Is your store a good fit for loyalty program?

Acquiring new customers is one of the most difficult challenges for any company, especially for small businesses. It’s no surprise that 80-90 percent of their marketing budget and efforts are often allocated to client acquisition. But doesn’t it make sense to have a strategy in place to keep all of these hard-won customers?

A store without a loyalty program is like a revenue bucket with a leak. You would never use a leaky bucket to collect water, particularly when water is scarce. However, that is precisely what you are doing in the absence of a retention plan. New clients enter via the top and exit at the bottom.

It makes no difference how big or small your company is. Retailers should ideally put in place a loyalty program before they even have their first customer.

How do loyalty programmes function?

Businesses’ principal purpose is to acquire and keep consumers. A lot of marketing focuses on acquiring consumers, but keeping them is frequently a different story. Loyalty programmes function by incentivizing customers to continue doing business with you. The incentives might be anything, but they must provide a significant value to keep customers coming back.

If you work in retail marketing, you are probably thinking about several forms of loyalty programmes.

To retain loyal consumers, merchants have used point systems, tiered programmes, and even paid membership loyalty programmes since the beginning of time. But, do these initiatives really foster loyalty?

And how do you know which form of loyalty programme is right for your brand?

Do not be concerned. We will go through the most common forms of loyalty programmes, outline the advantages and drawbacks of each, and provide some examples to help you decide which sort of loyalty programme is best for your company.

1. Point-Based Loyalty Program

This is likely the most widely used loyalty programme approach. Frequent customers accumulate points, which may be redeemed for benefits such as a discount coupon, a freebie, or another form of special offer.

If you use a points-based loyalty programme, make the conversions basic and straightforward. Although a points system is the most prevalent sort of loyalty programme, it is not always appropriate for every type of company. It is most effective for companies that promote frequent, short-term purchases.

2. Tiered Loyalty Program

Most organisations developing loyalty programmes struggle to strike a balance between reachable and appealing incentives. One solution is to design a tiered structure that rewards early loyalty and promotes more purchases.

Present minor benefits as a starting point for participation in the programme, and then attract repeat customers by raising the value of the awards as they go up the loyalty ladder. This eliminates the possibility of members forgetting about their points (and never redeeming them) due to the extended delay between purchase and fulfilment.

The most significant distinction between the points system and the tiered system is that customers derive short-term versus long-term value from the loyalty programme. Tiered programmes may be more effective for high-commitment, higher-priced industries such as airlines, hotels, and insurance firms.

3. Paid Loyalty Program

Loyalty programmes are supposed to tear down barriers between consumers and your company… so are we honestly suggesting that you charge them a fee? In certain cases, a one-time (or yearly) price that allows consumers to skip typical purchasing barriers is helpful to both the company and the client. If you discover the causes that are causing your consumers to quit, you can design a fee-based loyalty programme to solve those particular challenges.

Have you ever abandoned an online shopping basket after tax and shipping were deducted? This is a common problem for internet enterprises. To address it, you may implement a loyalty program similar to Amazon Prime, in which users automatically get free two-day delivery on purchases by joining up and paying a one-time charge (plus other awesome benefits like free books and movies).

4. Coalition Loyalty Program

Strategic customer loyalty partnerships (also known as coalition programmes) may be an efficient method to retain consumers and develop your business.

Which firm would be a good match for a collaboration? The answer is determined by your clients’ daily life, wants, and purchasing procedures.

For example, if you are a dog food business, you might collaborate with a veterinarian clinic or pet grooming facility to provide co-branded promotions that benefit both your company and your consumer.

When you give your clients with meaningful value that goes above and beyond what your business can provide them, you demonstrate to them that you understand and care about their difficulties and ambitions (even those that you can not address on your own). Furthermore, it assists you in expanding your network in order to contact the clients of your partners.

5. Game-Based Loyalty Program

What person does not like a decent game? Turn your loyalty programme into a game to attract repeat customers and, depending on the sort of game you pick, to establish the image of your business. However, with any contest or sweepstakes, you run the danger of making clients feel as though your organisation is jerking them about in order to earn business. To reduce this risk, make sure your consumers do not feel cheated out of their benefits.

The chances should be no less than 25%, and the buying criteria should be reasonable. Also, before making your contest public, ensure that your company’s legal department is completely aware and on board. When correctly implemented, this sort of programme may work for practically any type of organisation and make the purchasing experience interesting and exciting.

An investment in a loyalty rewards program often yields exponential ROI. Because loyal customers create 10X more income for you, In other words, each loyal client is worth ten times the cost of acquiring a new customer. As a result, even a small increase in loyal consumers will have a significant influence on your income.

So, regardless of how large or small your company is, it makes sense to implement a loyalty program. However, most loyalty programs are costly and difficult to administer. As a small retailer, you lack the funds and resources to launch and administer such initiatives.