Why Creating a Loyalty Program Is Important and How to Do It

Did you know it costs five times more to acquire a new customer than it is to retain an existing one?

As a business owner, this stat is enough to make you give up on finding new customers. You shouldn’t! Expanding your customer base is important, especially if you want to grow your revenues and stay ahead of competitors.

However, your efforts to attract new customers will only make sense if you’re successfully retaining the ones you get or already have. An effective way to retain customers is to have a loyalty program.

Continue reading to learn why creating a loyalty program is essential, as well as how to build one for your business.

A Loyalty Program Increases Customer Retention Rates

Is your first customer still buying your product or service?

If yes, you’ve done a good job retaining them. If not, there’s a reason they didn’t stick around. Perhaps the quality of your product or service was poor, they found a better, cheaper alternative in the marketplace, or they simply didn’t find a reason to stick with your business.

A loyalty program would have given them a reason to stay.

You see, a loyalty program, regardless of what the rewards are, makes a customer feel like they are getting more than a product, at the cost of that product.

Here’s an illustration.

Your business has a loyalty program where shoppers get two products for the price of one on their fifth purchase. Assuming your product is up to snuff, the customer knows that they’re in for a free product once they make the fifth purchase. This alone is enough to keep them loyal to your brand, at least until they have received the free item.

If you keep innovating the program, giving your customers a reason to keep coming back, you might just be successful at retaining most of them for a long time. Consequently, your customer retention rate will be sky-high.

Keep Your Marketing Costs Low

Most small businesses are spending about $75,000 on marketing a year.

This is a lot of money. What if we told you there’s a way to shave $10,000 off your marketing budget? If it sounds too good to be true, it’s probably because you don’t have an active customer loyalty program, or you have never implemented one.

It’s true. A thoughtfully-designed loyalty program can help you reduce your reliance on marketing campaigns to push sales. With a sizeable chunk of loyal customers, you can count on them to keep buying your offerings, which might just be enough to ensure your business stays afloat during slow periods.

As such, you won’t necessarily have to spend on marketing during slow periods. Or you won’t spend as much as you would if you didn’t have any loyal customers.

Improve Customer Satisfaction

Some business owners assume that a loyal customer is a satisfied customer. This isn’t always the case.

You see, a customer can be loyal to your business only because of your product’s superiority. They simply have no other option to buy from you. Even if your customer service isn’t the best, such a customer can still be loyal to your brand.

But what if a more superior product enters the market today? Your loyal customer won’t hesitate to switch to your competitor.

Why? Because you haven’t invested in their satisfaction.

A customer loyalty program isn’t designed to just keep customers hooked to your business. It’s also effective at making them feel valued, which is key to increasing their satisfaction.

Stay at Par with Your Competitors

Your business should have a customer loyalty program because your competitors probably have one.

In a competitive marketplace, you cannot afford to lag behind on any aspect. If you fail to implement a loyalty program, you’ll be enabling your competitors to give consumers one more reason they shouldn’t buy from you.

How to Build a Customer Loyalty Program That Works

Now that you know the importance of a customer loyalty program, it’s time to learn how to build one. Here are a couple of helpful tips you can use.

Gather Feedback from Your Customers

What would your customers love to see in your loyalty program?

Since the program is primarily designed to benefit your customers, their feedback is crucial. You want to ensure the rewards in the program make sense to them.

To gather feedback from your customer, email them a short survey. You can also ask them verbally if your business is a brick and mortar store.

Establish What Your Competitors Offering

A good customer loyalty program should satisfy customers but also give you a competitive advantage. This is why you should establish what your competitors are offering in their program as you build yours.

At the very least, your program should match your competitors’. If it’s inferior, it’s possible that you might lose your customers to a competitor specifically because the customers are eyeing the benefits of the loyalty program.

Be Creative With Your Rewards

Don’t be that business owner who creates a loyalty program and lets it run for years without refreshing it. Customers will get bored with your rewards and move on to another company that’s offering better stuff.

As consumers’ preferences change, so should your loyalty program. When you’re out of ideas, you can visit this website to access software that can help you keep your program fresh.

Creating a Loyalty Program Is a Must-Do

Creating a loyalty program costs money, but your business cannot afford to not have one. The program doesn’t just keep customers coming back. It also improves their satisfaction and gives you a competitive advantage in the marketplace.

Keep reading our blog for more business tips and advice.