Do Customer Loyalty Programs Really Work?

As a business owner, you’re constantly looking for ways to better serve your customers and grow your reach. You’ve probably spent time reading reports and business blogs (like ours) to find strategies that work and have a great return on investment.

In this article, we’re going to cover all things loyalty and the most important question: do customer loyalty programs really work?

What is customer loyalty?

When your customers consistently have positive experiences with your brand, they’re more likely to trust you and develop a preference for your business over others. Customer experience and engagement are the keys to higher retention rates, higher customer lifetime value, and, most importantly, happy customers.

Loyalty programs reward your customers for making purchases and incentivize them to keep on visiting. They are no longer limited to paper stamp cards. They’ve evolved into user-friendly loyalty apps, which make it easy to track customer insights and offer more meaningful and timely rewards.

Why is customer loyalty important?

Fact: It costs 5x more to bring in a new customer than it does to bring back an existing one.

(Seriously - read our blog about the cost of acquiring a new customer)

Aside from it simply being good business, investing in customer relationships and building customer loyalty has a better financial return than depending on new customers for sales. Happy customers are more likely to spend more, visit more often, leave positive reviews, and act as brand ambassadors (attracting even more new customers!).

Bottom line: A well-executed loyalty program can increase traffic, turn customers into regulars, increase average ticket size, bring in new customers, and create a more stable cashflow.

Do loyalty programs work?

Yes, and they’re very effective! Here’s a few stats to prove it.

• 85% of business growth comes from loyal customers
• 24% of retail CEOs rank loyalty as a top-ten priority for their business strategy
• 80% of businesses with a loyalty program reported an increase in revenue
• 78% of customers are more likely to choose a business with a loyalty program
• 65% of loyalty program members spend more to maximize points
• 86% of customers recommend brands that they’re loyal to
• 92% of customers consistently look for a loyalty program when deciding where to shop
  
  

How to measure customer loyalty?

If you use a digital customer loyalty program, it should be relatively simple for you to measure how effective your loyalty program is and adjust your promotions to make it even more effective.

Our loyalty reporting gives you insights including:

• New loyalty members
• Time between point accumulations
• Total point balances
• Member spending and average ticket size
• Last member activity

These metrics will help you to understand how much more your loyalty members spend compared to non-loyalty members, how frequently members shop, and how quickly they accumulate and spend points.

You’ll also be able to send out and measure the effectiveness of your regular and ad-hoc promotions (ie: bonus points and points multipliers, rewards and discounts, spending tiers, BOGO, and punch cards). Once you understand which promos are most effective for your members, make sure you optimize!

Why start a customer loyalty program?

Starting a loyalty program is simple, inexpensive, and one of the easiest ways to bring in more revenue.

Since only 20% of small and medium-sized businesses currently use a loyalty program, it’s an effective way to differentiate yourself from the competition while rewarding your customers and boosting your revenue.

Ready to learn more about loyalty? Read our blog outlining different types of loyalty programs, best practices, and how to get set up.