Are Loyalty Programs Effective?

You just walked into your favorite coffee shop for the third time this week and after your order, the barista asks you “Are you part of our loyalty program?” Your first thought is No, and you start thinking to yourself on how you don’t want to be bombarded with emails, and notifications on your phone. Then after the barista tells you a little bit more about the loyalty program you may start thinking it’s a good idea, since they know your order when you walk through the door you decide to give them some of your basic information and just within a few seconds you are now in their customer database and now are a rewards member.

 You may have no idea what you just signed up for, and now you may have just downloaded another app on your phone as if you don’t have enough already. You get your usual iced vanilla latte and go on with your day. The next day when you go back to get your usual you can’t wait to tell them that you’re in their loyalty program. You ordered your drink and scanned a QR code on your phone and just got some points towards some free coffee. In your head you think this is awesome and are going to come back even more.

 Today I am going to explain to you why loyalty and rewards programs work and how they can benefit both the company and the customer 

 Do Loyalty Programs work?

The most effective loyalty marketing programs offer fun, easy to understand and desirable rewards systems that help incentivize customers to shop, as well as to become advocates for your brand. So, I am going to show you why companies should put an effort into creating a loyalty Program.

 Memberships are on the rise

A survey from 2006-2016 examined the growth trends of loyalty programs in the US and found that memberships have grown from 3.3 million to 3.8 billion from 2014 to 2016 alone, loyalty program membership has seen a steady growth. With technology being so persistent in our lives, the rise of loyalty programs are as well and making it an easier experience on our phones can make it that more incentivizing to join.

 Increased Consistency

Studies show that 69% of customers allow the presence of rewards or loyalty programs to influence their shopping decisions. Consumers more than ever want to sign up for a rewards program and are actively searching for the benefits and perks of being part of a loyalty or rewards program. Also, creating brand loyalty helps create consistently returning customers whether because of potential perks or because increased appreciation for the product.

 Returning Customers are better than New customers

A study from “SumAll” conducted in 2017 states that the more purchases a customer makes, the higher their chance of returning. If a customer were to walk into your store right now and buy something than the odds of that customer coming back are 27%. So, if that customer did come back for a second time and buy another item the chances of them to return a third time rise drastically to 45%. Then after the third time they have purchased something, there is now a 54% chance they come back again. I am telling you this information because if a company has a loyalty program it gives a reason on why a customer should come back and shop at your store and will continue to buy that certain brand or product.

 A new statistic came out and showed that trying to acquire a new customer can be 5 to 25 times more expensive compared to an already returning customer. Although many returning customers continue to shop at a certain store for a certain brand or product, it’s those customers who are not so set on a company, and a loyalty program can help draw that customer in to you.

 Targeting the BIG spenders:

A study conducted by the Harvard Business School showed that the consumers that are the most likely to spend large amounts of money are also the ones that are most dynamic. High spenders are always on the lookout for bigger and better discounts and rewards, which means that simply having a loyalty program in place isn’t enough. To retain customers, retailers must consistently keep up with their competition and offer rewards and service in return for member loyalty.

 Importance of values:

brand’s values and customer support can be crucial to retaining new customers. For instance, A Recent study showed that 57% of millennial women consider the values of a given brand before making a purchase, and as many as 47% know the story and founder of their brands. Companies that demonstrate the values of their consumer base are more likely to retain potential customers as part of their loyalty program.

 Companies doing it right

Baskin Robbins:

Just for signing up to their loyalty program, Baskin-Robbins gives out a free scoop of ice cream. They’re mobile-friendly and members can pay with their phones, view the latest flavors, and even order customizable ice cream cakes.

Target:

Target shoppers save 5% on everything with the RedCard. Target even partnered with Starbucks to give RedCard holders 5% off any in-store Starbucks location.

Disney:

Disney teamed up with partners Regal, Fandango, and Atom to give Disney Movie Insider members points for purchasing movie tickets. Members receive special content and can redeem rewards for exclusive experiences such as the Walt Disney Studios Gold Private Tour.

 Recap

A customer loyalty program can help your business retain customers and provide valuable insight into the motivations and habits of your customers. By taking advantage of the opportunities provided by the access to customer data through these programs, businesses can both learn about their customers and work to incorporate their loyalty programs to retain top customers. By providing valuable rewards in exchange for valuable information, businesses can reach out and touch customers like never before.

Connor is an undergrad Student at the University of Kansas seeking a double major in Supply Chain Management and Business Administration He has worked many jobs in the Customer Service field and has been a mentor for incoming freshman. As well as had the opportunity to intern at an aerospace company.