5 Reasons Customer Loyalty Programs Are Essential in Retail

Retailers understand the challenges that come with attracting and ultimately retaining customers—especially in today’s competitive climate. That’s why customer loyalty programs are as crucial as ever when it comes to creating a meaningful connection with your customers and growing your business.

Let’s explore five key reasons customer loyalty programs are essential for retail companies that want to succeed.

1. Customer Loyalty Programs Help You Hold Onto Customers

One of the primary purposes of a customer loyalty program is to keep existing customers interested in your business and coming back for more.

Increasing customer retention is a worthwhile pursuit, because even just a 5 percent increase in customer retention can lead to a much larger increase in company revenue—anywhere between 25-95 percent.

Source: HubSpot

The retail industry generally experiences lower customer retention rates than most other industries, making this a challenge retailers should pay special attention to. A customer loyalty program can encourage customers to remain loyal to your brand and shop with you again rather than going to your competitors.

2. They Make for a More Personalized Shopping Experience

Customers today want a personalized shopping experience, and customer loyalty programs help you deliver on that expectation.

Retailers have been finding ways to leverage data for years now, but from the customer’s standpoint, retail marketing campaigns still often feel generic rather than tailored to them. Customer loyalty programs introduce a more personal connection between retailers and their customers because they provide data that helps retailers get to know their customers. 

For example, you can offer customers recommendations based on previous purchases. Research shows that 63 percent of consumers are interested in these customized recommendations. Some customers may even be more willing to share their personal data if they know they’ll enjoy a more tailored user experience in return.

3. They Turn Customers into Enthusiastic Brand Advocates

Happy and engaged customers are not only more likely to remain loyal, but they’re also more likely to refer family and friends to your business. In this way, customer loyalty programs play a part in your customer acquisition strategy, in addition to your customer retention strategy. 

Word-of-mouth marketing can play a major role in bringing in new customers. Research shows that consumers rely on recommendations from their family and friends when making purchasing decisions. One study found that 19 percent of all purchases are directly motivated by recommendations, and far more purchases are indirectly influenced by word-of-mouth marketing.

Some brands may choose to create a referral program that rewards customers for recommending your company—specific products or as a whole—to friends and family. Even without a customer referral program, though, engaging more customers with your brand through a loyalty program means that you can expect referrals to happen naturally. 

4. They Boost Customer Spending

Customers who are loyalty members with your company are likely to shop at your store more frequently than non-members—and spend more when they do.

One study found that customers who have subscribed to a free loyalty program are 30 percent more likely to increase their spending with that brand. Even more impressive, members of paid loyalty programs are 60 percent more likely to escalate their spending. 

Loyalty rewards play a major part in getting customers to return for another great shopping experience. Even if a customer comes in to pick up a free item or take advantage of an exclusive discount, they’re likely to shop around while they’re in the store or on your website.

And regardless of the reason they came in, loyalty members often spend more in a single transaction than other customers. You can encourage this behavior further by taking advantage of upselling and cross-selling opportunities—a win-win for your business and for your customers.

5. They Provide Valuable Insights to Help You Understand Your Customers

Finally, the data you gather through your customer loyalty program provides your company with a wealth of insights, empowering you to better understand your customers and grow your business.

Data regarding customers’ demographics, location, interests, and more can all inform better business decisions. In addition to collecting basic information from customers when they sign up for your loyalty program, you can also provide more opportunities for customers to volunteer information. For example, customers could fill out a personal style profile to receive recommendations. You could also offer loyalty points or reward incentives in exchange for filling out a survey. 

However customers choose to share their information, use it to create a more personalized experience for them and appeal to your customer base more broadly as your company evolves. In many ways, your data-capture rate and your loyalty program’s success are inextricably tied together.

Grow Your Retail Business with the Right Customer Loyalty Solutions

Customer loyalty programs can be incredibly beneficial—but only with the right loyalty strategy, implementation, and technology to power your efforts. 

Baesman is a collaborative, marketing-first partner that builds custom loyalty solutions tailored to each unique customer. We understand the retail space and know how to leverage a combination of marketing efforts—from personalized direct mail to timely digital offers and captivating in-store signage—to connect with customers and encourage long-term loyalty.