10 Loyalty Program Benefits & Stats for SMEs [2020 Ultimate Guide]

Satisfied customers are NOT always loyal.

In the words of customer service expert, Shep Hyken,

“There’s a big difference between a satisfied customer & a loyal customer. Never settle for “satisfied.”

Your business needs loyal customers, especially if you sell products or services that thrive on repeat purchases. So if you

  • Sell apparels,
  • Run a café or deli,
  • Manage a restaurant,
  • Own a consultancy,
  • Have a computer, home or office maintenance business,

Or any other small to midsize business, you could benefit from a loyalty program.

Running a loyalty program may have been difficult in the past, but not anymore. Digitization has since made things easier. So managing your loyalty program these days is as easy as eating cake.

But then you might be wondering what you stand to benefit from launching a customer loyalty program. Yes, that’s a valid concern.

Read on to find out.

10 Benefits & Stats of Loyalty Program

1. Boosts Customer Spend

In a joint study published by Manta and BIA/Kelsey, 61 percent of SMBs say that repeat customers drive more than 50 percent of their sales. Meanwhile, only 34 percent of these small businesses have a loyalty program in place.

The study also found out that repeat customers spend 67 percent more than new ones. But the Manta study isn’t alone in this finding.

Although Amazon isn’t a small business, buyer psychology is often the same across platforms they trust. While Amazon Prime users spend an average of $1,500 a year on Amazon, non-Prime users spend only $625 a year.

In other words, Prime customers spend 140 percent more.

It helps that customers love loyalty programs. According to a Visa sponsored Loyalty Report study, 81 percent of customers say that loyalty programs encourage them to keep buying from a brand.

More than 39 percent of customers in a loyalty program would spend more on your product even if they have cheaper alternatives.

Yopto stats
Image Credit: Yotpo

2. Boosts Customer Spend Frequency

Top marketing consultants believe that customers who use loyalty programs are five times more likely to commit to buying from only one brand. But it doesn’t stop there, those customers’ frequency of buying is 90 percent more than others.

When customers attach their purchase to winning a reward, they tend to buy more to earn that reward. The Journal of Marketing Research says that the closer a customer is to a bonus, the more they buy.

3. Encourages Word of Mouth Marketing

Loyalty program customers often feel good about the rewards they receive from a business. So they end up telling their friends and family about the brand.

In the Loyalty Report study that I cited earlier, 73 of customers on your loyalty rewards program are more likely to recommend your brand.

As you probably know, customer-to-customer recommendations have many benefits on their own. HubSpot says that 81 percent of customers trust recommendations from their friends and family.

Hubspot Loyalty stats
mage Credit: HubSpot

McKinsey reports that 20 to 50 percent of all buying decisions come from word of mouth. Here are some benefits of word of mouth marketing,

  • It’s free promotion for your business,
  • People trust them more,
  • Customers acquired via word of mouth spend more,
  • It has 50 times more chance to lead to a purchase,
  • Customers gained by word of mouth are more likely to recommend others
Referral Impact stats
Image credit: Bain & Company The Value of Online Customer Loyalty Report

A different study by Bain & Company supports these McKinsey findings. Customers who’ve shopped ten or more times refer 50 percent more people than one-time buyers.

4. Loyalty Programs Lower Customer Acquisition Costs

You can more easily convince an existing customer to buy more than ask a new customer to buy more. Customer acquisition costs six to seven times more than customer retention.

Retention Vs Acquisition
Image Credit: SuperOffice

Businesses spend a lot of money on marketing and customer acquisition is a big part of that spending. But stores that focus on customer retention notice significant profit boosts.

A mere two percent increase in customer retention would have the same effect as cutting costs by ten percent. In another report, a five percent boost in customer retention rate translates into a 25 percent increase in profit.

Here’s the exciting part.

Depending on your industry, increasing your customer retention by five percent could earn you a 125 percent boost in profit.

Meanwhile, acquiring new customers instead of building a customer loyalty program cost five to 25 times more.

