Overview: Customer Loyalty Program

“There’s only one boss; the customer.”??- Sam Walton

And what’s a better way to make the ‘boss’ happy than investing in engaging them the right way??

Customer engagement is dependent on a variety of elements, including product quality, pricing, customer service, and loyalty programs, to entice customers to return and commit to the brand. Customer loyalty programs assists in lowering sales expenses, compiling customer profiles for targeted discounts, and staying in touch with customers. Customers benefit from these programs as they can earn credits towards future purchases, special promotions, discounts, early access to new items, and personalized suggestions based on their shopping history.

But what exactly is a customer loyalty program, in layman's terms?

A customer loyalty program is a systematic approach that combines communication, software, hardware, gamification (in certain situations), economic incentives, marketing strategies, event planning, and other elements to assist firms in strengthening their relationships with their consumers. A customer loyalty program's purpose is to enhance retention and building brand champions out of returning customers.

Here’s an example from our favorite coffeehouse: Starbucks

One example of a loyalty program is the Starbucks Rewards program, which rewards customers with points (or "stars") for each purchase made at a Starbucks store. Customers can then redeem their stars for free food and drinks, as well as other benefits such as free refills and birthday rewards. The program also offers additional perks for higher levels of membership, such as personalized offers and early access to new products. By providing these incentives, Starbucks can cultivate repeat business and foster a sense of loyalty among its customers.

Before delving into the many forms of customer loyalty programs, let’s consider their overall benefits:

Customers often discover brand value via an effective loyalty program – they tend to feel more personally connected with brands that go the extra mile to make them feel valued. To determine success, a firm should track the use of the program over time and ensure that it converts enough clients. Once implemented, loyalty programs often yield the following benefits:

Enhanced consumer analytics:?

Loyalty programs use data-driven insights to comprehend the user’s demographic information such as age and gender, providing important insights into the company's client base, and connecting it to their purchase behaviors. By tracking customer purchases and engagement with the program, businesses can gain a deeper understanding of their target market, allowing for more personalized and effective marketing strategies. This data can also help businesses identify trends and opportunities, enabling them to make informed decisions about product development and pricing. Ultimately, enhanced consumer analytics and insights can help businesses improve customer retention, drive sales, and increase profitability.

Boost sales and revenue:

Loyalty programs can help businesses generate more revenue by incentivizing customers to make repeat purchases and encouraging them to spend more money. By offering rewards or discounts for frequent purchases or for reaching certain spending thresholds, businesses can increase customer retention and build brand loyalty. This not only drives sales but also helps to reduce marketing and acquisition costs by retaining existing customers.

Additionally, as said above, loyalty programs can provide valuable data and insights into customer behavior, which can be used to inform marketing and product development strategies. Overall, loyalty programs can be a highly effective tool for increasing revenue and improving customer relationships, ultimately benefiting the company's bottom line.

Improved brand awareness and customer loyalty:?

Loyalty programs can turn out to be powerful tools for brands to improve brand awareness and up overall customer loyalty. By offering rewards, discounts, and exclusive promotions, these programs incentivize customers to choose the brand over its competitors. As discussed earlier, loyalty programs also bring in a ton of customer data and insights, enabling marketers to tailor-make and shape user journeys in ways that will not only benefit the brand but the user too. This builds a personalized customer experience, creating better brand recall and word-of-mouth marketing by repeat customers.

Build a community of engaged customers and users:?

By offering exclusive rewards, personalized experiences, and other incentives to repeat customers, brands can build strong relationships and foster a sense of community with their most loyal users. These customers are more likely to recommend the brand to others and even defend it against criticism, acting as advocates for the brand. By investing in loyalty marketing, brands can not only retain their existing customers but also attract new ones through the positive word-of-mouth generated by their advocates.

Effective loyalty programs lend a plethora of benefits through which brands can strengthen their relationships with existing customers, attract new customers, and gain a competitive advantage over competitors that may have not leveraged the power of loyalty programs.

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With that, let’s understand the types of customer loyalty programs most used by companies:

1. Partnership Program

A partnership program is a type of loyalty program where two or more companies collaborate to offer mutual benefits to their customers. Through this program, customers can earn rewards, discounts, or other incentives for engaging with one or more of the partner companies.?

For example, an airline and a hotel chain may offer a partnership program where customers can earn points for booking flights and hotel stays, and then redeem those points for free flights or hotel nights. Partnership programs are a way for companies to increase customer engagement and loyalty, while also expanding their customer base through cross-promotion.

