The Advantages of a Customer Reward Program

Competition in the business world is of course fierce, we all want a larger market share, more customers and higher profits. In this world we know that creating customer loyalty is one of the most widely touted methods we can use to increase market share and build long term profitability for a company. However, the actual advantages of customer loyalty programs may be less clear for a number of reasons.

Customer reward programs cost time, energy and money to run whether they are on a small scale or a large scale. They need to be carefully considered, planned and executed to ensure that they have the desired effect – creating loyal customers. It’s no good rewarding customer loyalty with free surfing holidays if your core market is retired people living in Cornwall. Getting the balance wrong can alienate large parts of your targeted customer base and so careful market planning is needed. With so much extra work involved you might be thinking that the ROI on a customer loyalty program might simply not be high enough – your business remains profitable and your customer total remains relatively constant.

However, before you disregard the advantages of a customer loyalty reward program consider what would happen if core members of your customer base remained loyal to you – decreasing the attrition rate of your customer base and increasing overall profitability incrementally. This is the reality of customer reward programs.

So what then are the key advantages?

The first core advantage then is that a customer reward program increases your chances of engendering customer loyalty. If you reward your customers well for buying your products and services then they will choose to keep buying from you over your competitors. So this core advantage is crucial – loyalty reward programs help us grow and retain market share by engendering customer loyalty.

The second core advantage is that customer reward programs provide boundless marketing and research opportunities – from identifying core demographics to testing new products and services. In the UK Tesco holds more consumer data than any other body – including the government! Having the ability to attain customer information (essentially for free) means that the quality of your research ability and your marketing will increase dramatically.

The third advantage to a reward programs is that they are relatively low cost compared to many other forms of marketing and loyalty creation. Whilst an ad campaign or an online re-launch might attract short term attention reward programs are in essence self-perpetuating; all your customers are offered the opportunity to join the reward scheme and the scheme itself becomes engrained in the operations of the company. This means that after the initial costs the maintenance is relatively low – sourcing new rewards and maintaining the actual materials.

Finally reward programs also offer one further opportunity worth mentioning – the ability to build cross promotional platforms across markets and sectors. If you reward program offers discounts or deals with other companies you can create reciprocal deals where other companies’ loyalty programs send customers to you and vice versa. In certain industries this can allow you to build mutually cooperative platforms which allow for easier marketing and increased business growth through strategic linkages.

The advantages of customer reward programs are just massive and whatever stage your business is currently at customer loyalty should be a high priority.