Customer loyalty benefits and loyalty rewards schemes

Updated 30 September 2022

While attracting new customers is an important part of improving brand awareness, existing customer retention is equally so. Offering incentives for loyal customers to continue to engage with a business can help to maintain a constant revenue stream. Learning more about customer loyalty benefits can give you a better understanding of how to improve customer retention and increase revenue. In this article, we explain why customer loyalty is important, discuss loyalty programmes and their benefits and outline the advantages of a rewards scheme mobile app.

What are customer loyalty benefits?

Customer loyalty benefits both customers and businesses. You can reward customer loyalty with discount vouchers or special offers. These can be in the form of redeemable points or introductory offers on new product lines. They benefit customers by making them feel valued. Such reward schemes benefit businesses by encouraging customers to return and spend money, which improves retention. They also help with new customer acquisition and provide opportunities to market products, services or brands in a targeted way.

Related: Incentive programme benefits: advantages and examples

Why is customer loyalty important?

While companies often focus their marketing efforts on acquiring new customers, encouraging existing customers to return is often a more effective way to promote brand awareness and increase sales. Customer loyalty is a major factor in marketing and investment decisions.

Customers often prioritise a shop where they can accumulate points and rewards. Even if the price is a fraction higher than elsewhere, they may consider the rewards more valuable than a slightly lower price tag. Some customers may even switch to a brand with a worthwhile loyalty programme. A great loyalty scheme can increase both the brand's value and the customers' lifetime value.

Types of loyalty schemes

The three most common types of customer loyalty programmes include:

  • Points: Most customer loyalty schemes work on a points system. Customers accumulate points every time they spend money in a shop and they can redeem them at the point of sale.

  • Vouchers: Some businesses offer discount vouchers for specific items or a percentage discount if customers spend a certain amount of money.

  • Referral rewards: Businesses sometimes offer rewards to both a loyal customer who refers someone and a new customer. This usually includes points for the loyal customer and a discount on the new customer's first purchase.

Although loyalty programmes benefit loyal customers, knowledge of the scheme may also attract new consumers. A comprehensive loyalty scheme enables modern marketing techniques. Since many consumers trust their peers more than advertising and marketing campaigns, social media can be a powerful influencer. Social media can turn loyal customers into promoters of a brand or business. In addition to recommending it to their friends, happy customers may endorse it on social media. Therefore, a loyalty programme can be a free marketing tool.

Benefits of customer loyalty programmes

Implementing an effective customer rewards scheme provides benefits for both customers and businesses. It helps businesses to do the following:

Increase customer spending

A scheme that rewards loyal customers can help them feel that the company appreciates and values their custom. The customer also feels like they're saving money. This may encourage them to spend more and continue to support the business.

Enhance customer experience

The customer experience encompasses everything from browsing and purchasing products to receiving after-sales service. A loyalty scheme produces the expectation of earning a reward and provides satisfaction on receiving it. Thus, it helps to create a positive customer experience.

Related: Happy customers: tips for improving loyalty and satisfaction

Improve customer relationships

A customer loyalty scheme shows customers that the business values them. This makes them feel important. It also helps to solidify their relationship with the business.

Increase customer retention

Satisfied customers become loyal customers, and they're likely to spend more money than new customers. They're also more likely to remain loyal to a business or brand that rewards them for their loyalty. Repeat customers cost nothing, whereas acquiring new customers often requires an investment in advertising.

Reduce pricing competition

Reducing prices to match or beat those of competitors' can impact profits. An effective loyalty programme can help to eliminate the need for price cutting. Loyal customers are less likely to conduct price comparisons with competitors.

Related: Sustainable competitive advantage: with examples and steps

Access customer data

When customers sign up for loyalty programmes, they typically provide personal details. This enables you to source their data without breaching data privacy regulations. This data is helpful when creating promotional material for certain demographics or preferences. A cleverly designed loyalty scheme can also reveal shoppers' trends, which can help you to target marketing strategies. It can also provide information about a customer's order history, online shopping activity or in-store purchases, which enables you to personalise emails for individual customers.

Create mailing lists

You can incorporate customer data into a mailing list for emails or promotional material like brochures or catalogues. Keeping customers informed about new products, services or special deals reminds them of the brand. This may encourage them to remain loyal to it.

Improve customer engagement

A loyalty scheme is helpful in improving customer engagement. Loyal customers are more receptive to emails and other marketing materials. They're also more likely to provide feedback.

Receive valuable feedback

Loyal customers usually respond to emailed surveys or questionnaires. Their responses can provide valuable feedback that you can use to develop more effective marketing strategies. Their feedback may also indicate possible improvements you can make to customer services, in-store facilities or product displays.

Encourage shopping in traditionally slow periods

Some industries may experience days or seasons when sales decline. A scheme that rewards loyal customers can help to increase business during these slow periods. Offering rewards with an expiry date may encourage customers to shop at a time when they normally may not do so.

Acquire new customers

Loyal customers can persuade their friends and family members to patronise a business. By praising the rewards they receive through a loyalty scheme, they may influence new customers to become regular customers. This is particularly true if you offer referral incentives, such as extra points for referrals and introductory discounts or special offers for new customers.

Increase profits

Rewarding loyal customers can help to maintain a constant stream of revenue. Loyal customers who regularly receive rewards or discount vouchers may feel more inclined to continue purchasing a brand. They may also feel inclined to buy more than they would if there were no such scheme to reward them.

Reduce costs

Advertising campaigns to attract new customers can be costly. These costs can be substantial if you employ an ad agency or produce printed promotional material. Focusing on the data you gather through a loyalty scheme is more cost-effective because you can email your promotional material to your entire customer base.

Choosing a loyal customer rewards scheme

Implementing a scheme that rewards loyal customers can be a simple task. Decide what you want to achieve with the scheme and what customers might expect from it. Then, decide if you want a system that uses printed loyalty cards and vouchers or a mobile phone app. Choosing a loyalty marketing partner can provide you with access to the necessary technology for developing and launching your rewards programme. They can help you to create a range of loyalty rewards. They can also help you to determine the optimum combination of promotional partners.

Rewards scheme mobile apps

With the proliferation of loyalty programmes, many app developers specialise in creating customised and branded mobile phone apps. These monitor spending and accumulated points and can automatically generate rewards vouchers. They can also generate discount vouchers for specific products to encourage repeat purchases or inspire customers to try a new product. It's also possible for these apps to utilise geolocation and Wi-Fi capabilities. This means a customer driving or walking past a shop may receive a push notification about a special offer or a reminder that a voucher is due to expire.

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