Customer Loyalty Programme – Should it be a priority or an afterthought?

If you were to ask a business owner what is his or her goal for their business, a typical answer would be to make profits. It is a fair statement but when asked further how do you intend to make profits? The answer is almost always the same, that is to get more customers. While there is nothing wrong with customer acquisition, the idea of engaging the company’s existing customers seems to have taken a backseat, which is puzzling since most companies understand that it cost five times more, on average, to acquire a new customer. 

With the rise in costs in customer acquisition due to first-party data strategies, it is vital for companies to shift their from customer acquisition to customer retention and engagement.

One way to engage your existing customers is through a customer loyalty programme, which is why investing in one alongside the platform to support it should have equal importance as your marketing initiatives to attract new customers.

People prefer to buy from brands that have customer loyalty programme

As a customer myself, I am also in various membership programmes and it has been subtly influencing my purchase behavior.

“Let’s go over to shop A, I need to get some shampoos.” I said, during one of my grocery trips

“But shop B is selling them too and it is nearer to us.” My husband replied.

“Yes, but I have the shop A membership card and I can earn points with it.” I replied.

Without me realising it, the loyalty programme from shop A has led me to make my purchase with them. The Nielsen’s Global Loyalty-Sentiment Survey has found that 7 in 10 (72%) loyalty-program participants somewhat or strongly agree that, all other factors equal, they will buy from a retailer with a loyalty program over one without.

People are more likely to make repeat purchase from brands that they are a member with

Loyalty programme is a great way to incentivise repeat purchase. From my example above, it can be assumed that if the price and service remains the same, it is most likely I will continue to get my shampoo from Shop A.

Repeat customers brings in way more value to a brand compared to new customers. A research  done by Frederick Reichheld of Bain & Company (the inventor of the net promoter score) shows increasing customer retention rates by 5% increases profits by 25% to 95%. How is this so?

Repeat customers spend more money

During my shopping trip in Shop A, I not only checked out with just shampoos, I also  added in vitamins that are on discount, a make-up remover and some cute hand sanitizers that are just sitting at the counter. What is supposed to be a $10 purchase ended up amounting to a value of over $50, 5 times more than what I was supposed to spend.

Repeat customers help you promote your company

With every repeat purchase made by the customer, it is a chance for your brand to build emotional connections with the customers. Since emotions are the driving force behind most buying decisions, building positive emotions are important to a great customer experience, making it more likely for a repeat customer to promote your brand to their contacts, which leads to… new customers! 

To wrap things up

While the above benefits are far from an exhaustive list of benefits of having a customer loyalty programme, I just want to share some personal thoughts and experiences on how customer loyalty programme has influenced my purchasing behavior and it might be worthwhile to reconsider your strategic initiatives if customer retention is not on top of your priority list.


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