Fact or Fiction? Loyalty programs use discount tactics, which cheapens your brand.
If you’re not playing in the discount market (where it’s pretty much a race to the bottom), you might be wary of discounting. Many retailers hesitate to use discount tactics, even sparingly. They worry that it might cheapen their brand and devalue their stock in the long run.
However, if brand perception is what you’re worried about, loyalty marketing can actually provide many of the benefits of discounting without devaluing your product.
Loyalty marketing is a marketing strategy that retailers of all sizes use to increase the lifetime value of their customers, by incentivizing and rewarding repeat purchasing.
Loyalty marketing is both:
Many retailers are wary of old-school discount tactics. The fear is that these tactics will bring in customers looking for the cheapest price—almost by definition, these people are the least likely to establish an ongoing relationship with merchants.
Instead, retailers can use loyalty marketing to offer discounts on a sliding scale: the more customers spend, the more they benefit from the program.
Here are six ways loyalty marketing helps your bottom line.
The value of a known customer can be measured, an anonymous customer can not. Loyalty programs give you a method of capturing the customer data required to measure and increase the value of each customer.
Customers who come back, again and again, love your brand and are willing to spend more. According to research by BIA/Kelsey and Manta, regular customers spend 67% more per order than one-off or infrequent customers.
According to a study by KPMG, 60% of consumers will buy from a store with slightly higher prices if they will earn a loyalty program reward. More than 65% of customers even admitted making special trip to redeem a free gift from a loyalty program.
Loyalty marketing influences the consumer decision-making process. Convenience, price and travel time all play a part in the consideration process. But if a customer has points to redeem at your store, that plays in your favour.
75% of consumers would give “rave reviews” to a loyalty program they’re involved in. Loyalty programs help establish a feeling of reciprocity, an important function of any brand-customer relationship. When customers feel valued, they’re more likely to keep coming back.
Loyalty marketing helps brands acquire new customers through referrals. Loyal customers generate word-of-mouth and referrals, so you will build an ever-widening network of new customers similar to your regulars (their friends, family or workmates).
Here are three of the most effective tactics loyalty marketers use to incentivize repeat business, drive up average order size and increase customer lifetime value.
One of the benefits of loyalty programs is that you retailers can ‘gate’ discounts, only offering rewards to people who spend above a specified threshold.
Tiered loyalty programs take this concept a step further. Tiers reward the highest-value and most frequent customers with the best gifts or discounts. The most widely known application of tiered loyalty is airline points. Airlines offer tiers like “bronze”, “silver” or “gold” status levels to reward customers in different spending brackets. This incentivizes customers to move up through the ranks to earn higher value rewards.
Done right, a tiered loyalty program will offer genuine value to your customers, whether they’re shopping in-store or online.
Cin7 customer Federation uses Marsello for their tiered loyalty program, Federation +. Their points and reward options incentivize customers to move up through the levels—Silver, Gold, and Platinum.
Since activating the tiered program, Federation have seen their repeat purchase rate jump to 20%. The loyalty program has led to a 10% increase in total revenue.
RFM stands for recency, frequency and monetary value. RFM segmentation uses all these factors to categorize a customer database into groups. Customers in a brand’s top segment have purchased recently, make regular transactions, and are in the top percentile of lifetime value.
You can use RFM segmentation to group your database, provided you have purchase data attributed to unique customers.
If you have trouble collecting or tracking this data, a loyalty program provides a fantastic incentive for customers to self-identify. A loyalty program will also drive customers into your most engaged segments by incentivizing repeat purchases.
You can also use your loyalty program tier lists or RFM segments to send one-off campaigns. PB Tech sends occasional rewards like free shipping codes to incentivize repeat purchases. You can tailor your promotions to suit the customer group—giving the most exclusive offers to your best customers.
Referral programs encourage existing customers to share your brand with their friends in exchange for loyalty points or rewards. That direct referral is highly influential—people are as much as 4x more likely to buy when referred by a friend.
Loyal customers are a powerful marketing asset. Incentivize customers to tell their friends about your store with a referral program to help you acquire more like-minded customers. You’ll tap into the potential of your customers’ networks (their friends, family or work colleagues), connecting you with consumers who are more likely to love your brand!
With a bit of planning and effort, a loyalty program augments the customer experience and leaves them feeling valued.
We know that our regulars are our most valuable customers. But do you know who they are? Could you send them an email? Or an SMS? To actually market to your most valuable customers, you need to know who their customers are, how much they’re spending, and how to reach them. A loyalty program offers an incentive for customers to self-identify at purchase, so you can collect this information.
If you’re collecting that data—that’s great! Use your top loyalty tiers or RFM segments to offer personalized offers to your highest value customers.
Powered by Cin7 and your e-commerce data, Marsello works seamlessly in-store and online to provide a true omnichannel customer experience.
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