Customer Retention and Loyalty Programs
It costs five times more to acquire a new customer than sell to an existing one. Therefore, Customer Retention and Loyalty are essential for any business. Keeping your customers happy and engaged reduces the chances of leaving for a competitor. And with a loyalty program in place, you can encourage customer loyalty and increase customer spending over time.
Let’s take a deep dive:
Table of Contents
What is Customer Retention?
Customer Retention refers to the rate at which customers stay with a business for a measurable amount of time. It includes the act of reselling and upselling to your current customers. Many times, customer retention is used to describe the actions taken by a company to keep its customers. Your customer retention rate can be improved by providing high-quality customer service and offering loyalty programs to reward customers for their patronage.
Why is Customer Retention so Important?
You need to fight customer turnover, also known as the “churn rate”. The loss of customers or churn, can kill a business’ prospects and potential for growth. If you keep more customers, you need fewer customers overall, plus you reduce costs of trying to constantly attract new customers. Your focus should be on keeping customers as long as possible to drive the customer lifetime value higher. Toptal has a comprehensive article that highlights the critical importance of customer retention.
Essential Reasons for Retaining Customers
1) It is more expensive to attract new customers. It takes time and money to identify potential new customers, develop new customer relationships, and convert them into paying customers.
2) Customer retention is a critical factor in achieving long-term success. Repeat sales from current customers come at a much lower cost, thus the profit margin is much higher. This results in the long-term profitability and ongoing success of a business.
3) Loyal customers are more likely to recommend a company to their friends and family, known as word-of-mouth referrals. These referrals decrease your customer acquisition costs. At the same time, these loyalists are also more likely to return for future purchases.
4) Finally, customer retention can help boost profits. Repeat customers are often more likely to spend more money than new customers as they know your products, services and your team members. A study by Echo for American Express indicated the loyal customers are willing to spend 13% more, on average. Long-term customers likely will also return more frequently.
5) The impact of improving retention can have a significant impact. Bain Capital has long driven home their theory on the impact of customer retention. Bain believes that by increasing retention by as little as 5%, profits can be boosted by as much as 95%.
Ways to retain Customers
There are several different ways to retain customers. Various tools enable businesses to keep more customers. The best approach depends on the type of business and its customer base. There are different approaches for a B2B vs. a B2C company.
Some companies focus on customer service, while others offer programs to loyal customers or personalized offers. The most important thing is to find what works best for your company and then put in the effort to retain your customers. A customized loyalty program can provide that benefit to reward customers, and just as significantly, it can help keep them engaged!
What is a Loyalty Program?
In essence, loyalty programs are a way for businesses to reward customers for their Loyalty. Customers earn points for every purchase they make as some programs track based on the spend amount. Some programs provide rewards based on the number of visits. Customers can then redeem these points for rewards such as a percentage discount, a gift card or store credit for a future purchase, a free gift, or even cashback.
Loyalty programs can be a great way to attract and keep customers. After all, who doesn’t love getting rewarded for spending money? Additionally, loyalty programs can help businesses learn more about their customers’ buying habits, which can help with marketing and product development.
Essential features of a successful Loyalty Program
1) Make sure the rewards you offer are desirable to your customers.
2) Make sure the program is easy to use. Customers should be able to track their points balance easily. They should be able to receive rewards hassle-free.
3) Make sure that the program is well-promoted so that customers know it and take advantage of the benefits.
Tips for a Successful Loyalty Program
A) Keep it simple. Customers don’t want to have to jump through hoops to get rewards. Make your loyalty program easy to understand and use.
B) Offer something of value. Customers should feel like they’re getting something valuable in return for their participation in the loyalty program. This could be special discounts, points for rewards redemption, or other special privileges. Make it exclusive so these benefits are not available to all, only to the select few who have been invited and have joined.
C) Make it personal. Customers appreciate when companies take the time to learn their preferences and offer them personalized deals and recommendations.
D) Communicate regularly. Let customers know about new offers, changes to the loyalty program, and other newsworthy updates such as special events, new products or new services. In other words, keep them engaged and motivated to continue participating.
E) Consider adding a JOIN Reward to entice customers to join. This can be a reward that can be instant and used on their initial purchase, or you can send the Join Reward after, so that it is available to get them back in. Both approaches can be effective.
F) Create a multi-tier rewards program so that the customer is rewarded along the way to larger gifts or prizes. An example is a three tier rewards program: a customer is rewarded for their purchases at the $100 spend level with a $10 gift card, at the $200 spend level, they receive a $15 gift card and once they reach the $300 spend level, they receive a $25 gift card. The program then restarts all over again. This approach keeps customers engaged for the next higher reward.
These are just a few of the customer retention tactics and techniques used by Mobile High 5.
Conclusion – Loyalty Programs help retain Customers
Loyalty programs are a great way to show your customers how much you appreciate them. You can encourage customers to return to your business and keep coming back for more by offering loyalty rewards.
We offer a variety of Loyalty Programs.
Call us at (484) 325-5725 to chat about how our services can help you grow revenues and profit!