10 Reasons to Start a Customer Loyalty Programme

Customer loyalty programmes are used across a wide range of sectors to retain and reward customers, and also to help organisations improve their business performance.

In a world of huge consumer choice, attracting customers to sign up to a loyalty scheme can help a company become the first point of call in people's purchase journey, and generate return visits.

Customer loyalty programmes help organisations gather and leverage customer data, giving them a head start in shaping their proposition and bringing new products and services to market.

Essentially, those launching a customer loyalty programme should understand they are doing so for multiple reasons – not least to elevate their service offering for the end consumer and because there are clear benefits from an operational, marketing, and brand-building perspective for the organisation. 

Here at Epsilon, we’ve helped some of the most well-known brands launch their own custom loyalty programmes that dramatically impacted their business’s bottom line. 

Now, we want to share with you the top ten reasons why every growth-orientated organisation should launch a customer loyalty programme.

1. Loyalty Programmes Provide a Chance to Reward Top Customers

A good customer loyalty scheme will reward your best customers for their faithfulness to your brand.

Ultimately, when you have consumers who want to spend money regularly with you, good customer service dictates you should recognise this loyalty. 

Loyalty schemes can put all the foundations in place to give your business the ability to recognise and reward individuals accordingly.

Rewarding your best customers for their loyalty can cement or formalise your relationship with them and encourage them to spend more over time.

2. Reduce Your Customer Cost-of-Acquisition

Talk to any brand or commercial enterprise and they will tell you it is more expensive to recruit new customers than to retain existing ones. Although it is difficult to put an exact figure on it, the general rule of thumb is that in marketing, the cost of acquisition is five times greater than customer retention. 

For a growing organisation, it is – of course – essential to bring in new customers, but you should realise the significant commercial benefits of looking after the audience you already have.

Having a customer loyalty programme gives you a chance to access and communicate with your existing consumer base and, therefore, trigger repeat spending that boosts customer lifetime value. 

3. Customer Loyalty Programmes Boost the Customer Experience

The feeling a customer has about a brand they interact with – otherwise known as the customer experience (CX) – is a modern-day focus area for many consumer-focused organisations looking to stand out in a world where products and services can be bought with the click of a button or swipe of a screen.

When used appropriately and proactively, a customer loyalty programme can support the overall CX. Sending members tailored messaging at the right time, or simply recognising their loyalty with a reward, discount or another incentive, builds a positive association with the brand in question.

Research from business analyst group Forrester suggests good CX is crucial because customers are 2.4 times more likely to stay with a company delivering good CX, and they are 2.7 times more likely to spend more and 10 times more likely to recommend the brand in question.

4. Customer Loyalty Schemes Enable Data Capture

Talking at the Retail Technology Show in London, UK, on 27 April 2022, former Sainsbury’s CEO and now New Look chairman, Mike Coupe, told the audience his greatest achievement at the supermarket chain he led for six years was to acquire loyalty scheme provider Nectar. 

He referenced the accompanying customer data as a huge prize from the deal, giving the retailer a chance to know customers better and reward their loyalty. The scheme gives an in-depth insight into how people shop, Is Your Marketing Team Prepared for the Death of Third-Party Cookies?

6. Customers Want Personalised Relationships with Brands

As discussed, a customer loyalty programme enables organisations to get closer to their audience and be more tailored in their marketing activity. In 2018 Virgin started the process of revamping its marketing to bring multiple loyalty schemes under its banner together, following customer feedback.

This is not just good for the business, it’s what customers are looking for from brands – there is an expectation of value exchange. Consumers are increasingly aware of the value of their data and expect to be rewarded with a personalised experience from a brand when they sign up for loyalty schemes.

Loyalty schemes allow organisations to monitor a member’s purchases, and with this information, they can market to them replacement items at a suitable time and suggest related product ranges that are more likely to resonate.