Understanding Loyalty Programs and
Why They Are Important to Your Business
A loyalty program is an advertising strategy designed to encourage consumers to keep on or to use the services of an organization associated with the program as long as the consumer pays the agreed upon amount. It is typically called a reward program and a customer usually joins the program in return for some form of "reward". The "reward" in a loyalty program may be some form of monetary benefit such as discounts or other privileges, or it may be some form of recognition such as a letter of appreciation or even an award. Loyalty programs are usually designed for special clients or for a group of people, and not just for single customers.
Loyalty programs are a very good way to promote your brand and increase customer Relationship Management. They work especially well in two particular ways. The first way that they work is that the more times customers refer their friends and family to the company - the more the company benefits from this word-of-mouth advertising. Loyalty programs encourage customers to let their friends and family know about the great products and service they receive from your company, which will result in more new customers being referred, as well as a growing pool of regular customers who will most likely become repeat customers over time.
The second way that loyalty programs work is by increasing the amount of spending customers do when they do business with your company. Let's say you sell shoes. If you offer a loyalty program that gives your customers a discount if they buy two or more pairs of shoes, then they are more likely to buy those shoes in the future. That means they will spend money on shoes. Eventually, these customers become loyal to your company and spend more money - and spend it on more things, which lead to more referrals, and so on and so forth.
Many loyalty programs offer either cash back or other form of credit or rewards. Loyalty programs may also provide points or certificates for goods and services. Again, these points add up and eventually convert into cash. Some companies even offer credit to their loyal customers. This is known as "tiered" loyalty programs.
One of the biggest benefits to these types of programs is that they are very effective at increasing sales for retailers that have them. Retailers that have loyalty programs are able to attract more customers who spend money on their products and services. That in turn means more profit for the retailer, which results in higher pay for the employee who leads the charge. For example, an employee earning $20 per hour can earn additional bonuses of several thousand dollars for spending customers who shop at Amazon or Best Buy.
Not all retailers offer a loyalty program. However, those who do find that they are quite profitable. Companies like The Home Depot and Lowes have integrated these into their own retail programs. These retailers require employees to have a membership with their company before they can qualify for a loyalty card. Employees receive an identification card that contains a number that customers spend with the retailer.
Online retailers also offer loyalty programs. Some allow their customers early access to special deals or "pre-launch" specials that aren't available to customers who purchase their products at traditional retailers. Early access to special deals can result in large savings for the customer. For example, some consumers may be able to buy a new computer for less than they would normally pay. The faster they get their computer, the sooner they can start using it and the sooner they can enjoy the benefits.
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