By now, it’s hard to ignore the power of loyalty programs. According to Northwestern University’s Center for Retail Management, more than half your business is coming from about 10-15% of customers — and marketing to this targeted, loyal audience is far cheaper than looking for new customers. So, it’s not surprising to hear that loyalty programs are dramatically boosting sales for businesses in every industry.
But beyond sales growth, here are a few surprising ways loyalty programs can grow your business:
1) Personal Connections with Customers
Great customer relationships are personal customer relationships, and they start with connecting a name to a face. Loyalty programs help your staff learn the names and faces of your most loyal customers, and progressively learn those customers’ preferences. That means better customer service and a transformative customer experience that sticks in customers’ minds, sets you apart, leads to free word-of-mouth marketing, and brings customers back again and again.
2) Short Feedback Loop for Finely Tuned Marketing
Traditional advertising has a long feedback loop. Many ad campaigns only pick up speed after numerous placements, as the ads get lodged in consumers’ minds and eventually drive action. Tracking the efficacy of a billboard advertisement, for example, can also be murky. Did a customer really come in because they saw the billboard? A loyalty program shortens and focuses that feedback loop. Customers’ behavior is tracked in real-time, and rewards or special offers can be limited with expiration dates. If customers come back, the promotion worked. If not, it didn’t. Either way, you’ll know immediately — and can hone your future marketing accordingly.
3) Bringing Back the Same Customers Brings In Greater Revenue
Here’s the math: Most businesses lost more than 20% of their customers each year. Considering that it costs 10 times as much to attract a new customer as to keep a current one, focusing on retention will actually grow your revenue.
4) Incentives Drive “Overspend” and Cross-Sell Opportunities
Incentives bring loyal customers back through your doors, and this alone is valuable. Just as consumers with a gift card tend to spend more than the card’s dollar amount, the incentives offered through a loyalty program drive so-called “overspend,” as customers look to make the most of their incentive by upgrading or adding additional products. Make sure your staff is taking advantage of these cross-sell opportunities to encourage overspend.
5) Instantly Adaptable Marketing
Along with the short feedback loop, loyalty programs give you a highly adaptable marketing tool. Need to clear out a type of product for an incoming shipment? Having a slow week? Placing traditional ads takes time — and the response lags significantly. By contrast, you can push a new offer through your loyalty program almost instantly.
As you explore the potential of your own loyalty program, you’re sure to discover many unexpected and hidden ways the program is helping your business grow. Don’t keep them to yourself — share these insights with other small business owners, and look to learn from your peers to make sure you’re getting the most from this valuable tool.