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4 Surprising Benefits of a Loyalty Program

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I barely see any brands, companies or retail merchants succeed without an adorable loyalty program like one we have at TemplateMonster marketplace. Let’s look at Amazon, a giant in e-commerce which, according to a study conducted in 2011 by Brand Keys, stood at the top position in customer loyalty. According to another survey, 87% of buyers have kept shopping from a brand offering a good loyalty program over the last few years. Besides, 33% of shoppers decided to buy another brand to get a better loyalty program.

The importance of a successful loyalty program cannot be denied; this is why loyalty programs are increasingly popular all over the world, especially in eCommerce - currently. While there are many distinct ways and methods to keep customers engaged and loyal to your brands, the real secrets to build an effective loyalty program are not revealed to many people.

Hence, what a loyalty program is and how merchants benefit from it are going to be disclosed in this blog post.

What is a loyalty program?

Loyalty Program

In a research article Loyalty programs and their impacts on the repeat-purchase loyalty patterns by Byron Sharp, Loyalty programs are structured Marketing strategies designed by merchants to attract and encourage their buyers to come back the store and continue to shop or use services associated with each program in a regular basis. These programs can find in different types of commerce and may be varied in features and rewards schemes.

Another definition of loyalty programs found in Investopedia is “A rewards program offered by a company to customers who frequently make purchases.” And although there is some disagreement among some experts about a rewards program being nowhere near a loyalty program, I still reckon that it’s one of the marketing efforts to bring customer loyalty to a firm.

From Customersthatstick, I found another definition: A loyalty program is a system of structured rewards given to customers, usually in exchange for desired behaviors, with the goals of increasing customer loyalty and collecting customer data. Loyalty programs use the psychological principles of reciprocity, commitment and loss aversion to increasing the likelihood of customer loyalty.

To find out the best answer to the question “What is a loyalty program?” was not easy to me. However, after consulting other articles, I can say that:

“Loyalty programs are all structured Marketing efforts to coax consumers into forming loyal shopping behavior, to build and grow strong, lasting customer relationships, which are potentially beneficial to the firm.”

Loyalty programs come in two forms, reward programs, and special offers. While reward programs are tools to encourage consumers to repeat buying or using services, special offers can give buyers an extra reason to keep shopping on your store. I would like to discuss this in detail below.

Why do you need customer loyalty?

Customer loyalty is necessary. This competitive e-commerce world is harsh, and earning a new customer is never easy when you are just one among millions of better choices out there. That is why coaxing a first-time buyer into returning your website requires a lot of effort. Loyalty programs, in fact, are never-lose investments. Indeed, online merchants insanely benefit from them. Below are some:

Increase revenues

Loyalty Program

When an online buyer chooses your store to shop, he/she has a reason. However, that one purchased your brand one time does not guarantee one will come back and uses your services another time. Good news is that loyalty programs increase opportunities to bring your one-time buyers back. There are some types of rewards or offers that coax them into shopping again or interacting your stores like:

  • Reward points that can be used as a payment method/discount in the next purchases on your stores
  • Reward points that can be redeemed at checkout on other third parties’ stores
  • Cashback rewards
  • Other rewards for specific behaviors like subscribing newsletter, sharing products, reviewing, and so on
  • Rewards for specific customer groups (Platinum, Diamond, Gold, Silver, etc.) or different product groups.
  • Personal offers depending on different customer buying behaviors (Big Data)

All these above methods are efforts to boost up interaction with your store. Through this, revenues will come either from existing customers or new buyers who are attracted by your loyalty programs.

Expand brand awareness

Loyalty Program

Having a well-known and successful loyalty program can be an excellent way to market your brand to potential customers. The reward program, in long-term, can help your brand build a large community of loyal customers. This means your market share is extended and your brand will consequently become widely recognized.

On the other hand, when you already have a considerable number of existing customers, you will also own a massive group of people who are willing to contribute to sharing and socializing your brand images. Thus, your brand awareness can be improved in the market.

Customers love you

Loyalty Program

Do you ever wonder why buyers keep buying products and come back every time a new release comes up at a particular brand, even when these items may cost much more than others? Do you know why customers can be loyal to you? This is easy to understand, isn’t it? It’s because customers love you. Consequently, to shop at your store, they decide emotionally not logically. For sure, you will benefit.

In the relationship between consumers and merchants, in the beginning, customers are the side which always requires extensive effort and investment from the other - brands. In return, the store will also expect customers to come back and reinvest in the relationship to earn more benefits. That is how it works. An effective loyalty program is the one which can get customers attached easily after the first purchase. When they start being used to shop at your stores, they will be less likely to search for other brands or switch to another supplier. According to Loyalty360, 84% of loyalty program members are likely to choose the program retailer over its competitor. This is because loyalty programs make customers love brands. Just like a romantic relationship, when you commit, you are loyal and hesitant to start a new relationship.

Cut down extravagant advertisement spending

Loyalty Program

Brands and merchants make heavy expenditure on advertising annually, but this may bring unworthy effectiveness. Millions of dollars might be spent on commercials which are left unseen; thousands of flyers, banners or marketing emails might approach inappropriate targets. Yet, the effectiveness of advertising is hard to check as you will never know precisely how many customers it brings to you or how much money you earn from these marketing efforts.

However, loyalty programs remarket existing customers and attract new buyers at the same time while, as I already said, remain low risks and being a never-lose investment. Noticeably, this marketing program can be targeted correctly, and you do not have to waste a penny on those who are not your customers. Besides, based on the loyalty program system, merchants can track customers’ buying behavior. When they first bought at your store, how much they spent, how much they are rewarded and how they spend rewards at your store will be recorded. You can even track what source they get the information from and which program is more efficient by using A/B testing. Thanks to technology, everything can be assessed.

To be honest, advertising cannot be replaced to optimize marketing effectiveness. However, it’s time to consider about moving some expenditure spent on advertisements to loyalty programs.


Final words

I believe that searching for loyalty, in any terms of life or business, is not simple at all. Indeed, customer loyalty is a thing which requires lots of effort and investment. However, the results it brings back to you are worthy.

As a store owner or a marketing doer, do you have any plans for your future loyalty programs? Do you have any preference of reward programs that you want to build for customers? Are there any other surprising benefits you experienced from your own loyalty program that you want to share? Let’s discuss it together!

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