Did you know that increasing your customer retention rate by 5% boosts your profits by as much as 95%? However often businesses choose to focus instead on attracting new customers, instead of looking after existing ones. It’s understandable that you want to grow your customer base. But how do retain those customers who are the most likely to buy from you again – and again? Well, one solution is to create a customer loyalty program that rewards those customers who come back.

A loyalty program that offers customer benefits for staying loyal to your brand is a great way to say thank you. Not only will it be good for your customers but it is a smart business decision too. But what exactly are the benefits of a loyalty program?

There are many potential upsides – both financial and non-financial. In this article, we’ll focus on five key loyalty program benefits, and how creating a loyalty program of your own will help you hold onto customers.

Why is customer loyalty so important?

Should you spend money on attracting new customers? Or on making sure existing ones come back – time and time again? Retention often proves a more cost-effective way to grow a business. And customer loyalty is a big part of it.

If you’re unsure whether you should focus on acquisition or retention, here’s why existing (and loyal) customers matter. 75% of customers say they would switch brands for a better loyalty program. Most customers will prioritize buying from those brands where they have points to be redeemed their account. Loyal customers are your lifeblood.

What is a customer loyalty program?

Customer loyalty programs and reward cards are of course no new kids on the block. They are essentially programs that reward customers in exchange for an action you want them to take.

Usually that is a repeat purchase but it could also be referring friends or spreading the word on social media. A good loyalty program is a great tool to keep hold of customers.

Different types of loyalty programs

Each loyalty program for customers is different. You can choose what rewards you offer, the actions to be encouraged or the mechanics of the program itself. There are, however, some broad categories into which loyalty schemes can be grouped.

There’s the Earn and Burn approach, which is pretty simple. A customer takes your desired action in exchange for points (earn). With those points, they can then use (or burn) them to redeem their preferred reward.

Then there are the tiered loyalty programs, which groups customers in tier and offer different packages of benefits to them.

At Loyaltier we believe in KISS, keep it simple stupid. At Loyaltier, we’ve found that the best rewards programs are clear and straightforward: “Do X, Get Y”. The most effective loyalty programs are those easiest to understand, so customers exactly know what to expect. No need to refer to a schedule with benefits. One of the key findings in the J.D. Power 2017 Hotel Loyalty Program Satisfaction Study, was that understanding on how to redeem rewards was a key factor determining how satisfied customers were with a loyalty program.

Does your hotel need a loyalty program?

In short, your hotel needs a customer loyalty program because it has a major impact. When 80% of your business will come from just 20% of your customers, you can see why it pays to invest in – and reward – customer loyalty. A customer who signs up to your loyalty program is much more likely to buy from you again.

So, what are the four main benefits of loyalty programs?

We’ve just touched on the benefits of customer loyalty programs – so let’s now take a look at four of the key ones.

1. Stop competing on price

Today, it’s very easy to compare hundreds of prices in just a few clicks using booking platforms such as booking.com and to obtain discounts from so-called platform apps where brands are competing against each other on price, such as Zomato and the Entertainer.  And then there are the coupon apps such as groupon.com and cobone.com. If you only attract customers who are thinking about the bargains you offer then you’ll find yourself in a pricing race to the bottom.

One of the biggest benefits of customer loyalty programs is that they can stop you from needing to compete on price alone. By staying in front of them and connecting with your customers’ emotions, it gives you a way to set your hotel, outlets, and your brand apart – offering a much more enhanced (and personal) customer experience.

Let’s elaborate on that.

Studies show that when a customer makes a purchase, the decision is highly emotional. Do you provide a service that people buy through desire and not a necessity? If so, it’s crucial you appeal to their emotions.

Each time you reward a customer, you’ll appeal to their emotional side. By doing that, you start building a bond. As that develops, they see you as more than as the sum of the services you provide. It strengthens their loyalty – encouraging repeat purchases that boost your profits.

