The significance of customer loyalty lies in its definition. As per the American National Business Research Institute, the loyalty factor motivates consumers to buy from their favorite brand even when there are better alternatives.
Until the last decade, loyalty programs were appreciated by credit card companies, airlines, hotels, restaurants, and e-commerce firms. Now, businesses from several categories benefit from such initiatives. Consumers willingly pay membership fees in exchange for dedicated support, high-quality service along with early access to unique products, and of course, reward points.
Let’s take a look at how such initiatives help brands in taking CX to the next level.
1. Loyalty Programs Enable Brands To Offer Rewards That Consumers Want
Loyalty programs help in establishing relationships and reinforcing valuable consumer behaviors. Buyers who have loyalty scheme membership tend to spend more and make frequent purchases.
Consumers often take their business elsewhere when they are not receptive to goods of their choice. By creating a Loyalty Program, you can analyze historical purchase statistics and real-time shopping data to generate apt recommendations. Such highly targeted purchase suggestions with exclusive reward points offers can keep loyal buyers even more engaged.
There are software solutions that can assist in making intelligent recommendations as per multiple data points. Suggestions can be based on purchase value, frequency of purchase, product categories, demographics, lifestyle, etc. So, you won’t have to worry about flooding customer’s email inboxes with reward incentives on products that are irrelevant to them.
- Research has highlighted that consumers want loyalty scheme benefits to be more interesting.
- Customers often proactively opt to share data in exchange for personalized rewards.
2. Loyalty Incentives Can Inspire Long-Term Commitment
In this era of coronavirus crisis, long-term commitment is perhaps the most valuable aspect for businesses. Consumers enrolled in loyalty initiatives pay quarterly or yearly membership fees. Switching to another brand means losing out on the program’s points and privileges. Thus, most members remain committed during the enrollment period.
Incentives become a part of every member’s shopping routines. Interactions with the brand become frequent as consumers keep track of their points via apps, emails, or the website dashboard. If rewards are fantastic, members won’t easily give up on the same. This results in an incredibly solidified, lasting relationship between the business and the customer.
- A study published by HubSpot suggests 84 percent of consumers enrolled in such programs do redeem benefits.
- Surveys indicate loyalty initiatives make consumers more committed and loyal towards the brand.
3. Opportunity To Provide a More Personalized, Convenient, and Fast CX
Assumptions can be dangerous. And that’s precisely what happens when brands assume members prefer mobile app-based rewards program dashboard.
Digital coupon marketing giant CodeBroker conducted a study to understand user-preferences. Roughly, 75 percent of the US participants said they do not appreciate installing a mobile app for rewards updates. The overall analysis also pointed out that they prefer getting details via email.
An email containing details for accumulated points and claimed rewards weekly or monthly can be a win-win situation for both. Customers can have a much better experience, while the brand gets another opportunity to present tailored offers for consumers in the email. Such communication has a high opening rate.
- Email marketing has still retained its position as the king when it comes to ROI.
- Sending reward points milestone emails to loyal customers can be a crucial step towards building strong relationships.
4. Assured Recurring Revenue in Exchange for a Personalized Experience
The pandemic has triggered a long due change in loyalty schemes. Rewards or pure discount-based programs do not work anymore. Consumers seek exclusive services and additional experiences in exchange for membership. On the other hand, enrollment fees create a predictable revenue source for brands.
For example, eCommerce consumers get their preferred early delivery slots without paying an additional charge on every order. And businesses start their month with predictable revenue sources, even during the pandemic.
- Firms with a business model consisting of recurring revenue rarely miss their quarterly numbers.
5. Small Businesses Can Benefit From Loyalty Commitments
Giants like Amazon follow the warehouse model of business. Goods remain in front of buyers. They can check details, read Q&As and reviews from buyers, then make a purchase. Amazon does not offer a telephonic customer service helpline in most markets. Thus, there’s no customer service with human interaction involved while purchasing from a consumer’s perspective. On the other side, a small business operating in a limited geographic region can sell the same products and afford to offer human customer service.
This may sound unpleasant, but membership paying members are many times worth more than non-paying ones. Several small businesses run VIP programs for high-value customers. They make personal connections with selected customers by allocating dedicated resources. It is worth the investment because such buyers do not mind paying membership fees in exchange for the special treatment.
- Data released by Longitude suggest a large percentage of people prefer a telephonic conversation with a real person.
- Customers even show the willingness to change their brand due to the absence of a customer service telephone number.
6. Funding Premium Benefits With Paid Loyalty Programs
During recent months, the cost of serving customers has risen considerably, while the battle to retain high-paying consumers has also intensified. Businesses have two options. They can lower loyalty offerings and let some customers walk away or offer premium benefits in exchange for charging access fees. For example, some OTT platforms provide access to Hollywood blockbusters and sports events to VIP pass holders. Consumers need to pay a small charge over-and-above their membership fees.
The COVID-19 pandemic has disrupted several sectors. Shoppers have changed their buying habits. So, some business models have become irrelevant.
Brands were forced to pause and take their marketing campaigns back to the drawing board. However, the demand for paid loyalty schemes and perks is not reduced.
McKinsey’s study conducted during 2020 pointed out that paid loyalty programs can result in brand affinity and higher purchase frequency. It has also highlighted that subscribers of a paid loyalty initiative are 60 percent more likely to buy more from the associated brand. As per the study, several brands offer experiential benefits since the pandemic’s arrival, and they are funding their expenses via paid loyalty programs.