Why should you bother with a loyalty program?
Is it really worth the trouble, when you have so much on your plate?
The answer is an emphatic yes, and here’s why:
1. It’s 6-7 times cheaper to persuade customers to return than to acquire new ones
Loyalty programs can do several things at once, but the most important thing it does is incentivize repeat purchases.
It’s easier to persuade somebody to buy another cup of coffee from a store they liked than to try their luck somewhere else.
According to a Harvard Business Review article, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one.
If you’re running a small business, you likely don’t have a massive marketing budget to work with. You need to be efficient with how you spend your marketing dollars.
2. Customers are up to 80% more likely to shop at stores that have loyalty programs
According to a study by Technology Advice, customers are 82.4% more likely to shop at stores that have loyalty programs.
It probably boils down to consumer psychology. Customers always want to feel like they’re getting a good deal – so if they’re going to be getting coffee every day, and there are two equally good options to choose from, they’re going to choose the one with a loyalty program.
Considering the psychology of discounts, and things like the endowment effect, it’s quite probable that you might get more loyal customers by raising your prices and then giving a discount, than by lowering your prices wholesale!
The point here is to focus on the customer experience – you want to make sure that your customers feel good buying from you.
3. Loyal customers spend 33% more, and up to 10x more (!) over time
According to MarketingProfs (citing a study by Five Stars), loyal customers are less price conscious and are likelier to spend much more over time.
It makes sense – a person who likes your coffeeshop is likelier to buy that second or third drink, and a person who frequents your retail outlet regularly is likelier to pick up more things as she browses.
A Forrester study ‘The Business Impact of Customer Experience” backs up this claim – loyal customers spend more than new customers.
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