Loyalty Blogs

In today’s fast-paced business landscape, companies often struggle to gain the attention of their customers and retain them for a longer time. Business owners look for investment options that promise a high return on investment (ROI) and a well-planned loyalty program is one of the best long-term investment methods that can yield higher returns over time.  

Gone are the days when loyalty programs were just considered simple rewards-based programs. Today, loyalty programs are becoming an essential aspect for all businesses that helps to boost sales, attract new customers and enhance customer experiences. The global loyalty program market, which was valued at $180 Bn in 2022 is estimated to grow at a CAGR of 5-6% to $179-191 Bn between 2022 to 2026. 

In this blog, we will learn how well-executed rewards programs for businesses can drive growth across various industry verticals worldwide and yield higher profits.  

1. Increase Spend 

By making use of loyalty programs and offering appealing rewards, brands can encourage existing customers to spend more thereby increasing revenue. Research says that loyalty program members are more likely to buy often and spend more as compared to non-loyalty program members resulting in a 5-10% increase in revenue.  

Investing in existing customers to spend more can be more cost-effective than acquiring new ones. Here are some of the main metrics that businesses can use to measure customer spending- 

• ARPC (Average Revenue Per Customer) 

This metric is also known as ARPU and helps to define how much a customer contributes to the company revenue stream on average during a particular period.  

• AOV (Average Order Value) 

This metric can be defined as the average transaction amount spent by members over time, which is calculated by dividing the total amount spent by the number of transactions during a particular period. 

Loyalty programs serve as the ideal marketing tool to increase ARPC and AOV. For instance, you can make sure that the loyalty program you are building is incentivizing member spending, which can generate significant profit for your brand generating a win-win situation for both.  

2. Higher Acquisition 

We all know that acquiring new customers can be a good thing for the business to boost incremental revenue but it can be quite expensive. Business owners across various industry verticals are struggling with high third-party acquisition costs. However, by investing in the right loyalty software solution, you can combat this growing expense & still expand your customer base. 

Two metrics that must be kept in mind when it comes to acquisition are- 

• ARPNC (Average Revenue Per New Customer) 

This defines how much each new customer contributes to the overall company revenue stream on average during a particular period.  

• CPA (Cost Per Acquisition) 

This is defined as the average amount of money that the company spends to acquire a new customer.  

Ensure that you build your loyalty program in such a way that it helps increase ARPNC and reduce CPA. For example, you can offer rewards like coupons or discounts for new customers encouraging them to spend and make their first purchase.  

3. Better Retention 

Retention of customers is the ability of a business to keep its customers for a long time. Loyalty programs can help build effective strategies and efforts to maintain long-term customer loyalty, reduce churn, and boost repeat business. Irrespective of the industry vertical, retaining customers can be 5-25% more expensive than acquiring new ones. Additionally, increasing customer retention rates by just 5% can increase 25 to 95% profits. 

The main key metrics that are associated with retention of customers are- 

• CRC (Customer Retention Cost) 

This metric is the total cost of retaining a customer, which includes expenses of marketing, customer, service, loyalty programs and any activities to keep customers engaged.  

• Churn Rate 

This is the percentage of customers who stopped using the offerings and products of a company during a specific period. Churn is an important metric to track, monitor and optimize for sustainable growth of the business.  

Make use of targeted communications to boost engagement among customers with messages that are relevant and meet specific preferences.  Give more priority to high-value customer segments to reduce churn rate, which shows higher customer loyalty.  

4. Boost Engagement 

Keeping customers engaged is important for your business growth as it will not only boost customer satisfaction and loyalty but also help to increase word-of-mouth promotions. This means that by keeping your existing customers happy and engaged, your business can gather valuable feedback, understand customer needs and create tailored experiences that boost overall satisfaction. Higher customer engagement will lead to an increase in customer lifetime value and long-term business success.  

Ensure that you keep all the program members engaged across multiple touchpoints at both transactional and non-transactional moments. As most customers are active on social media, share about new product launches,  events and wishes on social channels like Instagram, Facebook, TikTok, etc.    

5. Brand Advocacy 

Make sure that you turn your happy customers into brand advocates and promoters, who can invite their family and friends to try your products and help your business increase its customer base. One metric that can help in measuring brand advocacy is the Net Promoter Score (NPS), which measures how likely customers are to recommend a company to their friends and colleagues on a scale of 0-10. 

Your business must focus on increasing brand advocacy by encouraging members to provide reviews to positively engage with the brand’s social media channels and offer referral rewards. Referrals are a great way as customers are more likely to trust recommendations from people they know.  

Final Thoughts 

As we can see loyalty programs are not just meant to offer rewards, but they have become an important tool to boost business growth and profitability. A good loyalty program can do wonders for the business in generating incremental revenue across various aspects- whether it is for customer acquisition, engagement, spending, retention, advocacy or data utilization.  

If you want to unlock new opportunities and grow incremental revenue, Novus is a reliable loyalty program platform that enables businesses across industries to transform customer relationships into lasting connections for profitable business growth. Talk with our loyalty experts today to build a custom-made loyalty program and gain a competitive edge in the market. Our team can help in developing unique programs aligned with changing business needs and customer expectations. Book a demo today to learn more.