Let’s talk loyalty. What’s the opportunity?
Article by Alex Preece, CEO at Tillo
Alongside rewards, incentives and recognition - there’s another term that’s become a bit of a buzzword across the gift card industry this year: “loyalty.”
It’s not a new term, but in an inflationary environment where economic growth has slowed gradually, companies that are laser-focused on growth need the right loyalty play to help them reach their goals.
More than 90%
of companies already have some sort of loyalty program in place, making a loyalty strategy more of a need-to-have than a nice-to-have.
Any organisation that’s generating enough of a profit margin can benefit from splitting this with the consumer in the form of a loyalty programme - with multiple benefits to the business long-term.
Traditionally, there’s been a battle between acquiring new customers and retaining existing ones. Spend money, time and resources on acquisition? Or spend money, time and resources on retention? With a modern day loyalty programme, you can drive growth by incentivising new audiences to start using your brand and reward existing ones.
So how can loyalty really benefit your brand
5 reasons loyalty should be on your radar
1. Connect with customers’ emotions
Sometimes competitors end up racing to the bottom to underprice each other. However, focusing on driving loyalty tends to be a smarter way to beat out the competition.
As brands compete for customers, those that focus on fostering lasting, more human connections with their customers will be at a significant advantage.
Many loyalty programs today enable customers to cash-out their loyalty points onto digital gift cards for the brand of their choice, and the psychology of gifting comes into play here.
Gift cards are better at fostering an emotional connection with a brand vs. rewards like cashback as they create more lasting memories.
Unlike cash which tends to disappear “into the pot” and is spent on every-day expenses, gift cards are more likely to be spent on indulgent or luxury items, making it feel like a treat for customers.
In fact, 76%
of consumers say they prefer a gift card as a reward for brand loyalty.
2. Ensure customer retention
It pays to invest in loyalty. There are plenty of stats that highlight the value of your existing customers, and why you need to ensure they keep coming back for more. For example:
- Acquiring a new customer is five times as expensive as retaining an existing customer.
- US companies lose $136.8 billion per year due to avoidable consumer switching.
- On average loyal customers are worth up to 10X the value of their first purchase.
- 80% of a retailer’s business comes from 20% of its customers.
Given that retaining existing customers is essential to sustaining business growth, a loyalty programme can help you delight and surprise your customers—recognising and rewarding them for giving you, their business.
Customer lifetime value is a key metric to track and can help make the case for implementing a loyalty program.
3. Win over new fans
Can you think of a business that doesn’t want to drive customer acquisition? Probably not.
Well, loyalty programmes can be a big hook for potential customers. According to LoyaltyLion, customers who sign up to your loyalty program are 47%
more likely to buy from you again.
A growing number of loyalty programs aim to incentivise new customers to sign-up, giving them bonus points for their first purchase or creating a loyalty account.
True innovators are reshaping the customer experience entirely, with loyalty as the driving factor—by making the loyalty programme the starting point, rather than an afterthought.
For example, Honey
enables shoppers to earn Honey Gold as they spend and cash this out onto digital gift cards. To take advantage of their offers, many shopping journeys now start in the Honey app.
You might be wondering if the ROI is worth it?
According to Experian
, 75% of companies see a return on investment from their loyalty program.
4. Bolster your reputation
In a digital world, brand reputation is gold. It’s not only essential to inspiring loyalty and driving your bottom-line, but a strong reputation is also needed to inspire customer—and stakeholder—confidence in your business.
Most brands realise that their reputation is in the hands of their customers.
Word-of-mouth recommendations have always been essential for growing a customer base. Research indicates that at least 92%
of people trust word-of-mouth (WOM) recommendations from friends and family more than any other form of marketing.
The end goal is to create a loyalty programme and customer experience that delights so much that customers start singing your praises.
You want to turn your customers into evangelists; and, with social media, it’s ever easier for your customers to advocate for your brand (or against it).
5. Differentiate your brand
A loyalty program can actually be a unique selling point (USP), enabling you to market yourself differently to your competitors and stand out in a crowded industry.
As a significant part of the customer experience, a loyalty program can also become part of your brand’s identity. Further, by reshaping the customer journey like Klarna or Honey, you can become the go-to player in your space.
Surprising and delighting your customers - and building that emotional connection - will go a long way to building genuine relationships that serve your brand for years to come.
What to consider for your loyalty program in 2022?
It is understood that not all loyalty programs are created equal.
To really stand-out, you should make use of customer data to deliver a personalised, superior experience across physical and digital channels.
Programs must be personalised, relevant and timely; show that you know your customers and care about delighting them. Where and how did they last engage and what’s their favourite product? Can you help them celebrate a birthday or an anniversary?
Offering a greater range of brands that people love for them to cashout their loyalty points will make your loyalty currency more valuable - and your loyalty program more popular.
Ultimately, successful loyalty programmes will work smarter, not harder - listening to customer feedback and delivering on the benefits that customers enjoy most.
If you have an existing loyalty program or are planning to launch one and would like to expand your digital gift card offering, Tillo can help. We’re ending the battle between loyalty and acquisition.
Working with over 2,000 brands in 16 currencies across 34 markets, we believe rewarding customers should be a delight from start to finish.
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