Customer loyalty programmes are used across a wide range of sectors to retain and reward customers, and also to help organisations improve their business performance.
In a world of huge consumer choice, attracting customers to sign up to a loyalty scheme can help a company become the first point of call in people's purchase journey, and generate return visits.
Customer loyalty programmes help organisations gather and leverage customer data, giving them a head start in shaping their proposition and bringing new products and services to market.
Essentially, those launching a customer loyalty programme should understand they are doing so for multiple reasons – not least to elevate their service offering for the end consumer and because there are clear benefits from an operational, marketing, and brand-building perspective for the organisation.
Here at Epsilon, we’ve helped some of the most well-known brands launch their own custom loyalty programmes that dramatically impacted their business’s bottom line.
Now, we want to share with you the top ten reasons why every growth-orientated organisation should launch a customer loyalty programme.
1. Loyalty Programmes Provide a Chance to Reward Top Customers
A good customer loyalty scheme will reward your best customers for their faithfulness to your brand.
Ultimately, when you have consumers who want to spend money regularly with you, good customer service dictates you should recognise this loyalty.
Loyalty schemes can put all the foundations in place to give your business the ability to recognise and reward individuals accordingly.
Rewarding your best customers for their loyalty can cement or formalise your relationship with them and encourage them to spend more over time.
2. Reduce Your Customer Cost-of-Acquisition
Talk to any brand or commercial enterprise and they will tell you it is more expensive to recruit new customers than to retain existing ones. Although it is difficult to put an exact figure on it, the general rule of thumb is that in marketing, the cost of acquisition is five times greater than customer retention.
For a growing organisation, it is – of course – essential to bring in new customers, but you should realise the significant commercial benefits of looking after the audience you already have.
Having a customer loyalty programme gives you a chance to access and communicate with your existing consumer base and, therefore, trigger repeat spending that boosts customer lifetime value.
3. Customer Loyalty Programmes Boost the Customer Experience
The feeling a customer has about a brand they interact with – otherwise known as the customer experience (CX) – is a modern-day focus area for many consumer-focused organisations looking to stand out in a world where products and services can be bought with the click of a button or swipe of a screen.
When used appropriately and proactively, a customer loyalty programme can support the overall CX. Sending members tailored messaging at the right time, or simply recognising their loyalty with a reward, discount or another incentive, builds a positive association with the brand in question.
Research from business analyst group Forrester suggests good CX is crucial because customers are 2.4 times more likely to stay with a company delivering good CX, and they are 2.7 times more likely to spend more and 10 times more likely to recommend the brand in question.
4. Customer Loyalty Schemes Enable Data Capture
Talking at the Retail Technology Show in London, UK, on 27 April 2022, former Sainsbury’s CEO and now New Look chairman, Mike Coupe, told the audience his greatest achievement at the supermarket chain he led for six years was to acquire loyalty scheme provider Nectar.
He referenced the accompanying customer data as a huge prize from the deal, giving the retailer a chance to know customers better and reward their loyalty. The scheme gives an in-depth insight into how people shop, Is Your Marketing Team Prepared for the Death of Third-Party Cookies?
6. Customers Want Personalised Relationships with Brands
As discussed, a customer loyalty programme enables organisations to get closer to their audience and be more tailored in their marketing activity. In 2018 Virgin started the process of revamping its marketing to bring multiple loyalty schemes under its banner together, following customer feedback.
This is not just good for the business, it’s what customers are looking for from brands – there is an expectation of value exchange. Consumers are increasingly aware of the value of their data and expect to be rewarded with a personalised experience from a brand when they sign up for loyalty schemes.
Loyalty schemes allow organisations to monitor a member’s purchases, and with this information, they can market to them replacement items at a suitable time and suggest related product ranges that are more likely to resonate.
Discounts and incentives based on an individual’s buying history are more likely to be redeemed than broad-brush marketing offers, and loyalty programmes provide a fast-track route to enabling such a service.
Learn more about personalisation:
7. Customer Loyalty Schemes Provide a Competitive Edge
Customer loyalty schemes can provide you with a distinct advantage over your rivals.
The early success of the Clubcard scheme, for example, helped UK grocer Tesco increase its market share and develop an understanding of customers that – at the time – was unparalleled in the UK supermarket industry.
In his 2012 book, Management in 10 words, the former CEO of Tesco, Sir Terry Leahy, explained how “sales surged ahead” in the months following Clubcard’s launch in 1995.
Comparing weekly sales growth against the industry average at the time, Leahy – who was marketing director at the time – said one or two per cent on either side of the average was the norm for a mature industry like retailing, and anything more was unusual.
He added: “That morning, we were 11 per cent ahead. I knew at that moment something had changed in the industry forever, and my life along with it.”
8. A Loyalty Programme Will Help You Keep up With Your Rivals
Just because your competitor has a customer loyalty programme, that does not mean you can’t too – in fact, it can help you reduce the gap between you and them.
Sainsbury's, Morrisons, and Co-op Food have all launched their loyalty schemes in the wake of Tesco's success – proving you can learn from and replicate parts of your rivals’ strategy to help you compete with them.
Superdrug launched its Beautycard scheme in 2011 following health and beauty rival Boots’ long-running success with its Advantage Card and had accrued one million users within a month. Seven years later active users totalled 12 million and that figure continues to grow, which shows how member numbers and customer data can be accrued quickly.
Being slow to launch a customer loyalty scheme is better than not having one at all.
9. Community is Important to Customers
Consumers are looking for communities and groups of people with similar interests, and they want to feel part of something – and loyalty programmes can help facilitate this.
Be it the Hobbycraft Club, Sweaty Betty’s Insiders or Neal’s Yard Remedies’ Feel Good programme, loyalty schemes can allow brands to distribute VIP invites to events, send exclusive offers and group updates that foster that feeling of community, and drive brand affiliation and potentially encourage greater brand advocacy.
10. Customers are Always Changing Their Behaviour
Customer behaviour does not remain the same for any substantial period and launching a loyalty programme will enable you to stay relevant and in tune with your audience’s preferences.
This is particularly crucial in a world post-Covid-19. Consumer behaviour has shifted, for example, towards more digital interactions with brands, greater demand for more environmentally-friendly services and products, and stronger connections with local communities.
These trends, which will continue to evolve, can be closely monitored with a loyalty scheme – which you can also use to engage with your consumers accordingly.
Ready to Start Your Customer Loyalty Programme?
These ten reasons should provide enough justification for deciding to invest in and find partners that can help you build your scheme. It is difficult to argue against developing a customer loyalty programme considering the following:
- Consumers are looking for the benefits a customer loyalty programme can bring
- A customer loyalty scheme is a source of business-critical information
- The rules of consumer engagement online continue to change and growing your first-party data can safeguard you
- From Tesco to Boots to Virgin. It is no coincidence that market leaders across multiple sectors run customer loyalty programmes.
If you’re a consumer-facing organisation, launching a customer loyalty scheme is a fast route to understanding and adapting to the audience you are trying to serve.
Reach out to Epsilon when you're ready to begin your own Customer Loyalty Programme.
In the meantime, check out the articles below to learn more about loyalty programmes or click the link below to download the Ultimate Guide to Loyalty Programmes.
Learn More about Loyalty Programmes
- What is a Loyalty Programme?
- How Much Does a Loyalty Programme Cost to Implement?
- How to Measure the Success of a Loyalty Programme?