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Do Loyalty Programs Help Client Retention?


A customer loyalty program is a great idea; companies like Canadian Tire have built their business on it. However, consider the program maintenance costs before diving into a customer appreciation program.

[1]A customer loyalty program or rewards program is a customer retention strategy that motivates customers to continue buying from your brand instead of a competitor. Read on for examples of the best loyalty programs.

Sometimes you have to give customers a reason to keep buying from you. A technique in building customer loyalty, businesses can offer special discounts to customers who make regular purchases. This strategy is known as a loyalty program.

If executed well and with the customer at the center, loyalty programs can help your customers feel good about purchasing from you. There are many different customer loyalty programs you can use to increase customer engagement. What you choose depends on your mission, product, and goals for the reward program.

What Can A Loyalty Program Reasonably Do?

As one of the essential tools in a marketer’s toolkit, loyalty programs can produce various benefits.

1. They Encourage Repeat Purchases

Giving your customers an incentive beyond your great products is a great tactic to get them to come back again. Repeat customers have proven to be more profitable for this one main reason: they spend 67% more than first-time customers.

Besides encouraging repeat customers to spend more, a loyalty program further spurs customers into increasing their purchase frequency and the amount they are spending on every interaction.

Pacifica Beauty is an excellent example of a brand that benefited from their aptly named loyalty program: Girl Code Points.

Because of its loyalty program, the brand’s repeat purchase increased by 44%, and the program members spend up to 22% more than non-members.

2. [2]Loyalty Programs Make Customers Feel Valued

If a customer is rewarded for interacting with a brand, they will believe that they are valued.

Depending on how you set them up, loyalty programs can make customers feel special and recognized – and this further fuels their admiration and strengthens their relationship with your brand.

Dunkin Donuts’s DD perks is a perfect example of a customer loyalty program that makes customers feel special by offering generous points giveaways (for new and existing loyalty members).

By signing up for the program, you receive one complimentary beverage, plus a free drink every year on your birthday, choosing to sign up easy. That’s probably the reason why it has signed up 7.5 million members in less than three years.

When customers feel valued, they are bound to increase their purchase frequency, which is why Dunkin Donuts reported the highest volume of orders soon after launching their program.

One of the reasons customers feel valued when they are part of a loyalty program is that these programs help them save money. The point here is that customers join loyalty programs to gain something out of it.

This is why 57% of customers engage with a loyalty program because they want to get something extra or a discount when they shop.

3. More Customer Referrals

If you have been in the eCommerce industry long enough, you’d know that referrals are one of the best ways that will help you increase sales.

How come?

Because a positive word of mouth said by a customer to their peers is the best and most trusted form of advertising –and it doesn’t cost a dime!

84% of people trust recommendations from people they know, indicating that most of the referred customers are highly qualified.

If customers enjoy your program benefits, they are more likely to recommend it to their friends or talk about it on Social Media.

[3]Defining Why Customer Retention Should Be Important To You

Customer retention is a strategy used to increase the number of repeat shoppers your store has. When you implement tactics to try and keep your current customers coming back for their lifetime, you’re investing in a customer retention strategy. It’s about focusing on keeping your existing customers loyal to your brand rather than only trying to recruit new ones.

As traditional acquisition strategies like paid ads and deep discounting become more expensive, it’s essential to focus your time and resources on retention methods. Customer retention is a great way to minimize your customer acquisition cost because loyal customers are an acquisition tool in themselves. Although it’s great to drive new customers to visit your store and make a purchase, finding out how you can retain those customers for future investments is crucial to driving your e-commerce store toward success.

Why Loyalty Programs Are Part Of This Process

New e-commerce stores are being launched every day—all of them selling similar or identical products. However, having something distinct about your brand can help set you apart from the competition, and this is where loyalty comes into play. By offering a rewards program for customers, you’re showing them that you appreciate their business. In return, this appreciation will be invested back into your store when they become loyal brand advocates.

Loyalty begins in the engagement stage, and it helps guide your customers back down the funnel to make repeated purchases and become brand advocates! Customers will be interested in being a part of your community when you offer points, tiers, and valuable rewards just for shopping at your store.

Benefits Of Implementing A Customer Loyalty Program

Improved Customer Engagement

Customer engagement is an essential aspect that directly impacts brand sustainability, especially in the long run. A brand that doesn’t connect with its audience has a low recall value and struggles with creating a reliable brand image. A loyalty program is an excellent way of increasing customer engagement. The customers are more open to receiving emails or other marketing content from brands when they are members of their loyalty or rewards programs. In addition, the program itself ensures complete customer engagement and helps strengthen the bond between the brand and its customers.

Impact on Brand Affinity and Loyalty

Consistent brand engagement can help build brand affinity, which is further strengthened by a loyalty program. In addition, rewards, gifts, and incentives help create a satisfying customer experience, which makes brand affinity.

Improves Customer Experience

Customer experience is the aggregate experience with the brand from pre-sale to post-sale processes. Most brands nowadays are trying to create a wholesome experience for their customers, and one of the easiest ways to do that is through a loyalty program. Expectations of earning a reward generate anticipation and excitement and receiving the reward improves customer satisfaction.

Increased Customer Retention

Data shows that 84% of customers say they’re more likely to stick with a brand that offers a loyalty program, and 66% of customers say the ability to earn rewards changes their spending behaviour. One of the prime advantages of a loyalty program is that it has an immediate and evident impact on the customer retention rate. A retained customer is an asset to any brand. They bring more revenue, have more chances of becoming brand advocates, and represent a trustworthy brand loyalist.

Increase in Sales and Revenue

The research conducted by Frederick Reichheld of Bain & Company that states, “increasing customer retention rates by 5% increases profits by 25% to 95%” still stands true. It is a known fact that customer acquisition costs exceed retention costs. Therefore, retained customers will bring more profit to your company for a reduced price and help to boost sales and revenue.

Increased Customer Lifetime Value

The net profit attributed to a specific customer is lifetime value or CLV. A loyalty program directly impacts CLV and significantly improves the longevity of the brand-customer relationship. It gives the customer a motive other than its products and services to remain associated with the brand. Moreover, if the loyalty program is engaging and offers meaningful rewards, it further helps in increasing the CLV, which ensures repeat purchases for a prolonged period.

Reduction in Attrition Rate

Customer attrition is a problem faced by numerous brands across sectors. Loyalty programs help in combatting this grave issue. Since loyalty programs improve customer engagement rates, the attrition rate declines significantly. Customers remain associated with the brand instead of rewards and incentives, hurting customer churn.

Fosters Brand Advocates

A happy customer is a vocal customer. Loyalty programs improve customer satisfaction to a great level, promoting brand advocacy. Brand advocates positively influence their network of family and friends and help with brand penetration. A referral program can further help in creating brand advocates and bring in more referrals.

Aid in Customer Acquisition

Brand advocates influence new customers and refer the brand to them. Therefore, if a loyalty program offers great rewards, it aids in promoting brand advocacy and tremendously helps widen the customer base.

Access to First-Party Data

Data will remain a priceless commodity in 2021 and in years to come, replacing oil in its value. Loyalty programs enabled you to ethically source first-party data while adhering to general data privacy compliance rules. First-party data can help you access your standing in the market, give you a better understanding of your customers and can help you design better business and marketing strategies. Customers are more than willing to share their information while participating in loyalty or a rewards program, which makes loyalty programs the best means of extracting data.


Take very careful thought when developing a customer/client loyalty program. The costs can get out of hand, then you need new customers to pay for the loyalty program.

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