offers.
Benefits of the customer loyalty program
Customer loyalty programs increase customer retention
When a business provides incentives for its existing customer base to continue to purchase at its store, it provides its store with a steady monthly cash flow.
By increasing retention, you can stop spending a lot of time or money growing your overall customer base.
The reason for this is that loyal customers have a higher conversion rate than new customers, which means they are more likely to make a transaction when they come to your store than new customers. Not only that, they are also more likely to spend more per transaction. By just increasing your retention by 5%, you can increase your profits by 25% or at most 95%.
Reduced access costs
Increasing customer retention ensures that you have loyal customers who spend their hard-earned money on your store month after month. You also don’t have to spend money on marketing to get them there.
Customer acquisition (or new customer acquisition) takes a lot of effort and money to convince complete strangers to trust your brand, come to your store, and try your product. Ultimately, any cash earned by this new customer will be eclipsed by all the money spent getting them there.
E-commerce businesses and brick-and-mortar retailers both rely on repeat customers to grow their businesses because acquiring new customers is 5 to 25 times more expensive than maintaining a customer base on your current item.
Customer loyalty programs are a great way to collect customer data
As brands prepare for third-party cookies to disappear by the end of 2023, collecting customer data and insights will become even more important.
Two types of data will be invaluable to brands: first-party and zero-party.
First-party data is data that your company owns and that is collected directly from your customers as they interact across your website and various brand channels. This data relies on acquiring consent from customers, such as when they fill out a form to download a whitepaper or agree to have their browsing behavior tracked when visiting a website.
Zero-party data is when customers willingly give brands their opinions on various parts of the customer experience.
This data helps brands leverage key customer insights. But what’s the best way for brands to collect this valuable data?
When a customer becomes a member of your loyalty program, some of the data your brand can collect include demographic information (name, age, gender, location), household information (income, marital status, children, home market value), and personal interests (hobbies, charitable donations, etc.).
You can also ask your members to participate in surveys in exchange for points or special promotions. It’s a great way to ask them what they love about the program or find out where it’s lacking so you can optimize
Armed with this type of customer data, brands can personalize offers, deliver relevant rewards, communicate with members more effectively, and re-engage old customers.
As third-party cookies disappear, loyalty programs will become even more critical as brands pursue customer data collection.
Customer loyalty programs can help your brand differentiate
Eighty-eight percent of consumers agree that retailers could do more to earn their long-term loyalty.
Many loyalty programs have a similar feel because they are one-size-fits-all. The challenge here is that these programs tend to offer little in the way of competitive differentiation.
You can differentiate your brand through the data collected from an engaging, valuable loyalty program. Listen to your customers and identify their pain points. Let your loyalty program solve those pain points.
With third-party data going away for brands in less than two years, the time is now to cultivate customer data from your loyalty program.
Brands can do this by offering a differentiated loyalty program. One with a combination of transactional and experiential benefits, along with enticing incentivized engagement, which drives positive customer behavior.
Transactional loyalty is one thing, but experiential loyalty elevates the member experience and creates sustainable emotional connections between brands and consumers.
This stands as an excellent opportunity for retailers to differentiate themselves through their respective loyalty programs.
Customer loyal programs create natural word-of-mouth marketing
If you build a successful customer loyalty program, you focus on providing a positive, personalized experience for your existing customers, and they will naturally tell their friends and family about your brand.
With each subsequent transaction, loyal customers tell more people about it. This is called word-of-mouth marketing and is an even more effective marketing strategy with higher conversion rates than traditional marketing.
Applying a customer loyalty program to your business will help you build a deep relationship between your customers and your brand. As a result, the likelihood of customers switching to competitors will be lower.
Correlation between Web3 and customer loyalty programs
Over the past few years, we have seen how current (and next-generation) values have transformed. Consumers want rewards that provide ownership and sharing on the downside; they want to connect in a way that makes sense for the brand’s culture and values; and they like to openly show their brand affiliation and status.
Web3 provides the building blocks for implementing digital tokens (non-negligible tokens, NFTs) and a public blockchain to create this new touchpoint that connects brand values to what’s valuable next-generation value:
The token turns consumers into advocates of the assigned brand. These consumers “hold” or “own” a part of the brand, reinforcing a sense of ownership toward it (the brand is “theirs”) consumption and brand awareness.
Enables direct connections to meaningful brands. It helps involve token holders in content co-creation, provides “VIP” access to events, and drops exclusive products. It provides a deep emotional connection and creates lifelong customers.
Consumers precisely brand tokens for immutable clues and signals of status that become part of their publicly identifiable digital identity. Displaying consumers expands the brand reach and generates referrals.
With the power of Web3 infrastructure plugged into the stores you’re used to, you can offer your best customers ownership, transaction ability, and identity in a way they’ve never experienced before. past before.
How does the Web3-based loyalty program work?
Customers are given digital tokens that can be purchased by purchasing directly from you or by earning them through qualifying actions or behaviors that are valuable to your brand. That could mean showing up as a customer only for the first week of launch, leaving a review, meeting a spend threshold through purchases or subscriptions, or visiting you at a specific store or pop-up event.
These digital tokens can be used as “member” or “access” passes through token portals; they allow access to new products before anyone else sees them. them, exclusive discounts, or other members-only offers. Brands can also reward customers with point-like tokens that can be redeemed for products or rewards or sent to a friend as part of an organic referral program.
Web3 offers unparalleled freedom in how you run your web3-based loyalty program.
Memberships, loyalty reward tokens, and tokenized commerce are three simple ways you can dive into Web3 to strengthen your retention strategy and gain an edge in the competition.
For example, you can configure your rewards program however you want, or you can launch a tokenized program for your real fans that rewards them with redeemable tokens. You can leverage aviation to cross-sell or use NFT to reward IRL participation, and over time the on-chain customer list will become a solid foundation for you to build rewards incentives, marketing efforts, or whatever you can think of.
Through this article, Twendee hopes readers have an overview of the customer loyalty program and its importance.