Why Should I Invest in a Customer Loyalty Program?

Oftentimes our potential clients ask, “Do you really think rewarding my customers will lead to higher returns for my business?” We don’t just think so, we know so! Customer loyalty is not a new concept. Many studies have proven that well executed loyalty programs create significantly larger profit margins in competitive markets. Why do you think large corporations like Starbucks, CVS, and Safeway (just to name a few) invest MILLIONS of dollars into their customer loyalty programs?

Here are a few reasons:

How Profitable Are Customer Loyalty Programs

Acquiring a new customer costs 6x-7x more than retaining an existing one.  I’ve met hundreds of business owners that regularly spend hundreds, sometimes thousands, of dollars on advertising each month. The problem here is that traditional forms of advertising are very expensive and their actual returns on investment are difficult to measure. Most of the time, these ads don’t bring in enough new customers to cover their costs and you won’t even realize how much money you’re losing! Both old and new forms of advertising such as coupons, discounts, newspaper ads , and daily deals, cut into your profit margins and do nothing to encourage these customers to return.

Customer Loyalty is the single most important driver of growth and profitability. Loyal customers, on average, visit 2x as oftenspend 4x as much money, and are also the best brand evangelists for your business. A great loyalty program can help you retain these customers and the long-term revenue they generate. Imagine what can happen to your business if you could create a much larger group of loyal customers!

A 5% increase in customer retention can double your profits. The average business loses 10-30% of its customers each year. It’s counterintuitive not to try to reduce this number, especially when thinking about the lifetime value of each customer. Without a plan for customer retention, you’re essentially attempting to fill a bucket up with water that has holes in it! What if you could implement a loyalty program that will tell you which customers haven’t been in for a while and provide easy ways for you to get in touch with them? Problem solved.

There are hundreds of reasons why a great loyalty program is worth the time to look into. It can literally be the easiest way to grow your business!  Maybe it’s time to make a positive change to your business that both you and your customers will love…

We’ll continue to post more articles on loyalty so that we can help guide you through the process, whether you choose to work with us or not. If you’d like more information about how FiveStars can act as your loyalty division or if you just want to learn more about loyalty in general, give me a call: (650) 870-0476

Gracie is the Online Marketing Strategist at FiveStars. When she’s not busy muttering about blogs or social media strategy, she can be found outside enjoying the sunshine, owning the foosball table, or jamming out on her speaker backpack like a boss.  She’d also like to give a shout-out to her intern for writing a mini-biography to append to her blog post. 

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