Benefits:

- Helps with client retention

- Gives an added sense of belonging

- Extends a basket of benefits to your customers

- Improves your Online Reputation Management (ORM) subconsciously

2. Points-based loyalty program?

Customers were rewarded for purchases hundreds of years ago with copper tokens (the points), which could subsequently be redeemed for discounts or even products. The tokens were eventually replaced by stamps, box tops, plastic cards – and so on. While the fundamentals of loyalty programs remain the same, the way customers collect and spend their rewards has changed considerably. Brands are bringing more creativity, strategy, and personalization into each aspect of their loyalty programs, subtly nudging customers to bank on the brand for their needs.

However, zooming out a bit, the underlying principle of points-based programs remains the same: gaining better future benefits on the customer’s end, and reducing customer acquisition costs for brands. Points-based systems, in simple terms, reward customers with points for each purchase, making them popular in retail venues such as restaurants. When customers successfully accumulate a specified number of points, they can use those points to purchase a product or obtain a discount.

Chipotle, for example, gives consumers points for joining their program and for subsequent purchases. Customers who accumulate enough points might earn free meals or products, among other benefits.

Benefits:

- Is a great incentive

- Improves chances of repeat customers

- Ties the customer to the value received from the earned points/ rewards

3. Subscription-based loyalty program

With such programs, customers pay a monthly or yearly charge to join your VIP member club and have access to exclusive services, discounts, or unique opportunities in a Subscription-based loyalty program, also known as a Paid Program - VIP member club. However, note that such subscription-based premium programs must contain perks only available to subscribers, or they may lose value.

Customers must pay an upfront, monthly, or annual fee to join a subscription-based loyalty program. Subscriptions can help brands retain clients for a specified period – from 1 month to a year.?

Amazon Prime, for example, is a premium membership service that provides customers with free delivery, OTT shows, and films (only available to members), among other benefits.

Benefits:

- When you pay for something, you get a sense of achievement

- Things that you need to spend money for inherently seem like something better

4. Cash Back Loyalty Programs

Spend a given amount to receive a certain amount back, generally in the form of coupons or 'cash' that can only be redeemed on a specific merchant or app. They are simple to comprehend and manage. While the principle is similar to point programs, there is one significant distinction.

Points do not always belong to the same currency as cashback, which is a monetary refund or reward.

For instance, Paytm lists a variety of cashback offers for its customers, propelling customers to use it more often, and making it their primary UPI payments app.

Benefits:

- Holds monetary value, making it more appealing to customers

- Gives a value-for-money feel

- Great customer retention

5. Tiered Loyalty Programs

Tiered loyalty programs divide user benefits into several levels, with higher program tiers offering greater customer rewards. Some programs employ the names such as silver, gold, platinum, or other premium-sounding naming conventions to encourage users to spend more and advance to higher tiers to obtain better incentives.

This tiered scheme is based on loyalty tiers. The more points customers earn on every transaction, the faster they can move up the tiers. In short, the higher the tier level, the greater the benefits.

For example, Hilton or American Airlines loyalty program provides free sign-ups and encourages customers to continue purchasing. Customers may then level up to higher ranks and get additional incentives as they make more purchases.

Benefits:?

- Brings an element of exclusivity?

- Makes the customer feel like they have earned their space

- Visibly increasing rewards with increasing interactions

If your business goal is to bring maximum customers to sign up for your loyalty program, a classic free program would be your best choice because it has few barriers to entry, increases client acquisition, and increases engagement with your brand.?

However, premium loyalty programs might be just what you need to raise those connections to the next level, especially if you are concerned about getting your most dedicated consumers to engage with your business even more. Creating an all-in-one loyalty program may appeal to your clients on many levels. A free transaction-based loyalty program might bring new consumers to your loyalty ecosystem. And once they sign up, it is much simpler to illustrate the value that a premium tier may provide, resulting in more engagement and brand love.

While every loyalty program renders different benefits, brands must ensure their customer is at the helm of every loyalty program they design. Getting them to sign up is only the beginning, but the benefits your brand extends to them as program participants will decide whether or not they return. And the only way to find out what to provide is to tune in to what they have to say.

And if you’re a brand wondering how you can get an edge over your competitors and etch your brand in the minds of your users - NUPI is here for you.?

NUPI provides an all-in-one solution for loyalty, rewards, and recognition, empowering brands to maximize their customer acquisition efforts, and turn customers into passionate brand advocates.

?Reach out to us at sales@nupipay.com for more details

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