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Loyalty Programs

8 Benefits of Having a Loyalty Program

Written by 
Brad Davis
November 20, 2022

If you’re interested in learning about the benefits of having a loyalty program, what you’re really asking is whether it will improve your business.

There’s plenty of ways in which a loyalty program will benefit your business, whether you own an independent coffee shop or represent a multinational software brand. When executed properly, rewards programs can help you boost slow seasons, build referrals, expand brand awareness, get an edge over your competitors and much, much more.

There’s no “one size fits all” approach to customer loyalty though. The most successful rewards programs are achieved by developing a solid loyalty marketing plan (we can help with this) that appeals to your customers’ needs and aligns with your branding.

Take the time to do this, and your business will be on track to reap these 8 key benefits of having a loyalty program.

1. Retain more customers

magnet pulling customers
Customer retention

Typically, most businesses’ motivation for rolling out a loyalty program is to keep customers coming back time and time again. By incentivising this behaviour through discounts, tailored rewards, skip-the-queue privileges and other perks, of course your existing customers are going to want to sign up!

But it also encourages what would have been one-time customers to become regulars, and this is where your business starts to build a larger customer base. Considering that two-thirds of consumers modify their spending to maximise loyalty benefits, there’s a lot of techniques you can employ to keep your loyal customers engaged.

2. Improve customers’ purchase frequency

trolley and a clock on blue background
Customers' purchase frequency

A good loyalty program doesn’t just encourage repeat purchases – it shortens the interval between these purchases, as the customer becomes increasingly committed to your brand.

This only happens by looking after them, of course, so your rewards need to be both appealing and easy enough to attain.

If your “Buy X, Get Y” model doesn’t seem to be working, try lessening the amount of “buy” or increasing the value of “get” until you find that sweet spot where customers are making purchases with you regularly.

3. Increase customers’ average order value

increase basket size
Increase customers' basket size

The other metric that coincides with FOV (frequency of visit) is AOV (average order value). This refers to how much a customer tends to spend in an average transaction.

To calculate this average, you simply add up the total dollar amount of the customer’s purchases in a given period, and then divide this number by the amount of transactions they made in that same period.

Ideally, a loyalty program should encourage more frequent visits while also encouraging a bigger basket. Not only are you holding onto these customers, but you’re obviously delivering a more than satisfactory brand experience as well.

4. Acquire new customers

dropbox referral program
Dropbox's referral program - Image Source: Dropbox

Gone are the days when loyalty programs were just a retention tool – they can actually help your business acquire new customers now as well. Monetary discounts and experiential rewards differentiate you from your competitors; especially if you offer a reward just for signing up.

An incentive for joining can help you build registrations up to three times faster than businesses that don’t have an upfront incentive, and by this point, half the battle is over.

Another good technique is to offer your existing loyalty program members additional points and rewards for referring their peers.Cloud-based file sharing and software service Dropbox did a fantastic job of this, offering an additional 500MB storage space to existing members who referred friends (the newly referred members also got 500MB extra space).

The proof is in the pudding – Dropbox rapidly expanded from this double-sided incentive approach (2.8 million direct referral invites in 18 months), and now 35% of all Dropbox signups come from the referral program.

5. Boost customers’ lifetime value

customer and staff making payment at POS

Customer lifetime value (CLV… we’re going big on the abbreviated terminologies today!) is any given customer’s total worth to your business over the entire period of the relationship.

Keep in mind that it can cost up to five times more to acquire a new customer than to retain an existing one. Also, the success rate of selling to an existing customer is 60-70%, compared to 5-20% for a new customer.

What does this mean? In the long term, businesses looking to drive growth are better off focusing on increasing the value of their existing customers; for a greater CLV.

Loyalty programs are a great way to increase the average customer’s lifetime value, through increased rewards and a heightened brand experience that shows you value their ongoing business.

6. Increased engagement and actionable insights through segmentation

recommended just for you
Personalized customer experience

When customers sign up to a digital rewards program, the platform can store a whole host of data points from every transaction and interaction they make, such as:

  • What products they purchase
  • How often they purchase them
  • What cross-sell or upsell items they tend to enjoy
  • Whether they prefer to shop with you online or in person
  • Whether they engage with your brand via social media, open your e-newsletters, take advantage of sales, and numerous other factors

As this information collects over time, the rewards platform is able to piece together an increasingly accurate customer profile. Customers can then be segmented into certain groups based on their profile, and sent more targeted offers.

The customers who prefer shopping online can receive free shipping, while your in-store shoppers can gain access to special pre-sale events and product launches, for example.

Your customers are treated to a highly personalised brand experience where everything is “just for them”, and the entire process is automated for efficiency. This is called personalisation, and it’s where we get things like “recommended products” and tailored sales follow-ups from.

7. More effective upselling and cross-selling

burger cross selling to meal

Personalisation allows more targeted upselling and cross-selling, so that you’re offering customers things they actually want, rather than assuming everyone will be enticed by the same offers.

This is where digital loyalty programs with sophisticated algorithms stand head and shoulders above generic loyalty programs, which cast a broad net over their entire customer base and hope to attract the largest portion possible.

Most customers don’t mind being upsold or cross-sold as long as the products actually cater for their needs and improve their experience with your brand. The better you get to know your customers, the more efficiently you can continue to please them.

8. Stronger brand with a loyal community

people helping to build tree
Loyal community

With all of the above points combined, you should find yourself with a highly effective loyalty program that constantly works behind the scenes to strengthen customers’ emotional connection to your brand.

This helps to build a community, which can be expanded into social media and other channels for a more wholesome and exciting customer loyalty experience. How far you go with it ultimately depends on your imagination, and your rewards program can even become the staple component that defines your brand messaging and core values.

The benefits of having a loyalty program are endless

Phone screen and computer screen with Stamp Me interfaces.

If you’re still on the fence about whether a loyalty program will benefit your business, why not try the free trial of Stamp Me’s digital loyalty app? It gives you an opportunity to explore the various features and functions that are available to your business and your customers, with no obligation.

Even once the trial is over, Stamp Me is a pay-as-you-go loyalty app and digital rewards platform for businesses of all shapes and sizes; whether you have multiple shops, an e-commerce store or all of the above!

Stamp Me revolutionizes the loyalty experience, merging the traditional "Buy X, Get Y" loyalty cards with a contemporary mobile app to enhance customer engagements. Trusted globally, it offers a seamless, intuitive platform where businesses can quickly launch and manage loyalty programs without any complex POS integrations. With a user-friendly design, collecting stamps becomes a delightful, simple task, supported by a 4.9 app store rating.

Graphic tile with text and icons.

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