As per a Harvard Business Review study, businesses that have robust loyalty program management increase their revenues two and a half times faster compared to their competitors. The same study also found that the companies generate a hundred to four hundred percent higher returns to their shareholders.
Now the question comes “How do they do it?”
A customized and well-crafted loyalty program is a potent tool using which businesses engage their customers and keep them loyal. The increased revenue is just a byproduct of exceptional customer engagement.
At LoyaltyXpert, we have helped a wide range of businesses enhance their customer engagement and revenue by providing them with our personalized and sophisticated loyalty programs. In this blog post, we discuss the various studies and stats that prove that loyalty programs are crucial to business growth and customer engagement. Read on to know more.
Well designed loyalty programs retain customers for a long time
The very idea of a loyalty program is to make customers stick to a particular brand. Businesses invest a lot of time, money, and effort in their loyalty programs to retain their customers for a long time. In the present times, most customers prefer to commit to a business that has a strong loyalty program. As per AnnexCloud report, three in every five Gen Z and millennial customers will not stick to a business without a loyalty program. Another study found out that 84 percent of customers are more willing to continue with a business that has well-designed loyalty program management. Customer retention can have a huge impact on a business’s profits and revenues. As per a Harvard Business Review study, a five percent growth in customer retention enhances profits by 25 to 95 percent.
Encourage customers to make more purchases
Apart from enticing customers to stick to a brand, well-crafted loyalty programs also encourage them to buy more. When customers make more purchases that automatically increases a company’s sales and revenues. One recent research found out that brands that offer incentives are likely to encourage more than 75 percent of their customers to make another purchase from them. Another study from CMO by Adobe found that loyal customers spend nearly 70 percent higher compared to other customers. As per the Incentive Solutions study, the integration of loyalty program management with an online shopping platform can enhance average order quantity by 319 percent. One more study shows that loyalty programs can enhance purchases by 20 percent.
Enhance customer lifetime value
When businesses engage their customers using personalized and innovative loyalty programs, they enhance customer lifetime value. According to Brand Keys’ study, a seven percent rise in loyalty programs can enhance lifetime value for each customer by up to 85 percent. As per Experian, nearly 70 percent of businesses with loyalty programs in the United States have an average lifetime value of US$1,803 for each customer. Another statistic reveals that customers that are loyal to a brand have a lifetime value that’s three times more compared to average customers.
Loyalty programs with high customer engagement provide businesses with high returns on their loyalty investments. As per Experian, more than 75 percent of companies with loyalty programs in the United States report higher returns on investment than their competitors. Another survey found that more than half of the retailers that use loyalty programs generate a return on their investment in the first six months of the implementation of the loyalty program. According to CMO Australia, businesses that use tiered loyalty programs witnessed a 1.8 times higher ROI compared to businesses that don’t use tiered programs. All the stats and insights show the effect of loyalty programs on ROI.
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Cost-effective in the long run
It’s a known fact that customer acquisition is extremely expensive compared to customer retention. According to the Harvard Business Review, the cost of acquiring a new customer is five to 25 times higher than the cost of retaining an existing customer. Another data says that just a two percent growth in customer retention would be as effective as reducing costs by 10 percent. Besides, the best thing about many loyalty programs is that customer engagement and non-cash rewards have been found more effective than cash rewards. As per a study by The Aberdeen Group, non-cash rewards are 300 percent more cost-effective compared to cash rewards and discounts.
Did you know that when referred by a friend, customers are four times more willing to buy a product? A HubSpot report reveals that more than 80 percent of people trust recommendations from their family and friends. Higher customer engagements and strong loyalty can lead to massive positive word-of-mouth publicity. Engaged customers are more likely to refer to a brand and its products and services to their friends and families. A study found that nearly 60 percent of loyal customers are inclined to refer their favorite brands and products to their family members and friends.
Help in finding new customers and encourage more people to purchase a product or service
As loyalty programs generate positive word-of-mouth publicity and encourage more engaged and loyal customers to refer to a brand, it results in more new customers. A study by ‘Big Three’ management consulting firm McKinsey & Company revealed that referrals resulted in double the sales compared to traditional advertisements. By using well-designed loyalty and tailored programs, businesses can incentivize referrals. A study found that more than nine out of ten customers stated that they will prefer a business that has a loyalty program. Members of loyalty programs generate between 12 and 18 percent higher revenue every year.
By and large,
By now we have seen how loyalty programs not only engage customers but also enhance the revenues of a business. Every business that aims for higher customer retention should leverage loyalty programs. If you are looking for personalized and tailored programs, we at LoyaltyXpert can help you with them. Contact us today to know how we can help.