What’s a loyalty program?

A loyalty program, is a marketing tool that provides some form of reward to a customer who is continually purchasing from a business.

In today’s world these loyalty programs are administered either via plastic card or applications. (or a combination of the two) Some stores or restaurants still offer a paper punch card, but those only prove beneficial to the user who gets rewarded for frequent purchases. The issuing company of these incentive cards doesn’t receive any information about the frequent buyer. It proves difficult to understand the buying habits of the customer. Therefore, each business should carefully consider how to best facility a program like that, so it’s not only beneficial to the customer, but also to the business and its business goals.

What are the benefits of a loyalty program?

A well-built loyalty program is not only beneficial to the customer, but also provides plenty of benefits to the business.

First, it allows you to find out more about the people who shop in your stores and their shopping habits. When a user scans their loyalty card their participation provides you with an insight into their buying habits, such as favorite products or times when they make a purchase. You can track their activity online and in physical store. A loyalty program gives you enough information to understand how responsive your buyers are to different offers and what offers are most effective. To get a better picture of your shopper you can cross-reference information the person provided at sign-up, such a birthday or gender, with their purchasing history. This will give you a clear picture of who your customer base is and how you fare in your market penetration for the specific group of people.

Second, it can help you increase the average ticket size and/or entice users to come back to store more often. A loyalty program will encourage shoppers to come back to the store to check out new offers, purchase additional or supplemental products.

Third it will help you create more targeted marketing programs or offers that can be tailored to the particular needs of the customer. Today’s shoppers don’t mind sharing personal information if they know they get personalized offers that fit their needs and shopping habits. Better targeted marketing efforts will result in increased sales. And if you are able to deliver more targeted marketing, you will be able to get better use from your marketing budget.

A good loyalty program will ask the joining customer to provide their personal preferences and demographic information at sign-up. For example, when I installed one of my favorite loyalty apps for a salad shop, the app asked me to provide my dietary preferences. By having this information, the company can personalize their promotional messages to their customers. As a customer I am not annoyed with marketing messages that are of no interest to me. On the flip side of that, when I actually receive a promotional offer it will be catered specifically to my interests or needs which will most likely result in a sale.

You can use your loyalty program as one of the tools to help you drill down to who your actual customers really are. You might know that the customers who use your product are females, but having a loyalty program will help you drill down to their age, income and even education. (Of course it depends on your business model what information you are asking of people who join the program. Also, keep in mind that you can append demographic information based on zip code users provide at check-out.)

Having this information will allow you to not only better market to your customers. It will give you an understanding who is more likely to buy from you. Your business will be able to target specific demographic groups to reach a population base similar to your existing loyal shoppers.

Tiered loyalty programs might be more effective in retaining the customers. Especially if you are in a competitive market, with many retailers offering similar rewards. Having a tiered program, based on the amount of money spent, will entice customers to return to the retailer to receive more points, higher discounts, free products or premier upgrade services.

A loyalty program can help you create strong business partnerships with other stakeholders. For example, you can partner with companies to sponsor your loyalty program. These sponsors provide products that are offered to loyalty program holders. There are some great examples in the beauty industry of partnerships like that.

A well-known beauty retailer offers a great example of a tiered loyalty program that is sponsored by companies that sell products in its stores. It’s a win-win-win for all participants. Customers receive rewards for their purchases and get to test out new products. The actual retailer gets specific information about the shopper and gets to increase the number of store visits and purchases. The vendor that offers the product gets exposure to a customer based they might have had a hard time reaching. It allows it to access these customers are a cost lower than “traditional” marketing with an “endorsement” of the beauty retailer. Now, how fabulous is that for all parties involved?

If you can’t decide whether you should introduce a loyalty program, consider how difficult it can get acquiring new customers and growing. A loyalty program will help you bring back the people who have already been doing business with you and increase your sales.

Reward your customers for choosing to spend their money with your business and consider all the benefits your business is receiving in return for a well facilitated loyalty program. Naturally, there are other elements that play a role whether a person makes a return visit. Easy of purchase, or customer service or products offered, all have an impact on the success of your program. I believe that the well-executed loyalty programs retain their attractiveness as the retailer is constantly fine-tuning and improving on the benefits offered.

Have more questions about this marketing program? Want advice on how to introduce a robust loyalty program to your business? Send me an email at daga@dagapostelle.com. Let’s talk!


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