Why invest in a customer loyalty programme?

Insights
Posted on 25 March 2022 Read time 6 mins
Author Hannah Dempster

What is a customer loyalty programme?

By definition, a customer loyalty programme is a strategy that aims to keep customers faithful to a brand for longer by offering them rewards and benefits in exchange for particular actions (like making purchases). 

Loyalty can manifest itself in several ways - from opting to spend with that brand, to evangelism, and devoted engagement. 

There are several different types of loyalty programmes - many operate on a points-based system where customers earn points when they spend. Others may share merchandise, rewards, coupons or early access to new products.

 

How do eGift card programmes differ from ordinary loyalty schemes? 

Some retailers enable customers to cash out loyalty points as currency to spend at their own stores. However, there’s a growing trend towards allowing customers to cash out points to a digital gift card for the brand of their choice. 

Offering greater redemption choice makes the loyalty currency more valuable as the customer can choose where they would like to spend it, rather than being limited to a single brand. 

The success of loyalty strategies and the growing need to retain customers in a crowded marketplace means that more organisations are investing in loyalty. 

And for good reason. On average, loyalty programme members contribute 43% of companies’ annual sales, and 60% of companies report that loyalty customers spend 2-3X more than non-members. 

 

Why does your brand need a loyalty programme?  

There are quite a few reasons why you should consider a customer loyalty programme. By creating a strong loyalty programme, you can expect to see these benefits:

  • Keep your customers coming back for more, increasing customer lifetime value (LTV). Acquiring new customers is much more expensive than keeping existing customers engaged.  
  • Ensure your customers spend with you rather than the competition.
  • Delight customers so that they become evangelists - and help you win new customers
  • Attract new customers (both evergreen customers and win customers away from competitors). This is also known as word-of-mouth marketing. 
  • Build your brand reputation and foster long-term trust with customers.
  • Drive increased basket spend with specific loyalty offers 
  • The data collected enables you to improve the overall customer experience, sharing more personalised, relevant offers, and surprise and delight customers. 

 

Yotpo loyalty stat

 

How effective are customer loyalty strategies? 

As you’ve seen, there are plenty of benefits to creating a loyalty programme. Any business that makes a decent margin on their services should think about re-investing some of that to help grow their brand.

In fact, to stay competitive, most businesses can't afford NOT to offer some kind of benefits/rewards to grow their customer base and keep customers loyal. 

But how can you be sure that your business will see the benefits? 

Of course, not all loyalty programmes are created equal. 

You’ll need to ensure that you have a comprehensive loyalty strategy before implementing a programme; it’s important to provide customers with real value for taking part in your loyalty programme. See the section below for considerations and examples to help you get started.

There are plenty of stats and studies that show the value of creating a customer loyalty programme. Here are a few:  

  • 64% of brands reported an increase in loyalty memberships in the past year alone. (Annex Cloud). 
  • 54% of customers say that they would consider doing more business with a company because it offered loyalty rewards. (Annex Cloud)
  • The probability of selling to an existing customer is 60-70%. (Altfeld)
  • 58% of internet users believe earning rewards and loyalty is one of the most valued aspects of the shopping experience. (eMarketer)
  • Over 70% of consumers are more likely to recommend a brand if it has a good loyalty program. (Bond). 
  • 77% of consumers say they stayed loyal to specific brands for 10 years of more. (InMoment).


5 top customer loyalty programmes

The best customer loyalty programmes do more than just provide perks or encourage more spend with a brand - they delight customers and show that you value your customers. Here are five gold standard loyalty programmes for inspiration.

 

Klarna’s got the right “Vibe”

Klarna is the leading globally payments and shopping service; they have disrupted the buy now, pay later (BNPL) space and deliver more flexible shopping experiences to over 147 million consumers across 47 countries. They are the first BNPL service provider to offer a customer loyalty programme - it’s called Vibe

Members earn a “Vibe” point for every $1 they spend and Vibes can be redeemed for rewards such as gift cards from a wide array of brands. What we love most about Klarna’s loyalty programme is that to encourage and reward responsible spending habits, members will earn Vibes once their payments are completed and paid on time. The programme was developed with direct input from customers who wanted more freedom within a rewards programme. Pretty awesome! 

 

Tesco Clubcard

Most supermarkets have some kind of loyalty programme but one of the most well-known is probably Tesco Clubcard - as well as unlocking exclusive prices in store simply for scanning it, members also collect points when they spend on food, fuel, fashion and more. 

