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How to Use A Customer Loyalty Program to Increase Sales

R/M

Do you have a customer loyalty program in place? If you haven’t implemented a customer loyalty program, it’s time to start. Loyalty programs help improve the customer experience, drive sales and provide valuable data to help retailers better understand their customers. Loyalty programs have become increasingly popular for a very simple reason: they work. U.S. consumers held 3.8 billion loyalty program memberships in 2017.

Whether you offer stars, points, bucks, or anything in between, a customer loyalty program has some sweet rewards for both customers and retailers. Customers get discounts and earn rewards. Retailer reap a bounty from this relationship too: customer retention, increased sales, consumer data, and marketing opportunities. Research shows that strong loyalty programs encourage the most effective marketing: word of mouth advertising. 73% of customers are more likely to recommend companies with strong loyalty programs.

 

Get them Coming Back Again and Again

Loyal customers are repeat customers who buy big. 77% of consumers say a good customer loyalty program makes them more likely to stay with brands. A strong connection with your brand can be the deciding factor when choosing between your store and the competitor down the street.

Retaining customers can mean big sales: increasing customer retention rates by 5% increases profits by 25% to 95%. Loyalty programs are a proven incentive to keep customers shopping with you, especially if they can earn a reward for doing so.

Starbucks, Ulta, and Sephora are brands with notable loyalty programs. Each brand offers points for every dollar a customer spends and operates on a tier system. When customers spend above a certain amount, they move into a new tier. Each tier offers more rewards, such as double points, birthday coupons, and free shipping. Customers who are close to the next level are then enticed to keep spending to get to the next tier (“You’re only $50 from level X!”).

When I want to buy bath and makeup products, I often head to Ulta, even though Target carries the same products. Why? I earn points on my purchase at Ulta. When you add in points from Ulta Beauty, Ulta’s fell service hair and skin salon, it’s a better deal for me to shop at Ulta. All of these extra purchases add up to make a huge impact. 15% of the customers loyal to a brand can generate anywhere from 55% to 70% of total sales. Why wouldn’t you want to construct a customer loyalty program designed to retain these exact people?

 

Attract New Customers

In addition to improving your sales with your existing customers, loyalty programs can also convert new customers into loyal, returning customers. Research from IRI shows that 74% of consumers choose a store based on a strong customer loyalty program or discount program. With that in mind, it makes sense for retailers to leverage every interaction with a customer to drive enrollment. One common tactic is to offer a coupon or double points to customers at checkout in return for signing up for a loyalty program. Offering a deal like this to customers who are already at the checkout stage offers a twofold advantage: It makes the purchase even more attractive and dramatically increases the likelihood of a return visit.

 

Dig Into the Data

Consumers sign up with their birthdays, names, addresses, emails, preferences, and more — all valuable data for you. As a retailer, you have access to a wealth of data through your loyalty program. You can create segmented lists and market to directly to members with relevant offers based on recent purchases. Ex: A customer who’s recently purchased a kids size Nike hoodie can get an offer for a sale on Nike kids sneakers. Loyalty programs open new ways and reasons for communicating with customers with personalized messages.

 

Start Your Customer Loyalty Program Right

If you’ve decided to offer a loyalty program, make sure it’s easy to sign up or you may risk annoying your customer rather than enticing them.

We’d love to hear from you with your own best practices for building a loyalty program, along with examples of retailers who you feel got it dramatically right (or wrong). If you’re curious about how machine learning can help improve store operations, read more here or here.

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