Loss or Gain?: Loyalty Programs

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Free items, awards, and coupons are everyday benefits businesses give customers. But why do they do this? What does a company gain out of losing money? Essentially, are these consumer benefits a loss or gain?

These benefits are all a part of loyalty programs, a marketing technique used to gain customers' loyalty through different incentives. According to the Harvard Review, 65% of businesses use loyalty programs. There are three main reasons for this: better emotional connection, long-term customer retention, and increased customer reach. 

To start, for most businesses, establishing an emotional loyalty foundation for clients should be a top priority. Because the emotional relationship goes beyond economic incentives, emotional loyalty includes a stronger level of dedication to the brand. After all, emotion is the number one motivator of loyalty, according to Forrester Research.

Furthermore, loyalty programs encourage clients to stay with a company for a long time, or "repeat" customers, resulting in a high return on investment. Only 8% of a store's most loyal, repeat customers account for approximately 40% of its sales, according to NDM Technologies. 

Moving from the previous point, however important it is to retain customers, gaining customers is also important and necessary at a level. This adding of customers or buyers can be most effectively done through loyalty programs. As found by Nielson, personal recommendations are trusted by 83 percent of consumers more than any other form of marketing. Customers that are loyal and satisfied are one of the most effective marketing instruments.

Gathering all of these benefits, it is easy to see how much value a loyalty program could add to a business or corporation. These programs target the area of a business most important, the customers. Especially considering that it is easier now than ever to enforce these types of reward systems through new technologies, corporations should implement these types of systems into their business in order to get higher profits.