Loyalty marketing strategies aren’t new. In fact, the practice of incentivizing customers to make a purchase in exchange for a gift or discount dates back to the 1700s. In 1929, General Mills® brand Betty Crocker™ began offering Box Tops to be collected and used in exchange for discounted flatware. In the 1980s, one of the most famous loyalty programs, the frequent-flyer program, was established. By the mid-1990’s, loyalty marketing programs had become a fixture in mainstream marketing programs.
Today, loyalty marketing continues to be a successful marketing strategy utilized by small, local businesses and large, international corporations alike, offering free gifts, discounts, and exclusive access in exchange for making a purchase, referring friends and family, sharing a post on social media, and more. Here are 5 ways loyalty marketing can benefit your business:
On average, it costs 5x more to acquire a new customer than it does to retain an existing one. For a marketing strategy to be sustainable, it is not enough to focus only on acquiring new customers. Strategies focused on building loyalty and increasing engagement are the most cost-effective way to grow a business.
Customer buying decisions are often highly emotional. Loyalty programs allow businesses to tap into the emotional aspect of consumer behavior. Over time, as you learn more about your established customers, you can use that data to create a better, more personalized experience.
Returning customers typically spend more money than first-time shoppers. In apparel, a shopper’s fifth purchase is estimated to be 40% larger than their first (Bain & Company), and loyalty program members contribute between 12 and 18% more revenue per year than first-time shoppers (Accenture). Additionally, it is easier to sell new products to existing customers who have already established trust with your brand.
As customers build a relationship with your brand and continue to have good experiences, they are more likely to recommend you to friends and family. Word of mouth marketing is vital. According to a Nielson study, 92% of consumers believe suggestions from family and friends more than they do advertising.
Create competitive advantage
Loyalty marketing allows you to compete with brands on more than just price. Today’s consumers are inundated with options. While smaller businesses may struggle to compete with larger brands on price, brand trust, reputation, and a loyal customer base can help offset this.
Brand loyalty is key to modern marketing. With more consumer choice than ever before, loyalty marketing allows you to build lasting relationships with consumers and set your brand apart from the competition.