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Brands and retailers are continually wary about their spending, whether it is related to marketing campaigns or any other affiliate campaigns. With the advent of new trends in technologies and the plethora of social channels, marketers are in a dilemma as they contemplate if loyalty programs are still able to penetrate the minds of existing consumers as well as helpful in acquiring new consumers. We will explain to you in our post today why it is essential for the brands to conduct a loyalty program and how it can prove to be fruitful.
Let us first understand what loyalty program is:
A loyalty program is a relationship between a brand and a consumer where a company offers exclusive promotions or pricing in order to gain the consumer’s repeat purchases or brand engagement.
Now, let’s discuss why it is important for the brands to establish a loyalty program. These five reasons can resolve any dilemma:
Retention of existing consumers and acquisition of new ones:
In February 2013, an article in Forbes asserted that keeping an existing consumer is 7 times less expensive than acquiring a new one. Roughly, in a period of 5 years, a company with 70% consumer retention rate would have lost twice or thrice as many consumers as a company with 90% retention rate. A loyalty program persuades the consumers towards accumulation of reward points, and this also provides relevant information about the consumers for marketers to more effectively address their needs. This results in consumers feeling more engaged and likely to stick to the particular brand.
For new consumers, a rewards offer that adds value to their purchase is key to getting them on board with your brand. The enthusiasm and interests of reward points drives the existing and new consumers turning out to be highly profitable for companies in the short run and long run as well.
Market Research Data and Consumer Life Time Value (CLV):
Consumer Life Value is the measurement of the consumers that purchase annually and the projected value of all the interactions in the future. A loyalty program can assist brands with collecting valuable data and prove ultimately fruitful for carving out a long-term marketing strategy to target the existing categorized consumer base and acquire new prospects.
Curbing of competition:
It is not difficult for the discerning shoppers to compare hundreds of prices in a few clicks, and if they are only considering a brand’s products instead of your store or brand on a whole, your place will be found at the bottom in terms of price where compared to online e-tailing giants like Amazon. So if brands wish to increase their mindshare, rewards programs can assist them to stay away from the competitors.
Data suggests that 73% of millennials feel it is their responsibility to help friends and family make smart purchase decisions, and word-of-mouth is the primary factor for 20-50% of all purchasing decisions. There might be many cases where a consumer might refer or suggest to his friends or family to purchase a particular item for a particular store depending on the type of referral program, especially through social media. Such people are a company’s brand advocates. If a consumer refers a friend, he might earn huge reward points and the other one might get a discount on their first purchase.
Reduction of Costs:
At least 50% of the advertising or marketing budgets are focused towards developing a permanent place in the minds of consumers. Another 50% is spent heavily towards acquiring new ones. As compared to this now, loyalty programs cover all these aspects and give the ROI much earlier than expected. The data indicates that 75% of US companies with loyalty programs generate a return on investment and 83% of consumers agree that loyalty programs make them more likely to continue with the certain specific brands.
After reading the above reasons, our dilemma is surely resolved and that it is evidently prudent to initiate or conduct a loyalty program at some stage in order to enhance the brand equity, customer satisfaction and most important of all, the revenue. Furthermore, it can also be inferred that loyalty programs are also successful in providing much required edge in the ever growing competitive markets at much lesser costs.
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