In the 21st century, it is hard to retain attention to anything for long. Part of this can be attributed towards the Gen-Z which lacks commitment. People today despise the idea of sticking to one single thing, be it a brand or a product.
Thinking what is the next best thing they could opt for, it’s particularly difficult to maintain a stable stream of customers. Many businesses believe in loyalty programs to be fairly effective in stabilizing the customer’s engagement with the brand.
Holding a loyalty card instills a sense of security within the customer too, which makes them more comfortable with your brand and its policies. Once a person is used to your brand, you’re sure to never lose out on them – if you keep on modifying the policies, that is. So, before heading into the details, let’s first see what loyalty programs are and how they work within the market spectrum.
How Do Loyalty Programs Work?
Loyalty programs work in a way that benefits both, the customer as well as the business, creating a win-win situation for them. Often coming with cards or points, you can redeem those points or use the cards to get special discounts on your purchases. This is done because a customer needs to be repeatedly incentivized for them to keep coming back to your business. Especially in this generation which lacks commitment, you need to up your ante on all levels. This includes upgradation in Customer Relationship Management too.
In this article, we will be discussing the pros and cons of the loyalty cards/programs that various businesses offer to its customers.
Advantages of Loyalty Programs/Cards
1. Retaining Customers Easily
A tell-tale way to ensure a customer keeps coming back to you is by allowing them to opt for customer loyalty programs in which they’re able to get cards. According to research, increasing customer retention can lead to more profits in the long term, therefore, not only does the customer benefit from discounts and exclusive offers, but the business too, enjoys the benefits. Not just that, but it’s a psychological technique to create a sense of belonging within the customer by issuing them loyalty cards or points.
2. Communication Gets Better with Customers
It’s a great way to have direct communication with customers as it becomes easier to get their feedback and insights into things. Their feedback helps the business modify or keep products accordingly. Moreover, the customers who get special discounts through such programs often end up telling others about it too. Word of mouth can be seen in play because of loyalty programs as well.
3. Attracts New Customers
As mentioned above, the word-of-mouth rule helps in attracting new customers as everyone loves to receive discounts. Thereon, it will help a business in increasing its revenue and profits. New customers may even be impressed by the loyalty program rules such as convenience provided to particular customers (i.e., ease of exchanging or returning products). This drives them to register for them as well which eventually increases your business’s stream of customers.
Disadvantages of Loyalty Programs/Cards
1. Customer’s Loyalty at Question
Just because you’ve offered a customer a loyalty card, does not mean that they are actually loyal to your business. Most of the time, customers only use the cards when they are convenient for them (e.g., when they can avail discounts or other benefits). Once the benefits become ‘on hold’, so do the customer’s purchasing habits.
2. Too Much Competition
Though it is a standard to have loyalty programs and it would rather be a cost to your business if you did not have any as most brands offer them, it is still too much work. Your loyalty programs could be boring to customers as they may seem the same as others. Therefore, it is important to differentiate your loyalty programs and create innovative offers in order to attract customers efficiently.
3. Hit on Your Budget
Offering loyalty programs takes a huge hit on your financial budget as if you offer too many discounts or products, it might cost you losses. A business has to be very particular as to what it offers within the loyalty programs so that there is a fine balance between the profits and costs. Also, in the long term, the hype of your loyalty program may end and customers may shift to other programs which can eventually result in sluggish growth in your sales.
Should You Be Offering Loyalty Programs At All?
The answer to that is simple – yes. Since it falls in the standard expectation of the customers to be enrolled in loyalty programs, you want to make sure you do not lose out. It is important to stay two-steps ahead of your competition and create unique loyalty programs which help accelerate your sales and ensure customer retention in the long-run.