Customer Loyalty Programs are marketing tools used by all types of businesses to motivate repeat customers by offering some type of rewards for frequenting the business and spending money. Due to the prevalence of Customer Loyalty Programs used by the largest U.S. retail and restaurant chains, some customers have come to expect these types of loyalty offers.
Find the definition of a Customer Loyalty Rewards Program, along with examples of current successful loyalty programs running in retail and restaurant chains here. Also get info about the benefits of building a Customer Loyalty Program to the retail or restaurant chains that use them.
Definition of a Loyalty Club
A customer loyalty program is a structured and long-term marketing effort, which provides incentives to repeat customers who demonstrate loyal buying behavior.
Successful programs are designed to motivate customers in a business's target market to return often, make frequent purchases, and shun competitors. In retailing, these programs generally reward loyal customers with discounts, special offers, rebates, points, or freebies.
Examples of Current Retail and Restaurant Customer Loyalty Programs
- Big Lots Buzz Club
- KFC Colonel's Club
- Perkins MyPerkins
- Domino's Piece of the Pie Rewards Program
- My Chili's Rewards
- Hardee's Super Star Rewards
- P.F. Chang's Preferred
The Goals of Retail Loyalty Programs
Customer retention is the primary goal of a retail customer loyalty program. The Cost Per Acquisition (CPA) for a new customer is often much higher than the costs of the discounts and freebies awarded to them through a customer loyalty program system.
Data collection is also an important goal of retail and restaurant customer loyalty programs. Demographic and purchase data can be used to create ultra-targeted marketing and advertising programs which should result in cost savings. Retailers must proceed with caution when using customer data, however, because what might seem like personalization to the retailer could be perceived as an invasion of privacy by the customer.
Customer loyalty programs can help a retailer win a larger share of wallet. That is the percentage of disposable income that customers spend with any one retailer. Motivated increased spending from one loyal repeat customer with strategic loyalty program offers is much easier than motivating infrequent customers to spend anything at all.
Benefits to a Retail Company
Customer referrals are the biggest benefit of a Customer Loyalty Program to a retailer. Customer research indicates that about 73 percent of customer loyalty club members say they are likely to recommend that company to a friend.
Customer satisfaction is another benefit of a well-implemented customer loyalty program. As long as the rewards offered are of interest and of value to the customer, they will feel acknowledged, appreciated, and feel grateful towards the retailer in return.
Repeat customers create a steady flow of traffic which creates a steady stream of income. The larger the customer loyalty program becomes, the more predictable retail sales numbers become.
Why Customers Join Loyalty Programs
Customers join loyalty programs primarily to receive discounts and earn freebies. For the most active users of a customer loyalty program, working the system to maximize the rewards received is both a challenge and a source of entertainment.
Some customer also like the exclusivity of being a member of the club. Members-only products and services make them feel important and special.
Current Program Research
Because of the pervasiveness of customer loyalty rewards programs in the retail and restaurant industries, there is plenty of research studying every aspect of the programs. Here are some key data that reveals why customer loyalty programs can give retailers a competitive advantage.
- 73 percent of loyalty programs members are more likely to recommend brands with loyalty programs they like and use (source: Bond)
- Recipients of restaurant loyalty rewards are twice as likely to refer a new customer immediately following a reward redemption (source: Thanx)
- 77 percent of smartphone users say they are more brand loyal to companies that send points, surprises, exclusive content and birthday surprises via their mobile device (source: Vibes)
- 64 percent of the affluent middle class belong to a grocery store customer loyalty program to save money (source: Collinson Group)
- 48 percent of loyalty program members say they would be willing to pay a membership fee to continue receiving the rewards club benefits (source: Maritz)
Also Known As: customer rewards program, customer retention, loyalty incentive program, frequent purchase program, frequent shoppers program, frequent buyer club, customer satisfaction program, rewards program, customer appreciation program
Common Misspellings: customer loyalty program, customer loyal program, customer loyalty program, customer loyalty program, customer loyalty program