Before we dive into specifics of loyalty marketing and its advantages for growing businesses, let us understand what it means. Loyalty marketing is a strategic marketing approach taken by companies to increase revenue by retaining existing customers and building a long term relationship.
How does a company attain it?
By building loyalty programs that are exclusive for the customers and providing incentives in the form of rewards, discounts, freebies, etc.
Why should you do it?
Most of you must be wondering why you should invest in loyalty programs. All these incentives are only cost to a company, Right?
According to recent studies, it has shown that acquiring a new customer can cost up to 5x times than retaining an existing customer. That loyalty program looks promising now, doesn’t it?
Creating a loyalty program just for the namesake won’t do the job for you. Firstly you need to understand the customer. This means harvesting data that gives potential insights to customer’s intent. For an e-commerce website, you can easily identify the intent of the customer by looking at the search results and clicks.Once you have collected the data, you have now enough information to customize for personal user experience. This can not only enhance user experience but also help in building a personalized loyalty program. After which the marketing team can reach out to customers.
With these loyalty programs, you are giving the customers a reason to stay that in turn will increase the Customer lifetime value (CLV).
A modern example
It must be extremely difficult to find a person who has not used Amazon. Be it a book or apparel, every one of us has used at least once the service of amazon. Amazon Prime can be considered as a new age loyalty program. They have taken it up a notch by increasing the perks of being a prime member. To name a few benefits of being a prime member:
- Fast delivery
- Prime Video
- Prime music
- Gaming with Prime
- Prime reading etc.
The list goes on and as a normal customer, there are not many reasons that one can think to not opt for a prime membership. According to Consumer Intelligence Research Partners (CIRP) data, Prime members shop on Amazon 26 times per year vs 14 times for non-Prime customers. The numbers are astonishing and conclusively prove how important these loyalty programs are.
Chart Source– STATISTA
Are you wondering about the connection to digital marketing? If I am to ask you what was the importance of days Aug 6th and 7th of 2020, many of us may recollect that it was amazon prime day. The sales on these days where specifically for prime members where members are given exclusive access to new products launched and huge discounts on other products. Non-prime members were also given a discount to join prime to have access to prime day.
All things said aside, how did you come to know about the prime day? It is not like you browse amazon every day.
- Did you receive an email from amazon about the upcoming event?
- Have you seen a poster in any of the social media?
- Was there a display ad when you were browsing on the internet?
You may have seen all the above. To promote your loyalty program you must utilize digital marketing techniques to reach across different channels. The success of your loyalty program largely depends on your marketing team.
These techniques are not something that has come up in the modern age. A local Kirana store owner giving a discount on your product to encourage the customer to return was traditionally done a long time back. Except that they never knew what they were doing was ‘Loyalty marketing’. All of the modern programs can be considered as an extended version.