Loyalty Programs: Best Way of Customer Retention for SMB’s and Startups


by Reviewkeg Staff Writer | May 11, 2017

Acquiring new customers’ is the top most priority for every business. Be it SMB’s or startups, they are truly focused on finding, targeting and acquiring new customers. Most businesses tend to forget that the heart of any business or organization lies in their first or loyal customers. Acquiring new customers can boost your business progress but retaining your old customer is the key to sustainable revenue growth.

According to Invesp,

    Acquiring a new customer is five times as expensive as retaining an existing customer.
  • “44% of companies focus in “acquiring new customers” while 18% focus on “retaining the old one”. Rest focus on both.”
  • “Increasing customer retention rates by 5% increases profits by 25-95%.”

Moreover, companies that often prioritize customer retention find it easier to gain the trust of consumers and it also helps them to make the relationship with new customers better. The above statistics clearly prove that businesses need to narrow their focus on customer retention. One smarter way to retain your old customers is to implement a system that focus on building customer loyalty by running a number of loyalty programs.

What is a Customer Loyalty Program?

Now, that you are aware with how important customer retention is for any business, let’s understand what exactly is a loyalty program:

“Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying behavior — behavior which is potentially beneficial to the business” source

Though the goal of every loyalty program is same, but nature may be different. Following are the examples of most commonly used rewards in loyalty programs:

  • Loyalty points to the customers which later can be redeemed in form of discount offers provided by a company
  • Cash back rewards that can be paid after a ‘call to action’ is operated by consumer
  • Loyalty points that can be redeemed for using third party services or products
  • Rewards for joining as a member i.e member-only rewards

a loyalty program is implemented to enhance the relationship between customer and a company’s brand. It also helps to understand the mindset of the consumers which in turn helps out in strategizing the business goals with more engagement.

Benefits of Loyalty programs

Benefits of loyalty programs to an organization

There are ample of benefits of a customer loyalty program for an organization.

  1. Boost your online reputation – Implementing a loyalty program will not only ensure that your existing customers stick around after using your service or product but it also attracts new customers by enticing good word of mouth about your organization or business. The more your consumer feels satisfied, the more he/ she will refer about your service/ product to his closed ones. This, in turn, will improve your online reputation.

  2. Boost your business growth – Customer loyalty programs goes hand in hand with business growth. Rewarding your customers makes them stick to your product and they tend to use it every time they feel they can be rewarded.

  3. Loyalty programs are cost – oriented – Loyalty programs are not that much costlier what most people think. In fact, money spent in acquiring new customers is costlier than loyalty programs. Moreover, the capital you invest in loyalty marketing often covers the profit generated in the business. Thus it is a win-win situation for the business.

  4. Helps in understanding customers – As mentioned earlier, customer loyalty programs lets you understand customers in a broader sense. What type of rewards makes them use your product? What type of rewards doesn’t work? For such situations, you will understand everything with the help of trial and error.

  5. Entices customer to initiate more purchases – As mentioned above, loyalty rewards can help you in retaining old consumers and incentivizing new ones to make purchases. This will maintain your organization’s overall B2C purchase cycle.

  6. Helps in earning customer’s feedback – Loyalty programs are the best way to earn positive feedback about your service or product. A happy customer will appreciate your marketing efforts and won’t hesitate in leaving a constructive feedback. This, in turn, will improve your online reputation and customer retention factor.

To sum up, loyalty programs are the best way of customer retention even when executed with the help of a third party. Businesses that implement loyalty programs should not only consider the benefits provided by the programs but also they should consider them as an opportunity to increase customer loyalty and customer retention.

Is there any other benefits of a loyalty program that we have missed? In case you know any other benefits, please let us know in comments.

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