Brand Loyalty Programs — Drivers of Business Growth
Brand loyalty programs have been in existence for quite sometime now. One might even be able to surmise that even throughout history, on the narrow streets of ancient China, to the dusty corridors of Baghdad, brand loyalty programs have already existed. Think about it, the silk merchant rewarding his loyal customer with extra wares for the customer’s big purchase. Or the ivory merchant on the Silk Road , giving a huge discount to one of his repeat customers — it is evident that loyalty programs have been in this world since the advent of commerce 150,000 years ago, and is here to stay indefinitely, even onwards from the 21st century.
According to Chestnut: “The success of a brand on the long term is not based on the number of consumers that buy it once, but on the number of consumers who can become regular buyers of the brand.” This makes perfect sense, in that businesses won’t be able to survive if you don’t have loyal followers of your brand.
Having loyal customers, is an indication that your business is able to satisfy the needs of your clients in the most basic of levels. Not only that, it is an indication that you have been able to provide great customer experience. These are the prerequisites to customer retention, a.k.a. getting loyal customers, thus promoting healthy business growth. And who wouldn’t want to have business growth? The ancients did, why not the modern businessman I say.
“The success of a brand on the long term is not based on the number of consumers that buy it once, but on the number of consumers who can become regular buyers of the brand.”
There has been a study by Bain & Company, with Earl Sasser of the Harvard Business School, that just even managing to increase 5 percent in a business’ customer retention can lead to an increase of profits of between 25 to 95%. Why is this so? First of all, one would be able to know if one has at least an inkling of experience dealing with human nature, that people like things and/or people that they trust. And that upon an initial encounter with a brand/business that they aren’t familiar with, they will of course, perceive this new entity with a bit of wariness, so the costs for their initial purchases will be a bit low.
Nevertheless, if a business manages to provide great customer satisfaction, the customer will reward the business upon returning, with higher purchases. This makes sense, in that, inside the persons mind, he has already convinced themselves that “ Hey, i’m coming back to this store, I must like and trust this business.” Therefore, they will be more likely to spend more money on this business. A study by RJMetrics, a data and analytics company proves this. They found that loyal customers who purchase from you frequently spend more on average than your first time customers.
On the same note, another analytics company, Sumall, found that each time a customer comes back to your store, the chances of the customer coming back increases by more then 27 percent! And this chance increases as the customer comes back again and again! Overtime turning into a loyal follower of your brand. What does this mean? This means that businesses should focus more on their repeat customers, not only through what has been said, which is being able to achieve great customer satisfaction, but also, and more importantly, with a loyalty program that rewards customers because of being loyal followers of your brand.
Following the Follower: Hobgoblins of Society
It seems counter-intuitive to focus on your existing customers rather than acquiring new ones, but the thing is, it has been proven time and again that a good indicator that a brand is able to sustain long-term growth, is that there are people who are loyal customers of your brand.
Think about it, why would people, who are complete strangers to your brand, buy from your business when they see that your business doesn’t have a loyal following? What does this mean for them? That this brand is unwanted, not liked by other people, and guess what? People like people that other people like. The herd mentality dictates that everyone should play the game of follow the follower, and if they aren’t following you? (Your brand) why should they buy from you?
Focusing on what matters, by our friend Pareto
The Pareto principle states that 20% of the invested input is responsible for 80% of the results obtained. Named after the economist Vilfredo Pareto, this adage can be applied to most aspects of life. In learning something, the small 20% which are the fundamental or foundational skills that you train for are responsible for 80% of the results. In economics 80% of the wealth in the whole world comes from 20% of the population. In technology, 80% of software problems come from bugs. And most importantly, in business, 80% of your profits come from 20% of your clients!
Another study shows that, loyal customers refer more people to your business. Customers who buy more frequently from your business are more comfortable with it, and thus, are more willing to spread the word and recommend it to their friends. Add the fact that it is well known that word of mouth is one of the most strongest influences in marketing your business, more so than any type of marketing tool. This fact is as significant now compared to decades ago , now that we have social media to thank for. This affect, of a customers willingness to become brand ambassadors of their own volition, can be utilized by the modern businessman.
A symbiotic relationship in the business eco-system
And so, to summarize everything, this means one thing: Loyal customers bring in more business! Focus more on customer retention and grow your business to dazzling heights, learn how to fully utilize loyalty programs in order to make use of these facts. It is said that it costs on average, 5 to 10 times more to acquire a new customer, than it is to retain a new one. This was said a few decades ago by business researchers.
I believe today, it is 20 times more expensive to acquire new customers. With all the new marketing channels appearing such as Facebook, Twitter, and Instagram, and so much more, the cost of getting new customers have exponentially grown, and is not yet at its zenith. Businesses must now focus on what truly matters, and what actually creates an impact in their organizations.
The small 20% which brings in the 80% of a business’ growth. The few people who believe in your brand (including yourself of course), or what we would like to call. The loyal customers. Learn to acquire them, reward, and then retain them. For if you take care of them, they, in turn, will take care of your business! Learn the basics of loyalty programs now, and see your business grow faster.
