What is a Customer Loyalty Programme?

Customer loyalty is lucrative. Gartner Group research found that 80% of future revenue will come from just 20% of existing customers. Meanwhile, attracting new customers will cost your company five times more than keeping an existing customer, according to Lee Resource Inc.

Statistics like these confirm, time and again, that looking after the cream of your customer base with a customer loyalty programme will work wonders for your bottom line.

Epsilon’s expertise and experience of customer loyalty programmes is unparalleled. We share more than 4 billion campaign messages every month with more than 600 million loyalty customers, on behalf of companies of all sizes.

Through our Epsilon PeopleCloud Loyalty platform, we ensure brands stay in touch with their customers’ unique preferences and purchases, so brands know what messages to share, when to share them, and what to offer to earn customers’ purchases to retain their loyalty.

What is Customer Loyalty?

Customer loyalty is the act of repeatedly choosing a company over its competitors, recommending that company, and engaging with it over time. And loyal customers are likely to pay a higher price for the service and products they love.

It follows that rewarding those devoted brand fans will further strengthen their feeling of allegiance. This will lead to an ongoing relationship that could deliver a healthy flow of sales for years. Perhaps decades. Even a lifetime.

A brand-aligned customer loyalty programme can achieve exactly this. By definition, loyalty programmes recognize and reward customers who buy or engage regularly. Typically, they will allow the signed-up customer to collect points on a card or app, which over time will lead to a reward – a discount, a free gift, or some kind of special treatment.

Customer loyalty programmes help brands identify their best customers and follow up on their purchases. The programme becomes a vehicle to deliver a better customer experience.

If a company adopts loyalty cards or a loyalty rewards app, it will be able to recognize the customer and follow their purchase behaviour. They can build profile data, allowing them to give their customers personalized attention, earning their loyalty and trust.

Customer Loyalty Programmes Power Personalization

So, customer loyalty programmes are about far more than simply offering deals and discounts. The best schemes will use the customer’s purchase history and customer-provided data to present participants with timely and relevant offers.

By using data, it’s possible to deliver truly personalized customer experiences.

For example, if a grocery customer repeatedly buys gluten-free products, discounts on a new range of gluten-free ready meals are very likely to be appreciated.

Offering free shipping or a special gift on a customer’s birthday adds a strong personal touch to the relationship for an online fashion brand.

Often, companies can grow their customer base and deliver even more compelling rewards by forming innovative partnerships with related businesses.

And loyalty programmes are increasingly about having fun. Marketers today love to talk about gamification. Creating a programme with loyalty points is a great way to gamify the customer experience.

For instance, a health and beauty brand programme might offer bonus points for specific activities, like recruiting new members or making a purchase, and provide a reward once enough points have been accrued.

Check out our "Personalizing The Loyalty Experience" ebook.

Loyalty Leads to Better Customer Retention

For most companies, the main objective of a customer loyalty programme is to keep hold of customers. Increasing customer retention by just 5% can increase a company’s profit by a massive 95%, according to Bain & Co. Another standout stat is that repeat customers spend 33% more than new customers.

That’s how impactful it is to keep your customers happy. Loyalty is a key factor for business growth.

Today, marketers understand that customers are hard to win. And they are even harder to retain. A great deal of effort goes into providing engaging customer experiences.

A loyalty programme provides a framework for managing and promoting that, as well as making a more personal connection to an individual customer.

It’s important to remember, that consumers are making purchasing decisions not just on price, but on shared values, shared interests and aspirations, and their overall experience of a brand.

Strong loyalty programmes can also generate customer referrals. In other words, if your customers enjoy the benefits of your customer loyalty programme, they’ll tell their work connections, friends and family about it. Programmes that encourage satisfied customers to publish reviews and ratings on websites and social media create authentic ambassadors for your brand too.

And there are cost benefits. It’s more cost-effective for your business to retain happy customers than it is to consistently lose and acquire new ones. A survey by More than Accountants found that 4 out of 5 companies agreed that retaining loyal customers is cheaper than acquiring new prospects. The study calculated that the value of a lost customer is US$243 internationally.

Email Customer Loyalty Campaigns with Muscle

Customer loyalty programmes give brands the chance to send emails to valued customers and make the content relevant. In B2B, food, fashion, health and beauty, travel, hospitality and many more sectors, targeted email campaigns can supercharge sales at key times during the year.

Email campaigns are likely to be far more successful - achieving high click-through rates and interaction - if there is a level of personalization. Loyalty programmes can do this because they generate lots of first-party customer data. This enables hyper-personalised emails, rather than generic emails that sit, unopened, in customers’ in-boxes.

