5 Reasons You Should Start a Rewards Program
Studies have repeatedly shown that it is more expensive to acquire a new customer than to retain an old one, driving up costs six times more than the usual. It is one of the reasons why companies invest on programs to cultivate, enhance and reward customer loyalty. After all, customer loyalty breeds advocacy. If you have one loyal customer telling his friends about you and your product, you have found a more credible way to advertise and market your business.
Fortune 500 companies run rewards programs for customer loyalty. Understanding the reasons why you should adapt a rewards program in your business is as important as finding or creating one that is fit for your business goals.
Here are five reasons why you should start a rewards program:
1. Customer Acquisition and Retention
Studies show that in most businesses, 45% of customers make a one-time purchase and don’t go back for a second purchase. A loyalty program not only attracts new customers but also motivates existing ones to continue supporting your business because of the promise of rewards for their loyalty. A rewards program provides customers with a practical reason to buy from you again.
2. Relationship Building with your Customers
This reason doesn’t directly translate to return of investment (ROI) or profit right away but building relationships is the start of cultivating brand loyalty. When you take care of your customers, they, in return, keep coming back for more. Brand advocacy is the highest form of loyalty customers can show. People who hear recommendations from actual product users are more convincing than any other promotional or marketing ad they read, see or hear.
3. A Great Customer Marketing Tool
Leading marketers like Brian Woolf and Gary Hawkins has developed the strategy behind leading customer rewards programs today. The say that the best customer marketing strategy should involve spending more on your best customers in order to maximize one’s return of investment. And we are not talking about money alone – we are talking about spending more time and effort as well.
4. Valuable Insights to Customer’s Spending Patterns
Rewards program provide invaluable insight towards customers’ spending preferences. You can easily track products they usually buy, and how frequent. You can decipher which purchases are driven by promos or location in-store (i.e., whether they picked up a product because it was nearer the check-out aisles or not).
If you study customers’ purchasing behavior, you will be able to identify which products to stock more effectively, and which ones to advertise more. You can strategically bundle best-selling products with items that have more stock. By planning marketing promos driven by concrete consumer purchasing behavior patterns, you will be able to have more effective sales campaigns.
5. Reduce advertising costs
Since you can direct targeted campaigns instead of overall sales campaigns, you can undoubtedly have better sales conversions. We also always go back to customer loyalty. When you transform a customer into a loyal one, his customer lifetime value (CLV) increases. This measures not only a customer’s worth at present but the expected value over their projected lifetime as a customer.
When you think about how much you will spend on customer retention over a period, versus how much you will spend on customer acquisition repeatedly, you will undoubtedly be saving more with retaining existing customers.
You don’t have a rewards program yet? It’s time you seriously consider starting one.