Selling to your existing customers is so much easier than attracting new ones. So why not keep them coming back? Returning customers on average spend more and use your business more often. And that in turn increases your bottom line! If this sounds good, Then a loyalty program is the perfect tool to add to your customer retention arsenal.
Here’s something important to remember: keeping a current customer costs you 3-10 times less than acquiring a new one, depending on your industry. Small businesses spend between $9,000 and $10,000 trying to attract new customers on paid search campaigns in just each month on average. Just imagine how much more efficient you could be if you could switch that to getting repeat business from existing customers.
So we know repeat business is important, but how else should you justify investing in a customer loyalty program? Here are 5 key reasons:
1. Strengthen a positive customer experience
Did you know that 79% of customers will turn to a competitor if they experience poor customer service in the first week? That’s a fast way to lose a customer! It’s not just about customer support, it’s also about the way you show your customers that you value them for coming to your business. A loyalty program provides the perfect vehicle to do this. Customers see that they can collect points in exchange for purchases, they feel excited about the added value! This positive experience also invokes a desire to ‘return the favour,’ motivating them to purchase from you again.
2. Show customers that it’s worth it to come back
Remember the old days of video rental and getting your rewards card punched with every rental? You always made sure you had that card on you because after every 10th punch you got a free rental!
The point here is that customers are loyal because they want to save money. This is the traditional loyalty program approach that appeals to a wide range of customer groups. But it’s not enough! Nowadays, more than 75% of your customers expect some kind of recognition besides monetary benefits, like a special treatment perk that gives them a smoother, faster and more personalized experience.
3. Encourage customer referrals
Imagine that you’re out with friends and one asks you which mobile phone you would recommend. You have just purchased the latest Galaxy Note and you love it, so you list all of the phone’s greatest features to convince your friend to buy it as well. They go home and think it over, and sure enough, next week they order the very same Galaxy Note.
Now let’s say that you want your customers to replicate this satisfied recommendation scene virtually. A loyalty program allows you to do this. Studies show that referred customers have a 37% higher retention rate overall. If your loyalty program rewards customers for referring their friends, they will be more than happy to spread the word about you. The most common tactic to use here is a dual-sided reward mechanism, where both the referrer and his referral benefit from the process. This way, everybody wins!
4. Build social proof
More than 81% of customers research products or services, compare prices, and read reviews before making their purchases. While a loyalty program improves customer satisfaction in your business, it also provides opportunities for you to remind and reward customers for leaving product or service reviews or using certain Instagram hashtags while posting photos about your business. Research shows that 88% of customers trust online reviews, so it’s worth investing your effort into this field.
5. Maximize brand advocacy
You can’t win customers’ hearts with discounts and special perks forever. Not only can your competitors offer the same monetary benefits, but always (and only) offering discounts is also ensuring a leaking money tank on your end.
The easiest way to avoid this problems is to have your loyalty programs for your best customers. These are the top 20% of all of your customers, who can generate 70% more revenue by spending more over a longer period of time. But they aren’t just staying with you for the discounts - they’re staying with you because they LOVE you!
And a loyalty program provides a perfect chance to deepen their engagement. The more they engage the more likely they are to promote your brand, and they are 2-3 times more effective in persuading others to purchase from you.
You can’t increase your profit without focusing on your customers in the first place. So whenever you decide to launch a loyalty program, the most important thing is to plan it in a way that will really add value to your customers.
When you’re ready, the experts at Blue Collar Business Services are here to help! 732-451-7656