Reward programs and customer loyalty programs are popular marketing initiatives that engage customers by incentivizing activity that can be beneficial for a business. This is often activity that a company is already actively encouraging, such as increased interaction through social media channels, purchasing particular products, or sharing information about a company with a friend.
Historically, these types of programs were popularized in the United States during the 1920's and 1930's when Sperry & Hutchinson developed a rewards program that used trading stamps as an alternative currency. Consumers accumulated stamps and then redeemed them for products in a rewards catalog.
When most people think of rewards programs and customer loyalty programs today, the first examples that come to mind are frequent flyer mile programs. American Airlines is widely cited as having introduced the modern form of the popular initiative to the airline industry in 1981. These loyalty programs reward customers for flying with an airline by crediting them miles for every ticket purchase or purchase from an affiliate partner. These miles can then be redeemed for additional plane tickets, seat upgrades, or other goods.
Customer loyalty programs are now implemented by companies in every type of industry, from local coffee shops with paper punch cards to international credit card companies with automated point accrual, digital tracking, and online redemption. Today, even cable companies utilize these programs, rewarding customers with point accrual for everyday actions like paying bills on time or streaming movie rentals.
Over the years, we've worked with a number of small businesses throughout the process of planning and developing unique loyalty programs that make sense for their organization. From producing and distributing key marketing materials to sourcing branded promotional products for a reward catalog, even manufacturing and supplying physical reward cards themselves! Based on what we've learned through our collective experience in marketing, business communications and commercial print, here are three key benefits that make reward programs and customer loyalty programs worth considering for businesses of any size.
1. Reward programs create differentiation
As competition becomes increasingly global in nature, companies must place a greater emphasis on differentiating themselves from the rest of the field. This is equally true for small business owners as it is for major enterprises, as innovations in e-commerce have made it possible for any company, anywhere, to compete for business around the world.
While price and location still play important roles in how consumers choose vendors, these factors are no longer the only aspects taken into account during the decision making process. Consumers are willing to pay more money in exchange for better quality, and an increasing number of decision makers are accustomed to making both minor and major purchases online, diminishing the absolute importance of proximity. Reward programs represent an additional way for companies to offer greater value than their competition and improve their marketing position no matter where their competition or customer base is located.
2. Reward programs encourage repeat business
One important goal for small businesses is to decrease churn, or, the number of existing customers who choose to stop doing business with your company. Reward programs are one means of combating churn, because they create incentives for existing customers to remain existing customers and even increase the frequency of their purchasing. Repeat business is especially important for word of mouth marketing, as each service opportunity is a chance to engage a customer and send them home happy. Repeatedly satisfied customers that consider you a valuable resource can become brand ambassadors and help spread the word of your quality and consistency.
3. Reward programs increase data collection
Sophisticated rewards programs are implemented with the goal of not only encouraging repeat business, but also of tracking the habits of your company's best customers through data collection. Collecting data allows your company to track everything from program participant demographics (age, gender, etc.) to types of products purchased, timing of purchases and frequency of purchases. For an active company with either the manpower or technological capabilities to make use of customer data, reward programs offer a treasure trove of valuable information.
By tracking purchasing data, you’ll learn more about your customers and, in turn, be able to use the insights you gain from their behavior to improve your targeted marketing. Ultimately, this data is what fuels the internal value of a rewards program. By better understanding your customers’ needs and habits, your company can better serve your existing customers and more effectively market your goods and services to prospects.
Jason, for the team at Kendall Press