Consider the Benefits: Is it worthwhile to offer customer-centric benefits as a Start-up?

Staying competitive is an element of business building that remains on the minds of start-up founders. One strategy has stood the test of time and become an favourite for well-funded or creative teams — offering customer benefits. These benefits come in various forms, from discounts and referral rewards to cash backs. They not only enhance customer loyalty but also drive growth. In this article, we explore the methodology and behavioural benefits of customer-centric offerings, their historical context and examples of companies that pioneered these strategies. Additionally, we will explore the pros and cons and the key metrics to consider before implementing these strategies sustainably.

The Methodology of Customer Benefits

The concept of customer benefits has been around for over two centuries. In the late 18th century, the first recorded customer loyalty program was initiated by a US retailer, offering copper tokens to customers for making purchases. These tokens could be redeemed for products, paving the way for modern customer rewards.

Customer benefits tap into human psychology, incentivising customers to make repeat purchases and refer others. Discounts, rewards, and cash backs trigger positive emotions, making customers more likely to engage with a brand repeatedly.

Below are some advantages and disadvantages of customer benefits for companies that are considering this method of advancing customer service.

Advantages

• Enhanced Customer Loyalty: Benefits like discounts and rewards create loyal customers who are more likely to return.
• Word-of-Mouth Marketing: Referral rewards can turn customers into brand advocates which drives organic growth.
• Data Insights: Customer benefit programmes provide valuable data on customer behaviour and preferences.

Disadvantages

• Costs: Offering benefits can be expensive and can impact profit margins.
• Complexity: Managing benefit programmes requires time and additional resources.
• Expectation Management: Once offered, customers may come to expect benefits thereby making it challenging to scale back.

All businesses should get in the habit of understanding and tracking key metrics for all initiatives in the business. The section to follow displays key metrics and stages for sustainable implementation of benefit programmes for clients.

• Customer Acquisition Cost (CAC): Calculate the cost of acquiring a new customer versus retaining an existing one. Customer benefits should improve this ratio.
• Customer Lifetime Value (CLV): Assess the long-term value of a customer. Benefits should increase CLV by fostering loyalty and repeat business.
• Referral Rate: Measure how many customers are referring others. A successful benefit programme should boost this rate.
• Profit Margins: Continuously monitor profit margins to ensure that offering benefits remains financially sustainable.

Pioneering Companies

American Airlines (USA): In the early 1980s, American Airlines launched the first modern loyalty programme offering frequent flyers rewards like free flights. This inspired many other industries to adopt similar approaches.

Amazon (USA): Amazon's Prime membership, with its blend of fast shipping, streaming services and exclusive discounts, is a great example of customer-centric benefits. It has increased customer loyalty and significantly contributed to the company's growth.

Safaricom (Kenya): Safaricom's "Bonga Points" loyalty program in Kenya rewards customers for using Safaricom services. Customers earn points for every transaction, which can be redeemed for airtime, data, and even shopping. This program has played a pivotal role in retaining and expanding Safaricom's customer base.

The methodology of customer benefits is rooted in psychology, history, and proven success stories. Companies like American Airlines and Amazon have demonstrated the power of customer-centric offerings. While the pros are compelling, the cons are not to be underestimated. Sustainable implementation requires careful attention to key metrics and a gradual approach to ensure that the business can continue to thrive.