How does a loyalty program increase measurable revenue and profit?
Implementing an effective loyalty program is the most powerful way of retaining customers considering the ephemeral nature of customer loyalty. The ideology behind a customer loyalty program is simple – encourage repeat purchases and increase revenue. Most travel marketers abide by this basic yet powerful strategy of having an effective loyalty program in place in order to reduce the customer churn and expand their market share consistently.
So the question arises – how does a company really impact revenue and profit by utilizing a loyalty program?
The first step is to identify the need for a loyalty program in place. The second step is to find out how to drive revenue through that rewards program. Let us discuss how to improve customer loyalty and reap profits using a well-designed loyalty solution.
Acquiring new customers is far more expensive (about 5 to 25 times) than retaining the old ones. (Source) That’s why loyalty programs focus on increasing customer retention. Whether the goal is to jumpstart the sales or continually increase profits, loyalty programs have become a staple for many travel companies. This also implies that having a cost-effective loyalty program in place will make more money than the cost required to maintain it. A well-designed loyalty program can help any business size to scale new heights and rise above the competition.
Having a loyalty program means it will save to market existing customers than as opposed to getting new ones. (Source) Your business will save and make you money in the process as well. Not only is the acquisition cost higher than the retention costs, but it is also easier to retain than acquire.
The probability of selling your product to the existing customer is 60-70% as compared to 5-20% of sales you get from a new customer. (Source) The repeat customer will give and give which in turn could boost your revenue. A repeat customer is likely to spend 67% more money on a given purchase than a new customer. (Source) These statistics show that customer loyalty is of paramount importance. A loyalty program is not just a great way to reward your customers but also motivate them to be the brand ambassadors.
Loyalty program are trending up and their members are known to generate 12 to 18% more revenue than non-members, according to a 2016 study. (Source) The study also shows that the loyalty club members feel that loyalty rewards should be a way for the brands to show loyalty towards their customers. A strong emotional connection is a huge driver of loyalty.
Did you know: building loyalty with as little as 5% of members will lead to a surge of 25 to 100% profits per customer.
Customers love receiving loyalty rewards, services, goods, add-ons, better perks, and redeemable points as a part of the loyalty program. At the end of the day, making sure that you choose a loyalty program that values your customers and stands out by fostering a strong bond with them is the key to success. Loyalty programs do not have to cost a fortune and technology has made it easier to customize one that works great for your brand. Once you get it right, you will be hitting the sweet spot among brand loyalists!