Do Businesses Frequently Reward Loyal Customers?, Life in canada

Estimated reading time: 6 minutes

Loyal customers are where the money is at.

Explore the value of loyal customers and the impact of loyalty programs. Learn how rewarding loyalty can boost your brand’s revenue and customer satisfaction.

Any brand spending $$$$…$ on advertising to attract constant new customers without thinking about the loyal ones is doing it wrong.

Not to say you shouldn’t focus on new customers, but it’s a proven fact that loyal customers generate more money. 

The latest stats say they generate 12-18% more revenue growth annually, with the loyalty scheme market worth more than $4.43 billion. And they’re more likely to spend more, with some studies proving loyal customers spend 67% more than new customers.

The issue is that 88% of consumers think it takes three or more purchases to become loyal to a brand. It’s not exactly easy.

So the question is, are brands rewarding these loyal customers? Read on to find out.

Customer Loyalty Programs

The perspective of loyalty programs is not a recent one. Since the 19th century, loyalty programs have been common.

Early on, it was to entertain customers, with trade stamps and punch cards handed out to those who made returning purchases.

Advancements in technology have transformed the programs completely. Now, most of them work using QR codes and automated systems. 

Some recent data published by Bond Brand Loyalty indicated that out of all customers, 78% would stick with a brand if they had a loyalty program.

They’re most common in retail, hospitality, and eCommerce. For example, Starbucks now has over 54 million active users participating in their loyalty program, generating the company $$$$…$. 

The money customers must spend to get a free coffee on their loyalty card is such a money maker—but to the customer, it’s fun.

Why Customer Loyalty Matters

Loyal customers are the most valuable because they account for most, if not all, of a company’s profits.

Bain & Company’s study states that increasing customer retention by even 5% can increase profits by as high as 95%. And it makes sense for brands to do them – they’re ultra hands-off for the business, with the best online casinos for VIP programs, for example, rewarding instantly.

Loyal customers tend to:

• Spend more: Marketers love it when a loyal customer base is nurtured! They spend, spend, and spend.
• Promote the brand: Relatives and friends become a marketing channel because loyal customers are likelier to recommend and promote the brand.
• Provide valuable feedback: Often, reliable customers are the best source of business, giving brands ideas that improve the business processes.

The companies that prioritize loyalty are winning.

Are Businesses Rewarding Customers Effectively?

Looking at personalization, there are a vast number of businesses that have loyalty programs, but not all of them are effective.

Some are ineffective in skewing or increasing customer behavior towards the company.

Why do certain businesses fail to do that?

The answer can be found in the following:

• Customization and personalization: McKinsey & Company report in 2021 found that 71% of customers expect a more tailored interaction. Programs that offer generic rewards like discount percentages across various scaled customers are bound to be less effective.
• Ease of use: Customers might not want to participate in complex loyalty programs. Having customers memorize an ample amount of codes or demanding they go through a complicated and lengthy redemption process won’t work.
• Value creation: A rewards program must generate higher returns than the costs incurred from the program.
• A general survey in 2023 proved that 84% of the survey participants would more often than not become disloyal if the amount they can win doesn’t come close to the money they’ve spent.

Industries That Excel in Loyalty Programs

Some industries have perfected the skill of giving reward benefits to customers who remain loyal to the business. Some of the instances include:

• Airlines: Programs that are frequently called ‘frequent flyer programs’ are best epitomized by Delta SkyMiles or Emirates Skywards. The numerous miles a customer travels get converted into rewards that can be redeemed in light of new flights, upgrades, and other advantages.
• Retail: Brands like Sephora and Target have created a proper working system for their audiences’ loyalty programs. The beauty insider program by Sephora presents several awards with varying levels of rewards and even age ranges, from birthday gifts to getting first access to the latest stock.
• Food and beverage: Major restaurants like McDonald’s, Chick-fil-A, and more use apps to accrue incentives for repeated visits.

Strategies for Businesses to Enhance Rewards

There are strategies businesses can use to ensure the customer comes first. Here are a few proven approaches:

1. Personalized experiences: Using information collected to determine what the customers like and rewarding them. For example, Spotify keeps users satisfied by giving them curated playlists and discounts for premium.
2. Gamification: Features like levels and challenges could be added to gamify some programs. Nike is good for this. The app encourages members to run specific distances and aims to unlock community achievements in Nike’s Run Club App.
3. Omnichannel integration: Enjoy a consistent experience on both the offline and online channels. For example, customers who purchase pizza from the outlet, from an app, or a drive-thru are rewarded through Starbucks rewards.
4. Sustainability incentives: Environmentally friendly options are, most of the time, the winning choice since consumers identify with such brands.
5. Exclusive benefits: Allow customers to restrict access to a certain product, allow discounts for specific members, or offer them VIP invites.

Not every brand necessarily uses a loyalty program, but the ones using them are winning. They’re essential for keeping customers coming back and spending more!

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