7 Reasons Why You Need a Loyalty Program And How To Do It Right In 2023

Customer loyalty programs, customer clubs, rewards programs, or loyalty schemes - regardless of how we call them, they all aim to achieve the same goal: to increase loyalty and retain customers by offering them incentives, discounts, perks, or exclusive access to products or services. According to Hubspot, 88% of customers that feel appreciated plan to stay loyal to brands, and 83% plan to spend more.

These rewards programs have become ubiquitous in various industries, from airlines and hotels to coffee shops and online retailers. According to the fifth annual “State of Marketing” research report, the use of customer loyalty program platforms by marketers is expected to increase by 80% in the next two years. The study further disclosed that 63% of top-performing marketers are presently using loyalty program platforms.

But why are they particularly relevant for manufacturers and brands selling through retailers?

In short, customer loyalty programs can help manufacturers and brands foster long-term relationships with their customers, despite not having a direct channel to them. When manufacturers and brands sell through retailers, they often lose control over the customer experience, pricing, and marketing messages. However, by offering a customer loyalty program, they can incentivize customers to choose their products over competitors', even if the products are sold through different retailers.

Customer loyalty programs can help manufacturers and brands differentiate themselves from their competitors and create a loyal customer base that transcends individual retailers.

Companies selling high volumes through retailers should focus on creating a D2C channel which allow them to create create their own customer journey, offer exceptional customer service, and ultimately build strong customer relationships. The aim is to motivate customers to repeat purchases from you.

Moreover, customer loyalty programs can also provide manufacturers and brands with valuable insights into their customers' preferences, purchase patterns, and feedback. By collecting data on customer behavior and using analytics tools, manufacturers and brands can optimize their product offerings, pricing strategies, and marketing efforts to better cater to their customers' needs and wants.

In this blog post, we'll dive deeper into the benefits of customer loyalty programs for manufacturers and brands selling through retailers. We'll also share some best practices, examples, and tips on how to create an effective customer loyalty program that aligns with your business objectives and resonates with your customers.

What Is a Customer Club or Loyalty Program?

According to Impact, 58% of all retailers and brands have a loyalty club to increase the customer life span and the overall retention. A customer club, also referred to as loyalty program is a program designed to reward and retain customers by offering them exclusive benefits, discounts, or privileges for their loyalty. A customer club is typically owned and operated by a manufacturer, brand, or retailer, and it aims to create a direct relationship with customers beyond individual transactions.

According to Kasper Holst, most of the companies end up spending a large amount of the marketing budget to get customer to visit their stores, while missing the opportunity to increase customers’ brand interaction.

Especially companies that do not have a direct sales channel need to find a way to engage with customers after the first purchase to increase retention and achive higher customer value. Loyalty programs are the perfect tool to achieve that end goal.

Members of a loyalty program typically receive rewards such as discounts, personalized promotions, early access to new products, exclusive events, and other perks. Companies should focus on build trust and loyalty because research shows that 91% of customers say their trust in a company makes them more likely to buy more frequently.

By offering these benefits,the company can increase customer retention, drive sales, and gain valuable insights into their customers' preferences and behavior. Overall, a loyalty program can be an effective tool for building brand loyalty and improving customer satisfaction.

7 Reasons Why You Need a Loyalty program

A successful customer loyalty program, can differentiate a manufacturer from its competitors, improve brand advocacy, and provide a direct line of communication with its more loyal customers within. In the following paragraphs, we'll explore 7 main reasons why customer loyalty programs help manufacturers succeed in various industries.

Here are seven reasons why manufacturers should focus on creating a strong customer loyalty club:

1. Increased Customer Retention

A strong customer loyalty club can help manufacturers retain customers by offering them rewards and incentives to continue purchasing their products.

2. Enhanced Customer Lifetime Value

Loyal customers tend to purchase more frequently and spend more per purchase than non-loyal customers, thus increasing their lifetime value to the manufacturer.

