Why rewarding customers is key

Customer loyalty programs are a staple strategy used by a huge number of corporations and franchise opportunities for very good reason. Not only are the customer retention opportunities they offer huge in scope. They also offer a dynamic range of other benefits which are highly sought by entrepreneurs, franchise owners, franchisees and other business owners alike…

1) You keep your customers

Customer retention is, of course, going to be the major goal of any loyalty program or customer reward system you put in place. By rewarding your clients for the desired behaviour – i.e. buying from you, buying in bulk or developing a buying habit – you give them a good reason to do so again in the future. A huge number of studies have been run on the effectiveness of loyalty schemes. The numbers seem to show that loyalty program members buy anywhere from 5-20% more often than non-members do in most industries. When it comes to what customer retention really means to your business’s bottom line are incredible when you put them into context: Even a customer retention boost of 5% can increase profits by 25%. There’s a reason why it’s a good idea to check out a network’s customer loyalty scheme plans when buying a franchise or to institute your own as soon as possible as a solo entrepreneur.

2) You gather relevant data

One of the major advantages of customer loyalty programs is that they allow you to collect valuable quantities of data on your customers and their buying habits and trends. You can then utilise this data to tailor your sales efforts to specific groups of customers – or even specific individual customers. Wide-scale analysis of this kind of data can also help you succeed in a wide range of tasks:

• Planning marketing campaigns
• Deciding which marketing channels to use
• Inventory management
• Making growth and expansion plans

3) You identify the dead-weight

Harsh as it may sound, some customers are essentially dead-weight as far as your business’s bottom line is concerned. You know the ones: They only buy your products when they are at their heaviest discount. They never discuss your products online and cannot be lured into even considering the purchase of one of your premium or even your standard products. By tracking your customers’ shopping habits via your loyalty scheme, you can identify those clients who are dead-weight. This allows you to prioritise deserving customers and mitigate losses on sales and other promotions which might ordinarily be consumed by the dead-weight.

4) You prioritise the high spenders

As well as using the data you collect to spot those less-profitable clients, you can also use it to pinpoint those loyal, regular customers who are happy and eager to buy from you. These can then be offered discounts – especially on related additional purchases. They might also be offered extras, such as accessories or warranties. On average, you will find that loyalty program members can spend anywhere from 5 to 20% more than non-members. All you need to do is highlight, support and reward their behaviour.

5) You communicate more clearly

Finally, one of the major advantages of customer loyalty schemes is the opening for communication that they offer. The classic example is a supermarket notifying its customers of the recall of a product which – through the data its loyalty program has collected – it knows certain customers have purchased. These customers can then quickly and easily be notified. But there are also major possibilities for even more positive uses of your customer loyalty scheme for communication purposes. These will be well worth experimenting with once you have your basic system set up.