It also makes them more likely to tell a friend, with 81% of emotionally connected consumers willing to both spend more and spread the word.

2. Retain existing customers

Loyal consumers spend 67% more on average than new ones. That’s a statistic you can’t afford to ignore. At the same time, acquiring customers could cost you at least five times more than retaining existing ones. Apply this thinking to your store and you can see the positive impact it can have.

Even in difficult times, members of a customer loyalty program can bring more value to your hotel.

A major benefit of loyalty programs is you can do more to keep customers coming back and spending more. As you start to turn existing customers into loyal ones, you’ll see the importance of customer loyalty management shine through in the long-term.

3. Increase Customer Lifetime Value

Customer lifetime value (CLV or CLTV) is the net profit attributed to the overall relationship you maintain with a customer. It measures how valuable a customer is to you – measured over expected time the customer will stay with you.

Why is this important? Well, figures show that for ecommerce stores you’ll see most of this 365-day “value” within just 30 days. Two-thirds of that is realized in the first month alone, rising to 79% by three months. The good news is that if you can get a customer to make a second purchase within 30 days of the first purchase, they are much more likely to come back a third, fourth, or even fifth time. This is where a customer loyalty program comes in. By staying in touch with them you can increase the chance of frequent repeat purchases and get a hold of those super-customers!

The benefit of a customer loyalty program here is that you have data on a person’s unique buying habits. With Loyaltier’s program for instance you will know exactly which customers purchased when, how much they spent and where they spent it. This will allow you to understand their needs and target your marketing efforts accordingly.

4. Build personal relationships

To create this emotional bond and make your customers feel loyal to your hotel shows how much you value them. You can do this by building personalized relationships. From the Loyaltier platform you can extract valuable customer data and insights such as: visit frequency, average spent and what they spent it on. Based on this you can segment your customers and email them to attend them to promotions that are likely to appeal to them.

Customers are increasingly looking to form a genuine bond with the brands they buy from and tailoring how your marketing approach will help you doing this. It’ll stop your customers from feeling invisible and start feeling valued, while you’ll start to realize the longer-term benefits of their loyalty to you.

How to start a customer loyalty program?

How to start a customer loyalty program?
How to start a customer loyalty program

With all the benefits of loyalty programs just waiting to be explored, why not start one for your hotel or B&B today? With Loyaltier you can launch one with minimal effort within a week.

At Loyaltier we have developed a loyalty solution that is tailored to hotels. We provide the apps, but you self-brand them in your house style using our web-portal. The signup screen, the logo and the colors can be set to match your house style. Your apps get their own listing in the Google Play Store and Apple App Store under the name of your loyalty rewards program and with your own app icon.

The program is designed to be very easy to understand. This, we saw above, is key to the success of a loyalty program. Each time a customer pays he gets to collect points, which can then be used as a discount on future purchases. The points expire after a year. How many points you want to reward is up to you. This solution allows you to sign up customers each time someone is paying a bill in a restaurant or checking out. Who wouldn’t want to sign up if you can immediately collect points which you can use a discount on future purchases?

After they have signed up you get their details allowing you to stay in touch with them. The app will not just allow your customers to collect and redeem points but allows you to showcase your current room deals and current promotions in your outlets. Moreover, customers can book rooms directly from the app, saving you on commissions you would otherwise pay to platform apps such as booking.com.

We take virtually all risk out of the equation for you. We use a performance-based fee model so that you pay only minimal fees if it doesn’t work out for you. And if it doesn’t work out you can terminate any time as the subscription fees are paid monthly.

You can download our white labeled apps in the Google Play Store and Apple App Store and test out how it works.

You are only a week away from realizing the four most important benefits of a loyalty program. Of course, some benefits can take a little longer to see than others. If you’re committed to your customer loyalty, however, that patience has the potential to pay off in the ways we’ve explored in this post. And it will help take your brand to the next level.


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