07 October, 2022

Think loyalty programs are just a cheap discounting tactic? Read this.

Fact or Fiction? Loyalty programs use discount tactics, which cheapens your brand. 

If you’re not playing in the discount market (where it’s pretty much a race to the bottom), you might be wary of discounting. Many retailers hesitate to use discount tactics, even sparingly. They worry that it might cheapen their brand and devalue their stock in the long run.

However, if brand perception is what you’re worried about, loyalty marketing can actually provide many of the benefits of discounting without devaluing your product.

What is loyalty marketing?

Loyalty marketing is a marketing strategy that retailers of all sizes use to increase the lifetime value of their customers, by incentivizing and rewarding repeat purchasing.

Loyalty marketing is both:

  1. A simple value exchange for capturing customer data and growing a customer database; and
  2. A targeted rewards system which can be used to incentivize repeat purchasing and recognise the value of individual customer relationships.

Many retailers are wary of old-school discount tactics. The fear is that these tactics will bring in customers looking for the cheapest price—almost by definition, these people are the least likely to establish an ongoing relationship with merchants.

Instead, retailers can use loyalty marketing to offer discounts on a sliding scale: the more customers spend, the more they benefit from the program.

How loyalty marketing drives revenue growth

Here are six ways loyalty marketing helps your bottom line.

Fashion store owner folding clothes for customer at checkout counter. Woman assisting female shopper at fashion shop checkout.

Data-driven marketing improves ROI

The value of a known customer can be measured, an anonymous customer can not. Loyalty programs give you a method of capturing the customer data required to measure and increase the value of each customer.

Regulars spend more per order than infrequent customers

Customers who come back, again and again, love your brand and are willing to spend more. According to research by BIA/Kelsey and Manta, regular customers spend 67% more per order than one-off or infrequent customers.

Loyalty marketing impacts price perception

According to a study by KPMG, 60% of consumers will buy from a store with slightly higher prices if they will earn a loyalty program reward. More than 65% of customers even admitted making special trip to redeem a free gift from a loyalty program.

Customers have a reason to choose you over a competitor

Loyalty marketing influences the consumer decision-making process. Convenience, price and travel time all play a part in the consideration process. But if a customer has points to redeem at your store, that plays in your favour.

Loyalty marketing creates positive customer experiences

75% of consumers would give “rave reviews” to a loyalty program they’re involved in. Loyalty programs help establish a feeling of reciprocity, an important function of any brand-customer relationship. When customers feel valued, they’re more likely to keep coming back.

You will attract more people similar to your best customers

Loyalty marketing helps brands acquire new customers through referrals. Loyal customers generate word-of-mouth and referrals, so you will build an ever-widening network of new customers similar to your regulars (their friends, family or workmates).

Top 3 loyalty marketing tactics

Here are three of the most effective tactics loyalty marketers use to incentivize repeat business, drive up average order size and increase customer lifetime value.

1. Tiered loyalty programs

One of the benefits of loyalty programs is that you retailers can ‘gate’ discounts, only offering rewards to people who spend above a specified threshold.

Tiered loyalty programs take this concept a step further. Tiers reward the highest-value and most frequent customers with the best gifts or discounts. The most widely known application of tiered loyalty is airline points. Airlines offer tiers like “bronze”, “silver” or “gold” status levels to reward customers in different spending brackets. This incentivizes customers to move up through the ranks to earn higher value rewards.

Done right, a tiered loyalty program will offer genuine value to your customers, whether they’re shopping in-store or online.

Federation + sees 10% revenue boost from loyalty marketing alone

Cin7 customer Federation uses Marsello for their tiered loyalty program, Federation +. Their points and reward options incentivize customers to move up through the levels—Silver, Gold, and Platinum.

Since activating the tiered program, Federation have seen their repeat purchase rate jump to 20%. The loyalty program has led to a 10% increase in total revenue.

2. RFM segmentation

RFM stands for recency, frequency and monetary value. RFM segmentation uses all these factors to categorize a customer database into groups. Customers in a brand’s top segment have purchased recently, make regular transactions, and are in the top percentile of lifetime value.

You can use RFM segmentation to group your database, provided you have purchase data attributed to unique customers.

If you have trouble collecting or tracking this data, a loyalty program provides a fantastic incentive for customers to self-identify. A loyalty program will also drive customers into your most engaged segments by incentivizing repeat purchases.

You can also use your loyalty program tier lists or RFM segments to send one-off campaigns. PB Tech sends occasional rewards like free shipping codes to incentivize repeat purchases. You can tailor your promotions to suit the customer group—giving the most exclusive offers to your best customers.

3. Referral programs

Referral programs encourage existing customers to share your brand with their friends in exchange for loyalty points or rewards. That direct referral is highly influential—people are as much as 4x more likely to buy when referred by a friend.

Loyal customers are a powerful marketing asset. Incentivize customers to tell their friends about your store with a referral program to help you acquire more like-minded customers. You’ll tap into the potential of your customers’ networks (their friends, family or work colleagues), connecting you with consumers who are more likely to love your brand!

Key takeaways

Loyalty marketing elevates brand experience

With a bit of planning and effort, a loyalty program augments the customer experience and leaves them feeling valued.

You can collect data with a loyalty program

We know that our regulars are our most valuable customers. But do you know who they are? Could you send them an email? Or an SMS? To actually market to your most valuable customers, you need to know who their customers are, how much they’re spending, and how to reach them. A loyalty program offers an incentive for customers to self-identify at purchase, so you can collect this information.

Customer data will provide marketing insight

If you’re collecting that data—that’s great! Use your top loyalty tiers or RFM segments to offer personalized offers to your highest value customers.

Get started with Cin7 + Marsello

Powered by Cin7 and your e-commerce data, Marsello works seamlessly in-store and online to provide a true omnichannel customer experience.

  • Capture in-store and online customer details
  • Deliver personalized and timely automated marketing
  • Incentivize repeat purchases with email, SMS, a loyalty program, and more
  • Grow your average basket size with advanced product recommendations
  • Accurately track and attribute sales to your marketing activity

Learn more

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