What Is The Point Of Rewarding Customer Loyalty?
By Jennifer Dawson, Contributing Writer
Retail is changing. Gone are the days when consumers had limited choice of shopping outlets. In their analysis of shopper trends over the recent holiday period, ShopperTrak reported Americans are spending more online — an increase of 18% compared with the previous year. Also due to the freedom of online shopping, a customer is only one click away from buying a product from a competitor. It is clear that retailers need to change in order to keep their customers coming back time and time again. This is especially important when adding a new customer could cost up to 25 times more than retaining an existing one.
What Is Customer Loyalty?
Loyalty is a strong feeling of support or allegiance. On a very basic level, for a customer to keep returning to a store, they need a positive association or emotional experience that will form a link between themselves and the retailer or brand.
The Loyalty Program report states that on average, a consumer is linked to 14 loyalty programs but only actively engaged with seven of them. Therefore, simply having a loyalty scheme is not enough — it also has to keep people interested.
The aim of a customer loyalty scheme is to encourage customers to return. This can either be through brand loyalty or store loyalty. Keeping a customer interested in a brand’s new releases can be a massive revenue generator. As a retail outlet, imagine a customer coming back to make repeat purchases without having to run expensive advertising campaigns.
Why Implement A Customer Loyalty Scheme?
In a study by dunnhumby, the financial benefit of implementing customer-centric reward strategies is clear: customer-centric retailers witnessed a sales increase on average of 3%, while their market share grew by 7%. There are many tried and tested loyalty schemes that can increase customer engagement with a retailer, resulting in repeat sales. A great example of this is U.S. grocery store Kroger which, via the popular Kroger Plus reward card, is able to offer customers discounts based on items they actually buy. The card is so popular that it is used in nine out of 10 transactions.
A loyalty scheme can be simple — such as a customer loyalty game — and doesn’t have to offer a monetary reward. Customers need to feel a bond with their retailer and demonstrating a shared value is a great way to achieve this.
Loyal customers convert — many retailers find that over 67% of their sales come from repeat customers. Attracting new customers is a costly business too, so why not combine the two? This is because rewarding loyalty can lead to new customers. If a customer is happy with their brand choice or store, they will share their experiences on social media and via word of mouth. The idea then is that existing customers do a lot of promoting for your brand to build on your social media marketing strategy.
A guide for any customer loyalty program needs to be simplicity — if the customer doesn’t understand how they get rewarded, they won’t keep coming back. Which in turn means that they won’t bring their friends. Remember, customer rewards equal loyalty, which generates sales and free positive marketing.