Marketers do accept that loyalty programme customers probably aren’t checking a brand’s website frequently to see what offers and points are available. Members need to be alerted to great offers and experiences with well-timed loyalty programme emails - reminding them how much they have to gain by engaging with it.

The best email campaigns will give loyal customers deals that tie into seasonal events like money off beachwear in early summer or two-for-one on Easter bakeware.

No loyalty rewards programme is complete without the birthday rewards email. This is a tried and tested way to connect personally with high-spending customers and offer them a discount that’s just for them.

Which Brands Ace Customer Loyalty?

Starbucks truly shines when it comes to its customer loyalty programme. Possibly one of the most popular in the world, as of October 2021, the Starbucks Rewards programme had nearly 25 million members and represents 53% of the spending in their stores.

The much-admired programme allows customers to collect ‘stars’ when they buy coffee with the mobile app. Starbucks can build insights into customer behaviour from data collected, which helps it make perks more and more relevant, and communications ever more personalized. Famously, Starbucks saw a 26% increase in profit and 11% in total revenue when they introduced the loyalty programme in 2013.

The North Face’s Explore Pass customer loyalty programme is also impressive. Customers earn loyalty points every time they make a purchase or attend events, check-in at certain locations, or download the North Face app.

Pass holders can participate in member-only competitions and events, get early access to products, as well as free delivery on orders and a birthday gift. Like many customer loyalty programmes, the aim is to build a community of loyal brand fans. These people then engage closely with the company and forge a long-term relationship with it.

Brands that ace customer loyalty tend to be those offering programmes closely aligned to the values and interests of their target audience. It might be a leisure pursuit, family life, or well-being. They offer truly personalised rewards, of genuine value.

The smartest brands are careful to communicate with loyalty programme members enough, but not too much.

Customer Loyalty and ESG Goals

To truly drive loyalty, brands need to identify with their customers on an emotional level. This is why more and more companies are weaving Environmental, Social, and Governance (ESG) elements into their customer loyalty programmes.

Following the COVID-19 pandemic, 40% of the general public say they are more likely to be actively involved in social issues, according to Deloitte’s #GetOutInFront research report. Many consumers are adapting their buying patterns and aligning with companies addressing carbon footprint, and social impact. As the world enters an age of growing activism, the research shows that consumers expect businesses to step up, especially when it comes to issues of CO2 emissions and protecting the environment.

Customer loyalty programmes are well-positioned to act as a framework for this. Eco-friendliness can be factored into loyalty, with points rewarded for recycling and re-use. Green customer loyalty programmes are on the rise in the fashion, beauty, and travel sectors. These deliver powerful, human experiences. They aim to build emotional loyalty and brand advocacy while addressing climate change at the same time.

A good example is Etihad Airways’ customer loyalty programme. The airline has updated its Etihad Guests rewards programme with options to support sustainability and reduce carbon emissions. This demonstrates that any industry can have a green customer loyalty programme.

Digital Tools Enhancing Loyalty Programmes

Whereas customer loyalty programmes once relied solely on physical cards, today’s brands are increasingly thinking mobile-first and contactless when creating and growing loyalty.

Loyalty programme apps are easy to download, and customers enjoy the convenience of having all their points and rewards data visible, on their smartphones. That said, many brands have retained plastic cards to be used alongside their loyalty apps.

Technology is advancing all the time. Today brands of any size can bring enterprise-level loyalty programmes to market with ease and speed, thanks to the latest digital platforms and cloud-based software.

They can also cost-effectively leverage customer loyalty data, to make their marketing ever more personalized, engaging and relevant.

Customer Loyalty Programmes in a Nutshell

Customer loyalty programmes come is various shapes and sizes, but they all aim to earn the loyalty and trust of customers by:

• Recognizing and rewarding customers who buy or engage regularly
• Enabling a signed-up customer to collect points on a card or app
• Over time this will lead to a reward – a discount, a free gift, or some kind of special treatment.

By investing in a high-quality customer loyalty programme, brands are able to identify their best customers, build profile data and offer customer-pleasing personalised experiences.

Considering Your Own Loyalty Programme?

Now that you have a better understanding of what a Loyalty Programme is, how it can help you retain loyal customers, and how it can benefit your business, what should you do next?

Check out our comprehensive "Loyalty Programme Guide" by clicking the link below. With this comprehensive guide, you'll learn everything you need to know to start, grow, and measure your customer loyalty scheme.

Keep Learning About Loyalty Programmes

• Reasons to Start a Customer Loyalty Programme
• How to Get Customer to Sign up for a Loyalty Programme
• How to Choose the Right Loyalty Programme Software

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