How does a loyalty program work?

Have you ever thought about this problem in your business: “I invest a lot of budget in attracting new clients and I get them to buy from me but then very few of them buy from me again”? Then you are reading the right article!

Getting a new customer is much more expensive than re-selling to the current one. In fact, statistics indicate that cost is between 5 and 7 times higher!

That’s why retention and loyalty programs are a boom around the world and help us improve the profitability of our store.

The ABC of the loyalty program

A loyalty program consists of giving a customer a reward for buying more than once. The goal is to retain the customer. Once you’ve drawn him in, are you going to let him go so easily? The program is a great way to keep you engaged, interested, and motivated to make more purchases.

This It will allow you to differentiate yourself from the competition. The program is the best excuse for a customer to prefer you over other businesses that sell products and services similar to yours.

The execution mode of the program is through points. The intention is that with each purchase you reward the customer, and that he can exchange the points for prizes that interest him and, in turn, encourage him to make new purchases.

The investment involved in applying the program is minimal when compared to what you initially made to advertise your business. And the profitability that it allows you is highly superior to the sum of both.

The secret is that the customer feels that he loses if he does not buy from you; you’re losing points and somehow losing the ones you’ve already earned with your first purchase.

The key is to keep the program active by alternating promotional actions that allow the customer to double points or increase their redemption value. Prevent him from forgetting that he has the advantage of obtaining prizes.

As a result, you will have higher profitability because what you invested to attract and retain the customer will be less than the money you generate as a result of keeping them encouraged to buy and, consequently, to increase their score.

Main benefits of a loyalty program

1) The great commercial effort you made initially to attract new buyers is amortized

Bringing a client generates a certain cost, an amount that he will probably not spend on his first purchase, so your investment is not covered. However, if you add just 20 percent to the money you had to spend – which is what it would take to install the points program and what guarantees that that customer comes back again and again to purchase your products – your remuneration will exceed significantly your investment.

2) The effort to retain them is less than the one you had to make to attract them

At first, one invests in advertising or promotion for , and then in strategies such as the loyalty program (which have a considerably lower cost).

3) The client accompanies you in your growth and leaves you, more or less frequently, a disbursement of money

It is a strategy that generates a fluid seller-buyer relationship. The frequency of the purchase will depend on the product you offer: a car is not the same as pet food. But it is likely that the customer will choose to return to your business because your proposal guarantees a plus in their shopping experience.

4) It is a way to differentiate yourself from the competition and get out of the price rivalry that ends up destroying your profitability

It is not about drowning you with prices to the public that are close to your costs, but about offering an extra benefit that inspires you to pay more and on a regular basis.

5) It is a very versatile tool that allows you to offer and alternate different promotions

There are multiple ways to encourage customers to add points and you can update the proposals based on your needs.

6) The customer perceives added value and that motivates him to make new purchases in your store

The fact that you can not only take what you went looking for, but also something that you did not expect or that no other store offers you, improves the image and the relationship that you establish with your brand.

7) Generates a more satisfied buyer who also recommends

Because when someone wins an award they like to comment on it. This allows other customers to come to your store as well.

Synthesis

When you manage to attract a client, it is essential that you retain it, since it is always more expensive to attract a new client than to sell to the current one.

Start offering benefits for your customers today!