10 Valuable Benefits of Using a Customer Loyalty Rewards Program

Larry VanDenHandel on October 23, 2019

Running a loyalty program is a great way to add revenue and make customers excited about shopping. In a way, a loyalty program encourages customers to purchase frequently because of incentives.

But how do loyalty programs work? What are the benefits of using a customer loyalty rewards program?

How do loyalty programs work?

When a company uses a customer loyalty program, it benefits both ends — the company itself and the buying customer. Simply, customers are rewarded for their brand loyalty while the company is provided with sales, referral, and vital data.

Fortunately, there’s no need to reinvent the wheel in starting a loyalty program. For example, you can partner with Lootly to help you grow your revenue as well as customer satisfaction through loyalty and rewards programs.

Source: Lootly

With an incentive marketing platform like Lootly, there will be no need for you to start from scratch. Simply customize the program with what you have in mind and there’s your program. It’s that simple.

Benefits of loyalty programs

For others, it’s baffling why big companies like Amazon, Apple, or Starbucks invest so much money in rewarding customers even to the point of giving out products for free. If you’re one of those people who would like to understand the behavior of these giants, here are the benefits of using a rewards program on a business:

1. Retain customers

Let’s start with the most basic. The primary purpose of loyalty programs is to retain customers by giving them incentives for each action they take — making a purchase, giving a referral, sharing on social media, leaving a review, and others.

One of the goals of a loyalty program is to have a “repeat business” phenomenon where customers go back to the store, again and again, to purchase products or avail services from the company.

As you move on through the list, you would realize that most of the benefits are brought by loyal customers.

Another reason for retaining customers is CLV or Customer Lifetime Value. This is simply a measurement of the projected value of a customer based on their present and future activities with the brand.

The bottom line of CLV is that acquiring new customers is more costly than retaining new ones. It would cost you more to gain a buyer through advertising and marketing. You make more profit when the customers who are already engaged with your brand keep on buying from you.

2. Gather relevant customer data

The customer data you’ll gain using the loyalty program is perhaps the most important benefit of them all. In fact, in a survey held by PwC, most of the respondents believe customer data to be the most valued and most important consideration.

These programs would allow you to track important analytics and measure metrics related to customer loyalty like repeat customer rate, purchase frequency, and even engagement. Lootly’s “Insight” feature allows you to drill drown on individual customer profiles and understand their behavior better.

Source: Lootly Insights Feature

Loyalty programs provide a space where you can conduct a form of research about your customers. Over time, you would be able to understand which reward drives your customer the most to perform an action. You can then apply the same incentives on some of your products to increase sales.

In addition, you can also use the data to provide customers with a personalized experience. It’s critical that you provide your customers with the best service possible. If not, you could lose a lot of them. A study fielded by American Express revealed that 68% of customers believe excellent customer service interaction is fueled by a pleasant experience.

With your data, you would be able to create targeted marketing campaigns that make marketing simple and cost-effective while ensuring a high engagement from your customers. 

3. Boost sales

Customer data is the most important benefit of loyalty and rewards programs because this collected data will allow you to give your customers personalized shopping experience. This allows you to make better recommendations to your target market.

For example, if you have tried buying and reading books with Amazon Kindle, you will receive book recommendation emails that contain books which are related to the ones that you once bought, including those that are inspired by your wishlist: