Customer loyalty programs are becoming more popular. Their primary goal is to build loyalty, but do they actually work?
The data tells us, yes.
We’ll explain the effectiveness of customer loyalty programs in this article.
Are customer loyalty programs effective?
Customer loyalty programs can be an efficient way to boost customer retention. They offer a win-win for both sides.
Businesses get the same customer to keep making repeat purchases, while the customer gets a discount or perk for returning to the store.
- 69% of customers allow rewards or loyalty programs to influence their shopping decisions.
- 63% of millennials and gen z shoppers will not commit to a brand if they don’t offer a loyalty program.
- 57% of customers spend more on brands they are loyal too.
All these customer loyalty statistics prove one thing – customer loyalty programs are effective.
What is a customer loyalty program?
Customer loyalty programs’ main goal is to build loyalty or in other words customer retention.
Usually, the loyalty program has an incentive for customers to keep coming back. This could be in a form of points (that have some monetary value), discounts or special offers.
It’s 6 to 7 times more expensive to acquire a new customer which is why capturing customer retention is a big deal for companies.
Having a loyalty program is a step closer to retaining customers.
Why do loyalty programs work?
By signing up for a loyalty program businesses can create a tailored experience. Businesses can give out personalized offers, coupons, promotions or even offer a birthday discount.
It’s these perks that make customers want to sign up and continue to stay a part of the loyalty program.
Want to learn more about the effectiveness of personalization, read our article “Define personalization: How to use it in marketing“.
Create a community
Most people want to be a part of a community. Loyalty programs are a great way to offer a community to their customers.
Businesses like Sephora do a great job of using a community as a loyalty program. They showcase their insider program which makes it feel like a club you can join.
A lot of people signing up for loyalty programs do it for cost savings. Businesses a lot of times even offer a discount for joining their loyalty program from the start.
The cost savings aspect helps the customer, but it also helps the business continue to get repeat sales.
Examples of customer loyalty programs
Loblaws customer loyalty program is the PC Optimum points. Customers that spend 1 dollar receive 10 points. Once a customer has 10,000 points there eligible to redeem 10$ on their next purchase.
Since Loblaws works with Superstore, Zehrs, No Frills, Esso, and Shoppers, customers have a lot of chances to earn and redeem points at any of those locations.
PetSmarts’ customer loyalty program is Treats. Customers can receive all sorts of perks such as for every 1$ they spend they earn 8 points which they can later redeem on their next purchase as long as they have enough points.
Another benefit of the loyalty program is a free gift on your pet’s birthday, and exclusive member-only deals and discounts.
PetSmarts’ loyalty program is very enticing for all pet parents. Offering special pricing, it makes it an easy sell for customers to sign up, along with offering a point system to redeem it’s another reason to continue shopping at PetSmart.
Air Canada’s loyalty program is Aeroplan. Customers can receive aero plan points while booking flights. They also partner with Starbucks, LCBO, and a few other stores where you can earn Aeroplan points.
Air Canada’s Aeroplan program works well. With so many other airlines available, the Aeroplan point system keeps customers returning to their company. If they flew on another airline they wouldn’t be earning points.