Customers Expect Loyalty Programs to Offer More Than Discounts

Savvy retailers know it costs more to acquire new customers than to retain those who already shop the business. Loyal customers are valuable for several reasons. They are a reliable source of repeat revenue–existing customers spend 67 percent more than new customers. These folks are also vocal advocates for their favorite businesses and brands. Word of mouth can be an essential factor in deciding where to shop or what product to buy. Plus, these buyers are open to engaging with the business on social media and other communication platforms to support the company’s philanthropic or social mission.

According to Rene Vader, Global Sector Leader, Consumer & Retail, KPMG International, “If you’re trying to build brand loyalty today, an emotional connection is no longer a nice-to-have, it’s a need-to-have.”

• Eighty-six of consumers will recommend a company to friends
• Sixty-six percent of people are willing to write a positive online review
• Six out of ten consumers are loyal because they feel a personal connection to the company

Why It Pays to Offer a Loyalty Program

Although many retailers offer a loyalty program, they struggle to define its purpose in its overall strategy clearly. Consumers see the programs as a way for companies to show loyalty to their customers, while some companies see them as a vehicle to encourage devotion to the brand. In reality, an effective loyalty program should benefit both the customer and the brand. However, companies that put the needs of their customers first are bound to be more successful.

• A 5 percent increase in customer retention can increase profits by up to 125 percent 
• (Bain and company)
• Increasing customer retention by 2 percent effectively cuts costs by 10 percent.
• (Emmet & Mark Murphy)
• Thirty-seven percent of consumers prefer rewards to discounts (Captain Up)

Rewards Programs Become Digitalized

While loyalty programs are important, many have failed to change with the times and are no longer effective or relevant in a digital economy. Although the idea of using paper punch cards is a distant memory, POS tablet-based rewards programs will soon follow. Consumers want to use their own technology to check the status of their rewards. Mobile loyalty apps are easily updated and offer many benefits that are advantageous for consumers.

• Fifty-seven percent of consumers want to use their mobile devices (Brand Loyalty Report)
• Push notifications drive nearly 9.6 times more users to make a purchase (99 Firm)
• Sixty-one percent of consumers subscribe to SMS messages to get incentives, coupons, or rewards (Oracle Retail)

Keeping Customers Engaged

Surveys indicate an increasing number of consumers (37 percent) are more interested in rewards than receiving discounts. For many consumers, experiential rewards are the way to go. Exclusive invites and VIP offers are popular. Gamification is also proving to be an effective method to keep customers engaged. Currently, 700 of the top 2000 companies have incorporated gamification into their loyalty programs.

• Eighty-seven percent of retailers plan to integrate gamification within five years (Snipp)
• One-third of companies using gamification realized a 50 percent increase in registration and conversion rates (TrchValidate)
• Brands that use gamification had 47 percent higher engagement and a 22 percent increase in brand loyalty (Snipp)

Practicing Corporate Social Responsibility

Fewer customers are willing to offer their loyalty to companies and brands that aren’t socially responsible. Although quality products, unbelievable deals, and exemplary customer service top the must-have list, corporate responsibility is also important. Two-thirds of consumers believe brands should speak about social issues publicly. This opinion is especially true for millennials and Gen Z consumers.

Capitalize on the Customers You Already Have

Businesses often invest more time in getting new customers than paying attention to the ones they already have. Customers notice when businesses take them for granted and stop giving them personalized attention. People who feel valued by a company become loyal customers with an emotional connection to the brand. These advocates are the most effective way to attract new customers because they are engaged and speak highly of the business. From a profit standpoint, loyal customers have a 306 percent higher lifetime value than a new customer and will recommend the brand 26 percent more than average—that is welcome news for any business.