Did you know it costs a business 5 to 25 times more to acquire new customer then to sell an
existing one? So what if a company do if they wants their customers to return to their
establishments? They should give them some incentives. It is mainly possible by giving
loyalty or reward program which will give them a motivation to return. Customer loyalty
means the customer’s willingness to buy from or work with the brand again and again which
is mainly a result of positive customer experience. So Loyalty program provides them with
customer free merchandise, coupons or even advance release products. But many businesses
often confuse Loyalty and Reward Programs. The reward program is mainly a customer
retention strategy while loyalty card program is build to repeat business to its loyal customers
(which frequently make purchases ) something that isn’t available to other customers. These
mainly resemble to plastic credit cards but they can also be in the for of keychain fobs or
stickers. A loyalty card has a barcode or magnetic stripe which is scanned in Point Of Sale
(POS) machine. It mainly identifies the customer information and sends the information
about the customer to a database which helps the retailers to understand and track his
customers’ buying habits. Loyalty program also helps in increase product and services sales,
an introduction of new product, increase the buying frequency of customers.
Taking an example of Amazon which for $99 a year, Amazon prime users get free and two-
day shipping on millions of products by having no minimum purchase. It provides value to
frequent shoppers to make then feel that it’s really benefitting them. According to analysts
estimate stats, they lose $1-2 billion per year on Prime but the company is doing it to increase
transaction frequency.
Loyalty cards programs are mainly to increase customer happiness and retention so
companies use ways to measure these things to check the effectiveness of these programs.
Different analytics used are Customer retention rate, Net promoter scale, Customer effort
score, etc
By
Pankaj Pimoli
