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Key Benefits of Customer Loyalty Programs

A significant trend from our 2020 POS/Customer Engagement Survey Report was around the need for retailers to create a more personalized experience for their customers.

And one of the most effective ways to be able to create curated shopping experiences and establish a connection with your key customers is through the use of loyalty programs. In fact, our annual survey found that loyalty programs were noted as a top priority amongst retailers when it came to tailoring the shopping experience.

Loyalty programs have been around in various forms since nearly the inception of retail, and with the recent rise in mobile commerce and digital wallets, consumer adoption is at an all-time high. There are several different flavors of implementation, and RCP will be publishing an upcoming report on Selecting the Right Loyalty Program. However, even if they may not make sense for every retailer, there are clear and measurable benefits when implemented successfully.

The big trend in customer identification lies in retailers’ future plans. Within three years, 59% of retailers plan to use loyalty programs and 78% plan to use mobile apps to identify customers in their stores.

Here are several key benefits benefits to a well-executed loyalty program:

1. Customer Retention and Acquisition

The primary motive behind a loyalty program is to retain customers by rewarding them for their continued purchase behavior. In short, the customer loyalty program is a tool to acquire and retain customers by giving them a solid motive to buy again from the company and establish habits.

2. Customer Trends

Loyalty program data gives companies access to incredible shopping insights to their most valuable customers, including a complete view of customer behavior, buying habits, and preferences. Companies can then use this information to make better decisions on its product selection, inventory management, pricing, and promotional planning.

3. Increased Spend and Visit Frequency

It has been well documented that loyalty programs increase customer spend and visit frequency. We have seen a well-implemented loyalty program achieve the following:

  • Loyalty programs increase overall revenue by 5-10%

  • Loyalty members spend 5-20% than non-members on average

  • Loyalty program members buy 5-20% more frequently than non-members

4. Communications

A loyalty program offers a direct and permissive line to customers, making targeted communication much easier and more accepted. Aside from announcing new products/services and promoting sales, communication to loyalty members is often more personal and allows customers to feel an emotional connection to a brand. This is especially true if members feel the brand cares about their specific needs and well as their extended community and environment at large.

There is no debate that a loyalty program can be a powerful tool in creating more loyal customers. However, there are certainly examples of loyalty programs being implemented unsuccessfully. Several key reasons we have found why a loyalty program does not achieve its intended benefits include: establishing the wrong value proposition, misalignment with the overall brand, and ineffective marketing/promotion of the program benefits.

Understanding the aforementioned pros and cons of loyalty programs can help mean the difference between increased customer retention and a confusing message which alienates potential returning customers.

RCP has successfully worked with many forward-thinking companies to develop, design and implement loyalty strategies and programs. Reach out to us at to learn more about our loyalty experiences and proven methodologies.

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