Five benefits of a loyalty program

Only 3% of new visitors that make a first purchase will return to buy again. This is an alarming statistic especially after you’ve spent so much acquiring them. So how can you change this? One way is through the benefits of loyalty programs. There are many financial and non-financial benefits of a loyalty program. Here we’d like to focus on five.

  1. Stop competing on price
  2. Retain existing customers
  3. Increase Customer Lifetime Value
  4. Build personal relationships
  5. Create brand advocates

1. Stop competing on price with competitors

Today it’s easy for discerning shoppers to compare hundreds of prices in a few clicks. If they are just thinking of the products you sell instead of your store and brand, then you will find yourself in a pricing race to the bottom, where large stores like Amazon will win.

Adding a loyalty program stops you from competing on price by giving you another way to differentiate your store: you can offer an enhanced customer experience by connecting with their emotions. Let’s elaborate on that here.

Studies have shown that when a customer makes a purchase it’s highly emotional. If you sell a product that people buy through desire instead of necessity then appealing to their emotions is key. A loyalty program gives you a way to surprise and delight customers by rewarding them for something that previously went unnoticed. Every time you reward your customers for their shopping activities (sign ups, referrals, purchases etc.) you will appeal to their emotional side and start building a connection with them.

As the emotional connection builds, shoppers will see you as more than a collection of products which will strengthen their loyalty.

2. Retain existing customers

Loyal customers spend 67% more than new ones. This is a statistic that cannot be ignored, especially when the Chartered Institute of Marketing lists a variety of sources that site customer retention costs between 4 and 30 times less than customer acquisition and that a mere 5% lift in retention can increase your profits by a staggering 85%.

These figures are hugely significant, and highlight that retention is one of the most cost-effective ways of increasing your profit margin. One of the main benefits of loyalty programs is that it can help to retain existing customers and turn them into loyal ones.

3. Increase Customer Lifetime Value

Customer Lifetime Value (CLV or CLTV) is the net profit attributed to the overall relationship you will maintain with a customer. It measures how valuable the customer is to you now and the projected value of all your interactions with them in the future. A loyalty program can help you calculate exactly what the CLV is for each of your customers, and help you wield those statistics into usable data for implementing solid strategies to retain your customers.

For instance, a loyalty program can provide you with behavioral data of your customers’ buying habits. We talked earlier about how making purchases is emotional, so this data is vital. Your store’s data is like a pile of bricks ready to be assembled; a loyalty program can guide you and make sense of this data on both macro and micro levels. Put simply, this means that you can monitor the steps your customers are taking before they purchase, allowing you to reward them at each step of the shopping experience so that you can increase your customer lifetime value.

4. Build personal relationships

The first step to this emotional connection and store loyalty is by showing your customers that you truly value them. We at LoyaltyLion believe that this can be achieved by building genuine relationships with your customers – your customers are unique so treat them this way.

As we explored in the section on how to retain customers, data is vital. LoyaltyLion will provide you with data on your customers such as order history, site activity, visits, referrals stats etc., so you can better tailor your service to their needs.

That may seem like a lot of information, but as companies typically segment their customers through only one or two categories in order to better market to them (and therefore make their customers feel invisible), we at LoyaltyLion understand that customers are more complex than just one segmented category. Their needs can differ from day to day, month to month, from a different location or another season, or any change of personal circumstance. LoyaltyLion will help you identify these changes, so you are able to provide a unique level of service, which will stop your customers feeling invisible and start feeling valued.

5. Create Brand Advocates

It is a mistake to think that your only valuable customers are the ones spending money, in fact, some of your most valuable customers won’t be the ones spending money but generating it. These customers are what we refer to as brand advocates, and they are the ones referring your store to their friends, family and if they are on social media, their followers. The importance of this cannot be overstated;

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 (Branderati).

One of the benefits of a loyalty program is that it provides the refer-a-friend feature. It is a two-way reward system which is proven to be the most effective. For example,  if your customer refers a friend one might earn points and the other a discount off their first purchase. This will work towards both customer acquisition and increasing the loyalty of your existing customers.


Some of the benefits of a loyalty program can take longer to see than others so we only recommend starting a loyalty program if you’re committed. When you decide to go ahead, make sure the loyalty program becomes a central part of your marketing strategy. If you’d like to discuss this more or if you have any questions please contact us using


Subscribe to our newsletter

By signing up, you agree to our terms and conditions.

Ready to find out more?

Speak to a member of the team to find out how you could use LoyaltyLion to drive customer loyalty and engagement.

Book a demo