The benefits of a loyalty program

This post was origionally published on 10/07/2019 and was updated by the editor on 13/07/2020

It’s more important than ever to retain customers in today’s saturated ecommerce market. The value of the UK’s B2C ecommerce market grew 11% in 2019, according to Hootsuite and WeAreSocial. And, with easy-to-use ecommerce platforms only one click away, there are ever-more competitors targeting your customers. But, rather than constantly struggling to reach new customers, why not focus on the ones you already have first? There are many benefits to offering a customer loyalty program, most importantly securing crucial repeat custom. And setting one up could hardly be easier.

A loyalty program is the tried and tested way of getting customers to shop with you again and again. If you gift customers points for purchases or interactions with your business, it makes them more likely to return and spend those points with you. It also helps you build a core audience who’ll organically tell people about your business. But what are the benefits of customer loyalty programs for your business? That’s what we’re about to find out.


The benefits of loyalty programs for online businesses

1. Avoid the race to the bottom

Does it come as a shock that shopping is one of the world’s most popular online activities? The growth of the ecommerce market can’t be overlooked. Here in the UK, the value of the B2C ecommerce market stood at $233 billion in 2019.

As you’d expect, certain major players are holding a large share of the ecommerce pie. Amazon leads the way, increasing its UK market share to more than 30% in 2019. In the US, that share of the pie is even bigger – accounting for 38% of all US ecommerce sales.

When customers open up their browsers to search for products, it’s easy for them to compare prices and find the best deal in a matter of minutes. Instead of a race to the bottom on price, however, look to differentiate your service with bespoke experiences.

One benefit of customer loyalty programs for retailers is the chance for your brand to connect with customers. This can be done through shared values and rewards, such as loyalty points to redeem on future purchases. Creating an emotional bond with your customers helps them to see you as more than just a corporate, faceless seller. Instead, it shows you as a brand with a clear identity and real-world values they can relate to.

Pillar Page Definitions (1)

2. Retain existing customers

It’s easier to keep hold of customers than it is to attract new ones. And creating a loyalty program benefits your customer retention rates. Why is this important? Well, research from Bain & Company shows that boosting customer retention rates by just 5% can grow profits by at least 25% and by as much as 95%. Essentially, it’s a no-brainer. So, try and hold on to those who already engage with your brand.

Loyal customers also spend 67% more than new ones. This gives you a useful insight into the  effectiveness of loyalty programs. Keep hold of your customers and they’ll keep spending with you. It’s much more cost-effective way to increase your profits than selling to new customers. In fact, one report suggests it can cost five times less to keep hold of an existing customer than it does to acquire a new one.

So, by creating a loyalty program for your online business, you give more reasons for a customer to stay with you. And it builds trust in your brand that money can’t buy.

Pillar Page Definitions

3. Increase your revenue

One of the biggest benefits of loyalty programs for businesses is the increase in revenue it can deliver in the long term. This is because you inspire and incentivise customers to return to you. It could be to redeem points, collect more points or check out exclusive offers. These are some examples of how loyalty programs benefit customers and your business.

Customers spend more over a longer period of time if you give them reasons to come back. According to the 2016 Bond Loyalty Report, loyalty members buy more often and spend more than non-members. The result of this is an increase in revenue of between 5 and 10%.

Your customers will also be keen to continue shopping and interacting with a brand they feel connected to. You can often find it’s easy to build a connection through your shared values – such as sustainability or providing informative tutorials.

One way to track loyalty program effectiveness is to see how it increases your customer lifetime value (CLV), which – in turn – increases revenue. Research in 2013 from marketing analytics company SumAll reveals that a customer is 27% more likely to return once they make a first purchase. This jumps to 43% once a customer makes their second purchase.

A loyalty program benefits your average order value too. Adding tiers to your program can push customers up a spending ladder. If shoppers see they can unlock rewards as they buy more, they’re likely to add more to their cart to access these rewards. And this ultimately bumps up their total spend as a result. It’s a really visible benefit of customer loyalty programs.

Beyond Retro Tiers

4. Build personal relationships

Every customer is different. And each one has different needs. Using unique data to recognise and speak to them as an individual will make them feel much more appreciated. People who sign up to a loyalty program often feel more valued as individuals over an anonymous experience. In fact, 76% of people believe that a loyalty program can deepen their relationship with a brand.

One of our benefits of loyalty programs for retailers is that it gives you a way to surprise and delight your customers. You can do this by using specific data to tailor their experience. From analysing order histories to reviewing site activity, show them the products and features that you know they’ll find interesting. It’s a much better way to make them feel more valued than serving a blanket offer that may or may not be relevant.