3. Better Customer Insights

By collecting data through a customer loyalty club, manufacturers can gain valuable insights into customer behavior and preferences, allowing them to tailor their products, services, and marketing strategies to better meet their customers' needs.

4. Increased Sales

Offering exclusive deals or discounts through a loyalty club can incentivize customers to purchase more frequently or in larger quantities, leading to increased sales for the manufacturer.

5. Improved Brand Advocacy

Loyal customers are more likely to recommend a brand or product to others, which can help manufacturers expand their customer base and increase brand awareness.

6. Differentiation from Competitors

A strong customer loyalty program can help manufacturers differentiate themselves from competitors by offering unique rewards or experiences that cannot be found elsewhere

7. Direct Communication with Customers

A customer loyalty club can provide a direct line of communication between manufacturers and customers, allowing them to engage with each other and build a sense of community and loyalty.

How Can You Create a Loyalty Program?

Here are some steps that companies can follow to create a customer loyalty club:

1. Define Your Objectives

Before creating a customer loyalty club, it's essential to identify what you want to achieve with it. Are you looking to increase customer retention, boost sales, or gain insights into customer behavior? By clarifying your objectives, you can tailor your loyalty club to meet your specific needs. One of the most common objectives of customer loyalty programs are

Collect deep customer data to inform marketing and product development efforts;

Increase customer loyalty and retention rates;

Encourage repeat purchases and increase sales;

Create a sense of community and engagement among customers;

Offer personalized product recommendations and targeted marketing campaigns;

Cross-sell and upsell products to existing customers;

Drive traffic to physical and online stores.

2. Choose the Right Rewards

To incentivize customers to join your loyalty club, it's crucial to offer rewards that are meaningful and appealing to them. Defining benefits and rewards for club members is crucial for building customer loyalty and engagement.

By offering exclusive perks and rewards to customers who join your loyalty program, you can create a sense of community and incentivize customers to make repeat purchases.

Having a well-defined set of benefits and rewards for your customer loyalty program can also help differentiate your brand from competitors and attract new potential customers who are interested in the perks and rewards you offer.

3. Determine Your Membership Requirements

You'll need to decide how customers can become members of your loyalty club. When determining the membership criteria for your loyalty club, it's crucial to consider the options available to your customers.

You could choose to provide an online sign-up option that's quick and user-friendly, allowing customers to enroll in your program with just a few clicks. Alternatively, you could require customers to make a certain number of purchases, such as five purchases, before qualifying for membership.

4. Create a Communication Plan

Once you've established your loyalty club, it's essential to communicate its benefits and rewards effectively to your customers. One effective way to do this is through email marketing campaigns, which can be personalized to specific customers based on their purchase history and loyalty club activity.

You can use email to announce new perks and rewards, highlight exclusive offers for loyalty club members, and encourage members to continue engaging with your business.

5. Collect and Analyze Customer Data

To optimize your loyalty club, it's essential to collect data on customer behavior, preferences, and feedback. This can help you refine your rewards, communication strategies, and overall customer experience.

By collecting relevant data about your customers you will be able to create a customer loyalty program that is appealing to them, thus increasing the customer engagement rate. Customer behaviour data are especially important to design highly effective reward systems.

6. Evaluate, Adjust and Be Consistent.

Over time, it's important to evaluate the effectiveness of your loyalty club and make adjustments as needed. This could involve tweaking your rewards program, testing new communication channels, or analyzing customer feedback to identify areas for improvement.

Moreover, consistency in a brand's products and services plays a crucial role in building customer loyalty. When customers can rely on a brand to consistently deliver a high-quality experience, it becomes an integral part of their lives.

3 Successful Loyalty Program Examples

Customer loyalty programs can be extremely beneficial for companies that are seeking to increase customer engagement and build customer loyalty. Manufacturers that are selling their products though retailers usually lack a direct channel to communicate and keep customers engaged. If you belong to this category, then you should take inspiration from the successful cases we will present you and start creating your customer loyalty program.