So the more loyal customers you have, the lower your cost per customer you acquire.

5. Stores with Loyalty Programs Attract More Customers

In a Technology Advice study, more than 82 percent of shoppers say they’ll opt for a business with a loyalty program over a store that doesn’t have one.

Loyalty Programs
Image Credit: TechnologyAdvice

But a loyalty program only works if your users are engaging with your program. So you want to know your users’ motivations and habits.

The Technology Advice study points out three core motivations for why users favor SMBs that have loyalty programs. These drivers include:

  1. Saving money,
  2. Receiving rewards, and
  3. Earning rewards,

You might think that earning rewards is the same as receiving them. But the two experiences are quite different.

According to the Loyalty Report I cited earlier,

the redemption experience—the anticipation of reward, as well as ease of redemption—is more important than the actual reward.

It’s not just in 2017 that experience mattered more than the reward itself. This attribute has remained consistent in the 2019 report. The report says “Brands must evolve their Programs by focusing on the redemption experience, not just on the reward.”

6. Customers on Loyalty Programs Have High LTV

Businesses with high customer acquisition costs may need to rely on a good customer lifetime value to turn in profits.

According to Bain & Company, e-Commerce customer acquisition cost is high. So most retailers must get shoppers to visit multiple times to make a profit.

To get customers to visit multiple times, retailers rely on loyalty programs.

In the example below, you can see the customer lifetime value over time.

Customer lifetme value
Image credit: Bain & Company The Value of Online Customer Loyalty Report

It helps that a customer who joins your loyalty program is worth ten times the value of their first purchase.

Customer retention
Image credit: CustomersThatStick

7. Customer Loyalty is Easier than Acquisition

About 63 percent of businesses think that customer acquisition is their most important advertising goal.

But over the years, more businesses have come to agree that keeping their customers loyal is easier to execute than acquiring new ones. The number of businesses that consider customer retention easier moved from 70 percent to 80 percent in one year.

So apart from being very profitable, customer loyalty is also easier to execute than customer acquisition.

8. Loyal Customers Help Businesses Beat Recession

One of the most powerful attributes of a customer loyalty program is that it’s recession-proof.

Repeat purchases uptrend
Image credit: Adobe The ROI from Marketing to Existing Online Customers Report

According to Adobe Digital Index, “Repeat purchasers also deliver more during economic difficulties.” The study showed that the revenue share from repeat buyers in Europe increased by three percent, and fell only by one percent in the US.

9. Seasonal Sales Do Better with Repeat Buyers

The Adobe study also showed that loyalty program customers bought 25 percent more per purchase during holidays and other seasonal sales. Meanwhile, first-time buyers only bought four to 17 percent more per purchase.

Returning purchase seasonality
Image credit: Adobe The ROI from Marketing to Existing Online Customers Report

10. Loyalty Program Customers Convert Better

If your business or brand ever introduces a new product who do you tell first?

Loyal customers!

They convert better and faster than new or repeat customers who have bought from you only two times.

Conversion rate of loyal customers
Image credit: Adobe The ROI from Marketing to Existing Online Customers Report

In the Adobe Digital Index report, loyal customers could convert at 24 percent where new customers only convert at six percent.

In terms of revenue per visitor (RPV), one returning customer equals five first-time shoppers in value. Whereas, one loyal buyer equals nine first-time shoppers.

Conversion rate by visitor type
Image credit: Adobe The ROI from Marketing to Existing Online Customers Report

Wrap Up

If numbers don’t lie, then you have more than enough truths on your plate. So you should consider launching your loyalty program if your business can benefit from repeat buyers.

If you’re in a business where margins are low, then introducing a loyalty program is critical to your survival!

About the Author:

Tulip Turner  –Tulip is a Content and Inbound Marketing expert at Snewscms. Over the years, she has helped dozens of businesses in defining their content strategy. She believes that creativity doesn’t inspire customers anymore. A true story when recited well, is enough to build a connection.

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