There is no silver bullet for running a successful business, but there are a few common factors among the best companies. Every enterprise is unique, but those with the strongest bottom lines often have the most repeat customers. When firms take new clients and transform them into fans with the help of rewards programs, they increase the profitability of the business-customer relationship for all parties.
Why focus on loyalty rather than acquiring new customers? It would seem to make sense that generating new sources of revenue would be most beneficial to the bottom line. However, according to the Database Marketing Institute, there are many advantages to boosting loyalty. Frederick Reichheld author of The Loyalty Effect explained that while the costs associated with servicing the most loyal customers are lower, these individuals tend to spend more than the average consumer on the brands they favor. In addition, having loyal clients results in more referrals and stronger profits.
Loyalty is also integral to boosting retention rates and the impact of these improvements can be significant. Reichheld says that in industries such as banking, auto service and insurance, a five percent increase in retention rates can result in a customer’s lifetime value rising by as much as 75 percent. This indicator is not only affected by cost of service, but price sensitivity as well. Loyal customers tend to be less influenced by price changes. They are likely to keep buying a brand’s products and services even if they cost more.
Shopify points out that loyalty programs can be an incentive to consumers. Many people like the idea of collecting points and working toward earning rewards. Implementing these marketing initiatives can lead to a customer returning more often to the company. When it comes to online commerce, offering points can increase the number of annual repeat visits to a website by up to 20 percent. The more incentive a person has to visit a location, whether virtual or physical, the more likely they will make a purchase.
A special touch
Shopify stresses that today’s consumers have tighter budgets. Company that want to increase will need to offer more than just the product or service being purchased. Offering co-branded or private-labeled discount programs can wow any customer and make them feel good about spending on a certain brand. Anyone can launch a loyalty program, but it takes a special one to drive the emotional connection that marketers are looking to inspire.