The effectiveness of loyalty programs can also be seen beyond the initial purchase, engaging your customers after they buy from you. It can be written content, birthday gifts or access to exclusive information, such as tutorials or forums. You may want to reward them for their on-site behaviour too.

Harney and sons loyalty program birthday pop up

5. Create brand advocates

Not only can you keep hold of more customers and build lasting connections with them, you can also turn them into your biggest brand advocates. A satisfied (and loyal) customer will tell others about your brand. Through this, you’ll acquire new customers without spending on marketing to them. Easy!

We like to make personal recommendations so much that 73% of millennials feel responsible for helping friends and family make “smart” purchase decisions. Nielsen research found that 83% of people trust word-of-mouth recommendations from friends and family – and 66% trust opinions and reviews posted online. And a benefit of customer loyalty programs is you can reward both of these forms of brand advocacy:

Rewarding Reviews

Use your loyalty program to thank customers for sharing their real-life experience of your brand – whether that’s on social media or an independent review site. These reviews make it easier for new shoppers to trust your brand and find out more about you before making a first purchase.

Pulse Boutique Reviews

Referrals

Referrals are more trusted – and more valuable – than any other form of marketing. More than three-quarters (77%) of people have said the recommendation of a friend or family member is the “most persuasive” when buying a new product.

Thechive Referrals

6. A perfect branding opportunity

You can tap into the benefits of customer loyalty programs to enhance your brand identity and draw customers further into your world.

Build a hub for customers to explore in more depth by using your brand’s colour palette, fonts and engaging images to extend your core identity across members-only parts of your site. It’s one useful way to ensure maximum loyalty program effectiveness. But this page must be easy to use, easy to find and and seamlessly reflect what you stand for.

Sustainable dungarees brand Lucy & Yak is just one example of a top-performing fashion loyalty program. They used their loyalty page to highlight customers’ user-generated content. They also use engaging lifestyle images to explain how to earn points – creating an on-brand, integrated loyalty program with our help.

The page is fun, easy to navigate and speaks in a clear brand voice – using terms such as “yak points”. This draws the customer further into the Lucy & Yak world. The result? A higher chance they’ll continue to engage and show the effectiveness of its loyalty program.

Lucy And Yak

7. Personalise the customer experience

Customer experience should be a top priority for all businesses. Shoppers no longer give their loyalty based on product or price. Instead, they’ll return to shop with brands that give them a positive experience. So, it’s important to keep up with their demands if you want to keep their loyalty in the long term.

Believe it or not, 86% of buyers are willing to pay more for great customer experiences. Two-thirds (65%), meanwhile, find that a positive experience proves more influential than amazing advertising. But how do you go about creating a positive brand experience for the customer?

This is yet another benefit of customer loyalty programs.

Use the data that you have on your customers to create a bespoke, more personal shopping experience. Only 22% of people are satisfied with the level of personalisation they currently receive. As consumers are actively asking brands to use their data in a positive way and deliver a more personal experience, why not deliver what they want?

Ecommerce stores that can’t offer any kind of personalisation will risk losing their customers to those that can use this data for the benefit of their audience. The added benefits of your loyalty program for retailers is that you can tailor the experience to the individual. Do this and you can get ahead of the competition. See how you can use loyalty data to personalize your shoppers’ experience with you.

Ultimately, it’s important to get data from multiple touchpoints. This lets you contextualise and analyse your customer behaviour. And, as a result, it means you can make intelligent, informed product suggestions for them that are highly personalised.

Conclusion

Harnessing the benefits of a customer loyalty program can help you avoid the race to the bottom against mega corporations like Amazon who will always win on price. Instead, focus on building a brand that your shoppers can get to know and come to trust.

Loyalty program benefits apply to both you and your customers. For them, it’s the chance to get enticing rewards that bring them back to you time and again. And it’ll be a more personal, curated shopping experience that reflects and anticipates their individual wants.

For your business, you can retain more of your existing customers and use your loyalty program to reinforce your brand messaging. This creates a whole new brand world for your customers to explore. And that adds even greater appeal to your brand than what you sell.

In turn, a loyalty program can be a valuable tool for creating brand advocates who tell their family and friends about you. Above all else, it’s a way to increase your revenue in the long-term. Here at LoyaltyLion, we can support you by providing loyalty program software that works for you.

Book a LoyaltyLion demo with one of our loyalty specialists today to find out what you can do.

About the author

Mollie Woolnough-Rai

Mollie is a Senior Content Marketing Executive at LoyaltyLion. After graduating from UCL in 2016, she has worked both in-house and at marketing agencies providing expertise in content for both B2B and B2C clients. At LoyaltyLion, Mollie manages our content, making sure our readers get the best quality resources about customer loyalty and retention.

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