What are customer loyalty programs? What are the advantages of customer loyalty programs?

Do you know that it is six times more expensive for businesses to acquire a new customer than to keep an existing one? A study conducted by the State of Marketing showed that 63% of high-performing marketers are already using customer loyalty programs. As a business owner, you must remember that customer loyalty programs are not just about offering discounts for your customers but also improving your customer's overall experience.

This article will guide you in knowing more about customer loyalty programs and their advantages.

What is a customer loyalty program?

To explain the customer loyalty program in simpler terms, it is a marketing approach that recognizes and rewards the customers who have high engagement with the business or brand. One huge benefit of adopting customer loyalty programs is that these programs often result in high customer engagement and customers turn out to be the brand promoters of the business. Customer loyalty program benefits involve free merchandise, rewards, discounts, coupons, early access to new products, etc.

A marketer does not have to spend much on customer loyalty programs. It depends on the business on what to offer in the customer loyalty program. Who doesn't love receiving something for nothing? Pleasing your customers with a small product or service with purchase is an investment you are making in the customer loyalty program, which will likely reap multiples in returns.

5 most effective customer loyalty programs:

1. Point-based customer loyalty program:

Point-based is the most common and popular customer loyalty program. Customers are very familiar with this program and have a good idea of how this system works. They earn points as they spend and once they have a certain amount of reward points, they can redeem them and use those points for rewards, discounts, gift cards, services, etc. The rewards that the customers get and the number of points that a customer requires to earn rewards entirely depend on the brand they’re buying from. As an owner, you must make sure that the customers see value in participating in your program, because if they don’t, then you might lose your customers.

2. Subscription-based loyalty program:

In a subscription-based loyalty program, customers pay upfront to enjoy unique rewards and privileges. The subscriptions the customers pay for can be renewed either monthly to yearly. Customers opt to pay for these subscriptions after taking into consideration that their average volume of purchases would meet up with the subscription fees they’re paying for. Remember that most of the customers opt to buy these subscriptions, so make sure that any paid program you want to launch is appealing enough for them to be a part of.

3. Tiered customer loyalty program:

Here is how a tiered customer loyalty program works: As customers make purchases at regular intervals, they go on to unlock a new level of loyalty that comes with exclusive benefits and privileges than those who are in lower tiers. This customer loyalty program will encourage your customers to buy more and more to advance to the next tier and enjoy bigger rewards. Like point-based customer loyalty programs, people are familiar with the tiered customer loyalty program.

4. Value-based loyalty program:

In value-based customer loyalty programs, customers will not be rewarded with discounts, cashback, discounts, etc. They’re rewarded in other ways behind these freebies. A business can consider a value-based loyalty program if it has a strong social mission that the customers are passionate about. The best example of a value-based customer loyalty program is a pet store. The business owner there can develop value-based customer loyalty program where a portion of money which the customers are spending goes to charities or organization to support animals. A value-based customer loyalty program will help in developing a stronger bond between the customer and the owner.

5. Cashback loyalty program:

Cashback loyalty programs are very easy to understand, create and maintain. The value proposition cashback loyalty program is quite simple, for every dollar a customer spends, they will get some percent of their money back. The higher the customer spends, the more they earn a percent back in cash. This will save a certain amount of money for businesses as they can avoid providing discounts on each and every product. A cashback loyalty program will help the businesses not only retain the existing customers but also attracts new customers.

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