The A-Z of Loyalty Marketing Programs

“As a customer’s relationship with the company lengthens, profits rise. And not just by a little. Companies can boost profits by almost 100 percent by retaining just five percent more of their customers.” – The Loyalty Effect author Fred Reichheld.

Did you know that repeat customers spend an average of 40 percent more on their sixth purchase than on their first?

With this much profit at stake, it’s easy to see why so many businesses today are turning to loyalty marketing programs to create and retain repeat customers.

What is loyalty marketing?

Loyalty marketing is a strategy where companies offer their customers specific rewards in exchange for their brand loyalty. This high level of customer engagement is designed to retain current customers and to encourage them to become frequent (loyal) patrons.

For example, a café may offer customers free coffees or other products, but only after they have purchased their ninth coffee with the business.

In addition to sales growth, loyalty marketing can offer hospitality businesses a tonne of other benefits, such as:

  • Improved customer relations
  • Increased customer satisfaction
  • Strengthened company reputation
  • Increased promotion of their brand message

When done right, loyalty marketing can also offer a great return on investment.

Types of customer loyalty programs

There are many different types of customer loyalty marketing programs for all types of businesses. But three main types appeal especially to hospitality businesses. These include the Simple Point System, Punch Cards and Partnerships.

The Simple Point System

The Simple Point System is perhaps the most common rewards program used by businesses of all sizes.

Customers earn a set number of points for various purchases they make. For example, a hotel may offer a set number of points for every night a customer stays at their hotel or for every dollar spent at the hotel.

Customers can trade these points in to earn rewards. Most companies use loyalty marketing software to make it easier for their staff and customers to track points.

Punch cards

Punch cards are similar to the Simple Points System, except they are typically used for a specific type of purchase.

This is the common type of system we mentioned above, where a customer receives a punch in their card for every coffee purchase. Once the customer receives the set number of hole punches, they’re eligible for the reward, such as a free cup of coffee.

This type of loyalty marketing strategy can be very effective and entice the customer to make repeat purchase with your company.

This strategy can be done without any type of special software. But make note that this can limit your business’s ability to gather customer data or contact information.

Partnerships

Partnerships require a bit more planning, but they can be extremely effective. It involves your company joining forces with another company to provide your customers with specialty rewards.

Grocery stores have been doing these partnerships for years, by offering their customers reward points for a discount on gas prices at a certain gas station.

Many companies in the hospitality industry are joining this new trend. The trick is to partner with a company that offers services that your customers need. For example, restaurants can partner with the cinemas for discount movie tickets with every meal purchase.

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Best practices: making the most of your loyalty program

If you’re choosing to use a brand loyalty marketing program for your business, make it count by keeping the following best practice principles in mind.

Align the program with your customers’ needs

You should never create a loyalty program just for the sake of having a program in place. It’s important you take the time to understand what your customers really want.

Both the type of customer loyalty program you develop and the reward system you use should be customer-centric. If your customers don’t feel that your reward program is beneficial to them, they’re less likely to make repeat purchases.

Align the program with your brand image

The last thing you want to do is to create a loyalty program that is inconsistent with your company’s brand image. Rather than developing loyal customers, this type of inconsistency could drive customers away.

Instead, make sure your loyalty program encourages customers to create habits that align with your company’s brand image.

Keep it simple

Don’t overthink your loyalty program. Customers want a process that is quick, simple, and, most importantly, easy to understand. Programs with a lot of unnecessary rules and regulations tend to only frustrate customers. Instead of feeling rewarded, your customers may feel that they have been treated unfairly.

No matter which customer loyalty program you choose to use, make sure you clearly state which purchases are included and what specific rewards you offer. Even if you are not using online loyalty marketing programs, your customers should easily be able to find information about your program through your website or social media.

Use customer data to your advantage

One of the best benefits of having a loyalty program is that it allows you to collect, retain and analyze customer data.

Make sure you create a program and use effective software that allows you to collect this valuable customer information. You can use this data to track customer spending habits, demographics and other vital information that could help you draw new customers through your doors.

Learn more handy tips and advice for marketing your hospitality business on the Impos blog today.

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