Winning new customers costs five to ten times more than keeping existing ones*. And it's not just expensive – there's always the risk they'll buy once and never come back. That makes loyalty programmes an important tool for turning one-off buyers into regulars and growing your business through stronger customer relationships.
What do consumers think of loyalty programmes?
Use of loyalty programs by country
Source: KPMG (2020)
A new survey shows that loyalty programmes are widely accepted and consumers love collecting points for perks (such as discount coupons, gift cards or tickets) or freebies.
According to a KPMG study, the penetration rate of loyalty programmes in Germany is around 45%. According to another survey by Accenture, 81% of respondents said they already actively take part in at least one loyalty programme. What's more, when choosing between two comparable companies, over 60 percent of consumers pick the one with a loyalty programme. Over 90 percent of all companies now also have some kind of loyalty programme, and participation keeps rising.
Is it worth running a loyalty programme?
A loyalty programme helps you grow sales steadily. Around half of loyalty club members said they shop with the company more often than before. According to an Accenture report, businesses can expect annual revenue from members of their loyalty programme to be 12 to 18 percent higher than from non-members. Existing, loyal customers are even willing to spend at least 33 percent more than new customers. Another report shows that increasing customer retention in e-commerce by around 5 percent can raise a company's profitability by up to 75 percent.
Loyalty programmes are a proven, relatively inexpensive way to build brand loyalty, strengthen how customers identify with your brand and make them more likely to buy.
According to the KPMG study, the following behaviour can be observed when a customer is loyal to a brand:
- 86 percent will recommend the brand to friends and family
- 66 percent are likely to write a positive review after a good experience
- 46 percent stay loyal to a brand even after a bad experience
So you need strategies to keep your customers – and ultimately turn them into ambassadors for your brand.
Digital loyalty reward programmes are currently the best and easiest way to look after, reward and retain customers. With or without a POS integration, with or without an existing CRM: modern loyalty systems offer tailored solutions that are easy to set up. And because your programme is 100% digital, you can collect and analyse customer data with every sale.
Some tips for designing an effective loyalty programme:
1. Set your goals. What do you want to achieve with your loyalty programme?
There are countless reasons to offer a loyalty programme. But your exact goal shapes many decisions – which software provider you need, whether to focus on digital or physical cards, and how to design your rewards.
Here is a selection of the most important goals you can pursue with your loyalty strategy:
- Increase the average basket value
- Shorten the time between two purchases
- Extend customer lifetime
- Bridge days/times with weak sales
- Acquire new customers
A well-designed loyalty programme can also help you win more new customers. Use coupon codes to make signing up easier, or turn your loyal customers into ambassadors for your brand.
Another effective way to acquire customers is “refer a friend” programmes. A very successful one is offered by the cashback platform Rakuten in the United States, where users can get up to USD 25 credited to their account as a loyalty reward as soon as they bring in a new user who spends at least USD 30 via the platform.
2. Focus on digital customer cards
Digital customer cards are taking off. Many shops used to rely on paper or plastic stamp cards; today, lots of consumers are happy to go contactless and paperless.
The digital customer account and the customer app have largely replaced the plastic card in customers' preferences. Younger customers in particular use such customer apps (80 percent), but so does every second customer over 50. Make it as easy as possible for your customers to collect points.
3. Allow payments with a rechargeable customer card
Paying with a digital customer card or a loyalty app is another major loyalty trend – and surveys show it's high on many companies' investment plans for the coming years.
4. Collect and analyse customer data intelligently
Another key to success is collecting customer data and being able to act on what you learn. The crucial point is that, given the continuing uncertainty about the future, businesses need to act creatively and with agility and use their customer data in a targeted way in order to respond quickly to customers' changing needs and preferences. Anyone who can win people over with a great loyalty programme has an ace up their sleeve in the battle for profit and customers.
5. Offer great experiences instead of just discounts
Successful loyalty programmes don't just offer attractive rewards – they build real emotional bonds and positive feelings. Beyond rewards and discounts, customers often look for something unique, and stay loyal to brands that give them that feeling through one-of-a-kind experiences.
Hotels, restaurants, spas and leisure and experience providers in particular now have the chance to modernize and digitize their loyalty programmes and focus them on experiences and other emotional rewards.
6. Offer rewards for every customer interaction
To get as many customers as possible excited about your loyalty programme, it's a good idea to offer a reward for every interaction with your company, e.g. when the customer shops in your online shop, downloads the app or creates a customer account, shows their card/customer ID at checkout, signs up for the newsletter or follows you on social media. That way you make sure customers feel valued and shop with you regularly.
7. Address your customers personally
Personalized communication does far more than a classic points system – it builds long-term relationships. In the end, a good rapport is what makes customers choose your programme and your offers. And most customers expect a personalized experience in exchange for their data.
8. Collect and analyse customer data intelligently
Another key to success is owning customer data and being able to act on what you learn. With so much uncertainty about the future, businesses need to be creative and agile and use their customer data to respond quickly to changing needs and preferences. Anyone who can win people over with a great loyalty programme has an ace up their sleeve in the battle for profit and customers.
Any downsides? For many businesses, the biggest hurdles are high costs, ongoing maintenance and a complicated setup that often needs extra software. Make sure you stay in full control of costs – for example by paying a fixed monthly fee instead of commission, however successful your programme becomes.
Ideally, the system shouldn't need any extra hardware either. A good loyalty system is easy to set up and use, and works independently of your checkout system, without expensive POS or CRM systems.
gurado makes it easy for any business owner to run a powerful customer card system. The browser and mobile apps let you scan customer cards, top them up, redeem coupons or gift cards and check points balances.
If you want a more advanced loyalty programme, gurado can also be integrated with many existing POS systems through its open API.
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Since 2013, our team has been helping businesses of all sizes and in all industries build customer loyalty with gift cards, tickets, coupons and customer cards, and can tell you in no time which module is right for your company. Click here if you'd like to arrange a consultation.
We'll be publishing more articles on loyalty on the gurado blog to help you run your loyalty programme efficiently and cost-effectively.
Sources:
KPMG (2020)- The truth about customer loyalty. The world’s consumers reveal what keeps them coming back
Accenture (June 2016) - Members of Customer Loyalty Programs Generate Significantly More Revenue for Retailers Than Do Non-Members, Accenture Research Finds
Zukunft des Einkaufens - Loyalty Trends Report 2020 – Kundenbindung heute und übermorgen
Invesp (2020) - The Importance of Customer Loyalty Programs – Statistics and Trends
Creative Style (2020) - Kunden mit einem Treueprogramm an seinen Onlineshop binden
