Before discussing the finer details of loyalty programs, it’s vital to grasp the overall impact customer retention has on your bottom line.

Have you heard that 80% of your overall business comes from only 20% of your total customers? It’s a very poignant statistic suggesting that while you need customer acquisition strategies to get people in the door, it’s consistent repeat business that’s genuinely lucrative.

Also, retaining customers is cost-effective; costing 5x less than acquiring new ones. Furthermore, businesses lose $1.6 trillion per year due to lost customers.

So, why fight an uphill battle? Why bang your head against a wall trying to capitalize on untapped markets when your efforts are better spent on people who already appreciate all that your business brings to the table?

With the above stats in mind, implementing customer loyalty programs to increase both retention and lifetime value of customers, should be at the top of your priority list.

The Lifetime Value of a Customer

Eventually, a loyal customer is worth 10x more than their first purchase. Also, 83% of consumers claim they are more likely to continue buying products from businesses with loyalty programs.

Using a loyalty program to focus the bulk of your marketing, sales, and customer service efforts on a filtered, relevant target is a vastly higher percentage play than converting cold leads into lifelong customers. This way, you can keep building on the foundation you’ve established instead of wasting energy trying to reinvent the wheel.

Why Do Loyalty Programs Work?

Successful loyalty programs act as both a point system and liaison between a business and its customers.

Customers are initially interested in the incentive-based rewards and discount aspects of a loyalty program. However, since customers provide their emails, it’s a bonus for you. Now you have the ability to send friendly reminders of events, seasonal sales and special offers.

Loyalty members also appreciate the personalization that comes with rewards programs. For example, by offering a birthday gift and emailing to alert them when their rewards will expire soon.

These are examples of subtle, personalized marketing and advertising. While emails telling someone to “not miss out on birthday dollars” is helpful and thoughtful, it’s also a way to reach a customer and remind them your business exists. Therefore, customers feel gracious instead of annoyed as they’d be with shrewder marketing tactics.

Think about it, with these notifications, you’ve made customers aware of valuable information. Nobody wants to miss out on a big BOGO sale or to let their rewards go to waste. Thus, you’ve both offered something useful and landed yourself at the top of your customer’s mind.

Acquiring New Business Takes Care of Itself

We’ve discussed how customer retention makes more money than acquisition. One of the main reasons for this trend is that businesses with strong customer retention are attractive to prospects.

For starters, offering extra points and discounts just for signing up is a way to earn the loyalty of new customers.

On top of that, a viable loyalty program encourages existing customers to spread the word about your products as well as the awesome perks they get from your loyalty program….especially one with a referral reward.

Furthermore, since brand advocacy and word-of-mouth marketing are known to increase marketing effectiveness by as much as 54%, you won’t spend as much on traditional marketing overhead.

Retaining Customers is Harder Than Ever

The cold hard truth is people don’t treat brands like they do good friends or loved ones. It doesn’t take much to lure them away to a competitor. Maybe it was an uncharacteristically bad in-store experience, a defective product, or a bill they thought was too expensive – but these scenarios do happen, and most consumers aren’t all that forgiving.

In fact, a Crowdtwist survey showed that 35% of women and 33% of men said they’d consider switching brands over better prices, while 49% of consumers would switch brands for a coupon.

With consumer/business relationships now more tenuous than ever, loyalty rewards programs are a way to combat customers’ knee-jerk purchasing decisions.

Conclusion: Customer Loyalty is the Key to Long Term Business Success

Without a group of loyal customers consistently spending their hard-earned money on your business, thriving is an uphill struggle. Those relationships don’t manifest out of thin air; cultivating customer relationships requires insightful strategy, high-level service, quality products, and (last, but not least) loyalty programs, such as Peak Rewards.

Loyalty programs are the perfect combination of customer service and marketing, providing proven value to a customer that keeps them visiting your store.