Why institute a customer loyalty program? Let us count the benefits. Loyalty programs provide:
- Increased spending. Loyalty members typically spend 18% more in your store than non-loyalty members.
- Customer retention. You know the stats on customer retention, right? You'll pay seven times more to acquire new customers than to retain the ones you've got. Retaining those customers can significantly increase your profit margin.
- Customer engagement. Loyalty programs are a great way to engage with your customers and keep them coming back.
- Referrals. Customers who have positive experiences with your loyalty program — quickly accumulated rewards, for instance — will refer others.
- User reviews. If you give your customers a great experience via your loyalty program, it's more likely they'll sing your praises online.
- Customer data. By gathering data about your loyalty members' purchases, you're able to know their preferences, frequent purchases and shopping habits.
Data is such an important benefit of loyalty programs. Let's do a deep dive into why it matters.
The value of customer data
Customer retention, engagement, referrals and increased spending are all great for your business, but the gold of your customer loyalty program is the data it provides. That data, including personalized information about your customers' purchases and spending habits, gives you a deeper understanding of their needs and preferences.
By analyzing this data, you'll be able to give your customers personalized offers, campaigns and promotions based on their past purchases. That kind of personalized interaction with your customers will enhance the benefits of the loyalty program itself, thereby making it even stronger. Your customers will feel known, understood and appreciated, which in turn translates to even greater loyalty, spending, engagement and referrals.
An important piece of data you'll glean from your loyalty program is Customer Lifetime Value data. What's CLV? It's the profit you net during the lifetime of your relationship with a customer. It can not only tell you how great a customer you've got today, but it can also predict future customer behavior. That's a powerful marketing tool with which you can strategize promotions and other offers.
One company that's benefiting from the data mined via their customer loyalty program is Starbucks. It has one of the most successful loyalty programs out there. In our whitepaper, 2020 Loyalty Marketing Trends for Convenience Stores, we outlined some of the highlights of Starbucks' program.
My Starbucks Rewards
To compete with the increasingly competitive coffee marketplace, Starbucks simplified and streamlined its loyalty program this year to include a larger range of redemption options for the points customers earn with purchases. They can now earn rewards quicker, at just 25 points, or they can accumulate points for greater rewards. Also, points no longer expire.
The program is based entirely on the Starbucks app. No punch card, no sign in. To earn loyalty points, which they call "stars," customers must order or pay through the app.
Why it works for Starbucks: Data. Starbucks learns customers' usual drink orders, frequently visited stores, seasonal preferences for specialty drinks and more. All of this information allows Starbucks to personalize offers that are relevant to customers.
Why it works for customers: Ease of use and rapid accumulation of points. Customers who order and pay on the app skip the long line, and earn two "stars" for every dollar spent.
In today's society, data makes the world go round. Your loyalty program can provide invaluable data about your customers' spending habits and preferences, allowing you to personalize offers, promotions and campaigns, which in turn, will create even more loyalty.