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.