A lot of companies work hard to attract new clients, which is not wrong in itself. Business expansion depends on it, and the increase in revenue is always a nice bonus.
Although, retaining existing customers is also important. As a matter of fact, acquiring a new customer can cost five more times that retaining current ones. It makes sense – first time clients aren’t easy to convince as they have no prior experience with your product or service.
A customer loyalty program is a cost-effective customer retention tool that increases sales, the amount spent per transaction and can even attract new clients, not to mention the increased lead generation.
This makes them especially important for small businesses since having a strong base of loyal customers provides the stability and a steady revenue needed to ensure the growth and life of a small business.
As a 2% rise in customer, retention has the same consequences as reducing 10% off a company’s business costs, it is crucial to ensure that a solid base of loyal customers is present.
Creating brand ambassadors
Satisfied clientele loves to talk about their experience with their favorite brands. Companies that wish to connect better with their customers need to consider how a customer loyalty program fits into their strategy.
Brand ambassadors can be encouraged by providing a client experience that brings joy, even surprise.
Loyalty programs enable companies to keep the customers happy with surprise sales and regular promotions to keep them engaged with a brand. This is the fastest way to get your customers to talk to new potential clientele about why they purchase from a certain brand.
How to build a loyalty program for consumers
Before the implementation of a customer loyalty program, a few basic steps should be covered.
Firstly, a company needs to serve its clientele’s needs properly and provide value for them.
If the customers don’t receive what they actually need, their loyalty will be scarce, at least until a business learns about their problems and tries to solve them.
An efficient way of starting the implementation of a customer loyalty program is with a universal gift card. As these cards don’t have a hidden advertisement in them, they allow a customer to choose what to buy instead of forcing them to choose a company’s product.
Whatever they choose to buy with it, they will always remember the brand that created that opportunity for them.
Another important step is creating evangelists out of the most satisfied clients. In business terminology, an evangelist is a person who actively speaks to others about their positive experience with a brand.
Any customer who had such a positive experience with a company or its products and services is a potential evangelist.
In today’s digital age, people increasingly post their positive, and negative, experiences online. Harnessing such opportunity invites clients to review a business or its products and services, whenever they make a purchase.
B2B businesses require different designing of customer loyalty programs. Here, customers are more interested in innovative ideas, excellent service, timely delivery and customized solutions instead of pricing.
Suggesting the best practices in order for them to succeed is a more efficient approach to gain their trust and loyalty.
Build More Repeat Business
To repeat, gaining new clients is expensive. In fact, according to Marketing Metrics, 20 percent of customers of any given business is the source of 80 percent of their profits.
If a customer made a prior purchase from a business, that company has a 60 percent chance that they will make at least one more purchase.
On the other hand, if a prospect goes to a company’s website, there is only a 20 percent chance that they will become a paying customer.
This is a place where customer loyalty comes in handy. Loyal clients are more likely to look for a business’s campaigns or upsells. As they already have previous experience with the company, they are more likely to trust the brand and its products or services.
In conclusion, developing a customer loyalty program requires a cost-benefit analysis on a case-by-case level. A loyalty program must be able to compensate its expenses through the loyalty and trust it brings.
Too generous rewards that don’t generate enough revenue and repeats business lead to a lower profit margin. Trial and error are the only way to figure out what works for a company.