Tesco turns every 150 worth of points into £1.50 and members are able to cash-out their voucher across hundreds of reward partners - from eating out, to entertainment, travel and more. The points certainly add up and we particularly love that customers are able to get up to 3x the value of their vouchers with Tesco’s Reward Partners, making their rewards go even further. 

 

The Body Shop

Well known for their socially responsible, sustainable and cruelty free products, the Body Shop’s “Love Your Body” loyalty programme is also a thing of beauty. With their programme, you get 10 points for every £1 and get a £5 voucher for every 500 points you earn, and points can also be donated to a variety of charities. 

They do a great job of sparking delight - for example, they send members a £5 birthday voucher, and also share invites to exclusive events, product launches and giveaways that are only available to members. If you forget your loyalty card when shopping in-store, you can just share some details and they’re able to access your points for you. It’s a smooth and seamless programme! 

 

Honey

The popularity of the free Honey app and browser extension shows just how excited consumers are to receive rewards that can be cashed out onto a range of digital gift cards. Honey automatically searches for and tests available coupon codes to help shoppers get savings on their cart. 

Customers not only get discounts through the platform but each purchase that they make through the platform earns them Honey Gold - once they have enough points, they can cash this out onto a digital gift card of their choice. Honey makes it super simple to get free rewards that customers love! 

 

Starbucks Rewards

One of the early adopters of an app-based loyalty programme, Starbucks Rewards makes it super easy for customers to earn loyalty points (or stars) - it breaks away from traditional coffee shop loyalty programmes which relied on a punch or stamp card which were easy to forget or lose. 

To earn points, customers must order or pay with the app; the customer preferences data this generates makes it easier for Starbuks to offer more relevant rewards and also makes it easier for customers to reorder their favourites. They’ve gamified elements of the app, provide prizes, double-star days, and give customers a free voucher on their birthday. 

 

How do you start a loyalty programme? 

There’s a lot that goes into setting up a loyalty programme so this is not a comprehensive list - but it gives you some key considerations to help you avoid common loyalty pitfalls. 

 

1. Define your strategy. 

Before you get started building it, you’ll need to define how your loyalty programme will work. For example, do you want to use a points based system based on the amount a customer spends? This works best for quick, everyday purchases (whereas a higher price point businesses like airlines and hotels would benefit from tiered rewards). 

Establish how the points system will work, and make sure that it’s easy for customers to understand and make use of. 

 

2. Consider the customer experience. 

How will you tie the programme to the existing customer journey? Make it easy for customers to sign up to and manage the programme - consider developing an app or building out a website and ensure a loyalty card can be added to customers’ digital wallets in case they leave their card at home. And redemption needs to be super smooth and simple to keep customers loyal to your loyalty programme! 

 

3. What rewards do you want to offer? 

Some organisations might be in a position to offer specific or distinct rewards that are unique to them. However, some of the most successful loyalty programmes enable recipients to choose from a range of brands that they love when cashing out loyalty. 

Consider partnering with an organisation that can help you build out your programme and deliver the rewards. If your brand doesn’t have the bandwidth to create your own programme, consider if your brand can join an existing one - like SkyTeam which covers a wide range of airlines. 

 

4. Name your programme.

Try and make your loyalty programme as catchy and appealing as possible. If you’ve got a strong brand presence then you can tie this to your loyalty programme name - everyone knows Tesco Clubcard - or make it that little bit exclusive like Stephora’s Beauty Insider Programme. 

 

5. Clearly communicate the benefits

Did you know that a key barrier to loyalty programme success is communication. 81% of loyalty members don’t know the benefits of their programs or how they can receive their rewards? Customers don’t have the time or patience to figure it out by themselves.

Ensure you have a communication strategy to clearly highlight the benefits of your programme, how to redeem and leverage purchase data to ensure your communications are relevant, timely and personalised. Depending on your audience, email, SME, direct mail and social media can all be used to engage members. 

 

Powering your loyalty programme with digital gift cards

If you’re offering customers the ability to cash out onto digital gift cards then you’ll likely want to partner with a digital gift card provider. Tillo makes it easy to integrate branded content into your own loyalty programme via the most comprehensive API in the market. 

Offering a wider range of brands provides your customers with value that goes above and beyond what your company alone can offer, shows that your organisation knows your customers well and cares about their needs. Tillo partners with over 2000+ international retailers that people love - so there’s something for everyone. We believe rewarding should be a delight from start to finish. 

Customer loyalty according to HubSpot

 

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