Reasons why loyalty programs are imperative for enterprises

Reasons why loyalty programs are imperative for enterprises

The battle for customer loyalty is heating up

Nowadays, more and more new domestic and foreign brands have come into the Vietnam market, which creates fierce competition among enterprises. For that reason, they are pouring lots of money into promotional campaigns, the development of new products and the improvement of customer services to create competitive advantages and gain customer retention and customer loyalty.

3 types of customer loyalty

However, customer loyalty can be divided into three types including behavioral, rational and emotional loyalty. If an enterprise can identify the main feature of each type of customer loyalty, it tends to have a more effective strategy as it focuses its human resource and finance on building a relationship with core customers.

Behavioral loyalty – Customers continue to purchase the same products based on purchasing behaviors and convenience instead of preference or emotional ties. They buy the same brand, every time, without checking for price or for what’s on sale.

Rational loyalty – Customers buy the products because of the prices. They tend to switch their providers if others offer a cheaper deal.

Emotional loyalty – This group of customers is usually driven by altruistic motives, emotional connection with the brand. They are highly unlikely to switch products since they are primarily driven by an inner belief and sense of purpose connected to these purchases.

Obviously, enterprises cannot benefit from consumers with behavioral or rational loyalty in the long term as these shoppers are likely to purchase products from other brands for some reasons. In contrast, customers with high emotional engagement are more likely to have a strong brand affinity compared to someone with low emotional engagement. Emotional loyalty entails a deeper level of commitment to the brand because the emotional tie goes beyond economic incentives. Specifically, they can accept changes in prices ranging from 8 to 13%.

In fact, enterprises can follow lots of methods to build emotional loyalty with customers. Some campaigns include focusing on customer services, listening to feedbacks, differentiating shopping experiences or delivering added values for customers.  Designing a loyalty program is not the only way to connect brands with customers. However, it is considered as the most effective way since it focuses on all of the aforementioned elements and offers members with diverse benefits and privileges, which loyalty statistics say 76% of female and 72% of male customers will buy products from a brand having a loyalty program.

Loyalty programs create emotional connections and build a long-term relationship with customers

Customers with emotional loyalty entail a deeper level of commitment to the brand. They keep buying products from their favorite brand though they have lots of other options. According to the study of Gallup, emotionally loyal shoppers will come back more frequently ( about 32% ) and spend more 46% than other customers.

Loyalty programs focus on delivering personalized experiences and create core values for each of the members. By leveraging the data on your customers such as order history, site activity, visits, referral status, companies can better tailor services to customers’ needs by offering them with various redemption options and communicate with members better on their preferable channels and in the right time. Being a member of a loyalty program, customers will get certain benefits based on their tiers. For example, they will be the first guest trying a new product of the brand, getting access to the information of promotional campaigns or enjoying exclusive privileges. When customers feel that they are recognized and appreciated, they tend to keep buying products from you as a way to repay for the services. Moreover, points have the power to solidify a lasting relationship with your brand. And customers simply aren’t willing to give up these exclusive benefits.

By connecting with customers’ emotions, enterprises gradually establish a long-term relationship with their members. At that time, they can buffer their customers against potential competitors as 39.4 % of the customers will buy products even when there are cheaper ones with the same features and functions (Yotpo). Adding a loyalty program stops you from competing on price by giving you another way to differentiate your stores.

Loyalty programs help increase sales

By personalizing shopping experiences and offering customers with lots of rewards, customer retention rate can reach up to 54% ( Loyalty customers will stay for a longer time and spend 67% more than new ones, which helps increase their lifetime value.

Loyalty programs help enterprises stop competing on price with competitors. Reducing prices cannot assure that customers will stick around after purchasing your goods and services this time. Instead, enterprises can carry out point promotions which let your members earn more when they buy a certain product or redeem their favorite rewards with fewer points required. The flexible point policies can incentivize clients to spend on a certain kind of products and save enterprises more cost than reducing prices.

Loyalty programs promote your brand

Though you deliver an excellent experience for your members, many of them are unwilling to share it with their friends and family members. Rewarding customers can incentivize them to share the awesome experience with other people. These existing customers are great for increasing word of mouth and are more prone to becoming brand advocates. This possibly creates great user-generated content for social media too. In fact, depending on their influence as well as how long they have used your product/service, they may become micro influencers for your brand.

In addition, enterprises can reward customers as an incentive so that they are likely to give you feedback to improve your products and services as well as customer experience. Loyalty programs can play an important part to communicate with customers at the right time. When they are happy after redeeming a favorite reward, give them an email to congratulate them and then ask them to give you feedback. In this case, you will have more chance to receive positive feedback from your members.

To round up, a loyalty program gives enterprises lots of benefits depending on the purposes of the programs. It helps companies develop and enhance relationships with core customers, make sure that their customers are being cared and appreciated. Well-designed customer loyalty programs are an important part of a marketing plan for each segment of customers, building a long-term relationship with customers, increasing sales and promoting the brand of the enterprises.