11 Benefits of Loyalty Programs

Updated June 24, 2022

While attracting new customers is an important part of growing your brand, so is retaining current ones. By incentivizing customers to continue to buy your products and services, you can keep a steady stream of revenue. One way to get customers to return is by offering customer loyalty programs. In this article, we explain what loyalty programs are and outline several benefits of using them.

Related: 4 Steps for Creating an Employee Rewards Program

What are customer loyalty programs?

Customer loyalty programs are incentives companies use to get people to return to their store or website. Rather than attracting new customers, you can create customer loyalty programs to reward your current ones. Although, if new consumers hear about your program, they may also be interested in checking out your brand. Whether you work as a salesperson, marketing professional or in any business development role, seeing if your company can implement one of these programs can help you build a stronger customer base.

Every loyalty program works a little differently. Some companies use a point system while others reward customers based on how much money they spend. Other incentives with loyalty programs include special deals and promotions for members. Often, companies use mailing lists to inform their loyal customers of special sales, enticing customers to keep shopping.

Related: 10 Best Customer Loyalty Programs That Work (With Examples)

Benefits of loyalty programs

Here are 11 major benefits of loyalty programs:

Reward current customers

If you want your current customers to feel good about supporting your brand, a loyalty program can help. By rewarding them for their purchases, you're showing them you appreciate their business. Rewards can help customers feel like they're saving money, helping them feel more inclined to continue to support your brand.

Related: 11 Methods for Building Customer Loyalty

Reduce slow seasons

Depending on your industry, there may be slow seasons for your brand. A loyalty program can help you boost business during these slower seasons by giving customers a reason to shop. Companies may decide to give out more rewards during slow seasons and include an expiration date so that customers get to the store or website within a certain timeframe.

Reduce costs

Marketing to new customers and having sales staff reach out to them can take up a lot of time and money. This is especially true when you're reaching out to new leads who may choose to shop elsewhere. When your brand focuses on creating a quality loyalty program, you can reduce the costs associated with finding new customers.

Create mailing lists

When people sign up for your loyalty program, you can gather their contact information into a mailing list. This makes it easier to send repeat customers your mailers and emails. By sending them information about different sales and promotions going on, you can convince them to shop with your brand. Mailing lists also help you nurture clients, keeping your brand salient to them.

Boost profits

Of course, one major reason to create a loyalty program is to keep a steady amount of revenue coming into your business. By consistently giving loyal customers rewards, coupons and special deals, they may feel more inclined to shop with your brand. Even if people are saving money on your products and services, your discounts may influence them to buy more than they would have otherwise. Simply getting people into your store or on your website can improve your chances of making a sale.

Related: 12 Common Types of Discounts

Find new clients

While these programs cater to current customers, they can also help you attract new ones. When people hear about your exceptional loyalty program, they may want to take advantage of your savings. Some brands even use referral programs to get their customers to influence their friends and family members to shop with the brand. Current customers get special deals for each person they refer, and new customers get a special offer too.

Improve brand reputation

Creating a customer loyalty program that gives customers great deals and rewards can help you improve your brand's reputation. You can target people who shop to save and show them you value their support. When customers feel like your brand offers them great value, they may also feel more favorably toward it. Creating these positive connections in people's minds can make them feel good when they shop with you.

Get ahead of competitors

A loyalty program may make customers feel like they can save money shopping with your brand rather than another one. For instance, many grocery stores use rewards cards to influence customers to shop with them every grocery trip. By having a better reward system than your competition, you can target customers who would rather save money.

Build metrics

Creating a loyalty program makes it easier to keep track of your customers' purchases and spending habits. This information can help you come up with better marketing ideas and promotions. The information you gather can also help you learn more about your target audience. For instance, asking customers to fill out their addresses and birthdays can help you figure out which locations and ages to target.

Incentivize more shopping

Brands often use different tiers for their rewards members, which encourages customers to spend more money. The idea is that when you shop more, you can save more. For instance, when customers reach a certain dollar amount, they can unlock additional rewards and perks. You can offer things like free shipping and returns, gift cards and extra freebies.

Increase brand relevance

While consistent marketing can help keep your brand relevant, so can a loyalty program. By giving your customers updates on their current reward status, you can remind them to shop with you. Likewise, when a new customer shops with you, asking them to sign up for a reward program keeps them in your sales funnel. This makes it easier to reach out to them and remind them of all the great products or services you offer.

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