Establishing A Customer Loyalty Program
As any business owner will tell you, the most important factor to consider in business is your customers. Although many companies spend a huge amount of money every year on marketing for new customers, the majority of a businesss income will be generated by repeat custom. Previous research has shown that it can cost as much as ten times more to gain new customers that it does to retain old customers.
So if improving customer loyalty or creating loyal customers is such a great way to increase sales, how do you go about achieving it? Well, there are a few different routes that you could take, though most companies prefer to implement a customer loyalty program and offer customers a loyalty card. A loyalty card could either be a card that advertises a set discount on certain or all purchases, or it can be used on a points system, giving the customer a discount on certain items when they purchase a defined total value of goods.
One thing that puts off many businesses from introducing a loyalty card is the initial and ongoing costs involved; and coupled with that is the very protracted period until a return on that initial outlay is seen. However, although there could be some financial risks involved, the benefits are extremely rewarding; one particular loyalty guru, Fred Reichheld is adamant that if your business can manage to retain just 5% of customers, then you can expect to see an increase in profits by up to 50% within two years.
Alongside customer retention, another incentive to introducing a loyalty program is the free market research that can be gained from the use of a loyalty card. By monitoring the spending habits of customers, you can see what products they prefer, and cross-reference that with the customers demographic description. What this means is that you can take information from the customer when they fill out an application form for the loyalty card, and use that information to create a demographic representation of your customers. Not only that but you can gain information on their product preference and also feedback from your current range of products. Ultimately, you can use this information to better target your marketing campaigns directly towards your ideal customers.
Ultimately, a business must be prepared for the long terms benefits that a customer loyalty program can bring. A loyalty program can cost you as much as 5% of your revenue, but if you are willing to put that much into the task of retaining customers then the likelihood is that you will see a much larger return on your investment within 2 years. Just make sure that the customer can get something out of it; nobody likes being taken for a fool and your customers are certainly not fools, so make it beneficial for them as well as you.
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