Customer rewards program is a key marketing tool that is used by businesses to encourage and motivate customers to return to stores and make repeat purchases. This is achieved by offering them some incentives like discounts, coupons, early access to new products, and other types of rewards systems. It mainly targets customers who exhibit loyal buying behavior. When customers participate in this program, the company or business obtains their personal information and in return, they are given a privately issued ID or transactional credentials to use when making purchases.
There is a very high prevalence of customer rewards programs in almost every business, and customers expect “bribed loyalty” offers in order to maintain their relationship with the business. However, this program is developed for the benefit of both the customer and the business.
Benefits of a customer rewards program
Implementing a customer rewards program requires resources and the company must be willing to spend big to make it effective. In the long run, the benefits gained outweigh the costs incurred. Here are some of the benefits of having customer rewards programs.
Retaining existing customers is the key to growing a business. This is supported by the 80/20 rule that suggests that 80% of a business’s sales come from 20% of its loyal customers. The cost of acquiring new customers is higher than keeping the existing customers. The most active customers can be kept through rewards programs or loyalty programs.
Boosts customer spending
Giving customers price discounts and other rewards encourage them to buy more. Also, incentives like customers earning points on slow-moving products increases customer traffic in order to buy more and keep enjoying other rewards.
Attracts new customers
Since it is costly to get new customers, all efforts should be directed to rewarding existing customers. This nurtures customer-business relationship which will not only benefit the existing customers but also attract and give new customers a reason to keep making purchases. This is a beneficial marketing tactic that rewards the business with new customers without spending a lot on them.
Increased competitive edge
Having an effective loyalty program can give the business the ability to give customers the best rewards in order to lay off the competition. Keeping customers happy and fully satisfied cements the company’s relationship with them and it will be hard for them to defect to another company for the same products or services.