Here are three customer loyalty program examples that are worth looking at:

Starbucks Rewards Program

Starbucks Rewards is one of the most popular loyalty programs in the world, with millions of members. The program rewards customers for making purchases at Starbucks with stars, which can be redeemed for free drinks, food, and other perks.

The program also offers members exclusive discounts and promotions, as well as early access to new products. Starbucks uses the rewards program both to encourage customer loyalty and increase sales, and it has been highly successful in achieving those goals. Starbucks rewards is a good example of a loyalty program that encourages customers to spend more on the brand.

Sephora Beauty Insider

Sephora Beauty Insider is a loyalty program for customers of the popular beauty retailer. The program rewards members with points for every purchase they make, which can be redeemed for free products or experiences.

Sephora also offers loyalty members other exclusive perks, such as early access to new products and free shipping. The loyalty program itself has been highly successful in driving customer loyalty and increasing sales for the brand.

Amazon Prime

Amazon Prime is a loyalty program offered by the online retail giant Amazon. The program offers members free two-day shipping, access to streaming music and video, and other exclusive benefits.

Amazon Prime has been highly successful in increasing customer loyalty and driving sales for the company. In fact, Prime members spend significantly more on average than non-Prime members, making the program a key driver of Amazon's success.

Different Types Of Customer Loyalty program

There are various types of loyalty programs that businesses can implement to encourage customer retention and repeat business. Some businesses may utilize a blend of various types of loyalty programs. To gain a better understanding of each program and how they function, delve deeper into each type below.

Points-based loyalty program

A points-based program is a type of customer loyalty program where customers earn points for each purchase they make. These points can then be accumulated and redeemed for rewards or discounts on future purchases. The number of points earned usually corresponds to the amount spent by the customer, and the rewards can vary depending on the program's terms and conditions.

Points-based programs are a popular way for businesses to incentivize customers to make repeat purchases and foster long-term customer loyalty.

Tiered loyalty program

A tiered program is a type of customer loyalty program that offers different levels of rewards and perks based on a customer's level of engagement or spending.

Customers are typically placed into tiers based on their purchasing behavior or loyalty to the brand. As customers progress to higher tiers, they can earn more valuable rewards, such as exclusive discounts, early access to new products, or personalized experiences.

Tiered programs are designed to encourage customers to increase their engagement with the brand and incentivize them to spend more in order to achieve higher tiers and unlock better rewards.

Value based loyalty program

A value-based loyalty program is a type of customer loyalty program that rewards customers for their overall value to the brand, rather than just their transactional behavior.

In a value-based program, customers are rewarded with reward points for their loyalty and engagement with the brand beyond just making purchases. This can include things like referring friends, writing product reviews, or engaging with the brand on social media.

The rewards offered in a value-based loyalty program are typically customized and personalized to the customer, based on their individual preferences and behaviors. This type of program is designed to create a more emotional connection between the customer and the brand, leading to increased loyalty and advocacy.

By focusing on rewarding customers for their overall value to the brand, value-based loyalty programs encourage long-term engagement and advocacy, which can ultimately drive business growth.

Non-monetary loyalty program

Rewards that are not cash or discounts, such as exclusive experiences or early access to new products.

For example, a non-monetary loyalty program for a fashion brand may offer exclusive access to a fashion show, a meet-and-greet with a designer, or a private shopping experience.

Similarly, a technology company may offer its loyal customers early access to new product releases, a behind-the-scenes tour of their headquarters, or the opportunity to participate in a beta testing program.

Crucial Success Factors For Building Customer Loyalty Program

To guarantee the success of your Customer Loyalty Program, it is essential to plan and consider several key factors.

Firstly, the club should aim to extend the average lifespan of a customer and increase their overall value to the company. This can be accomplished by offering exclusive discounts, rewards, and personalized experiences, which will keep them engaged and loyal to the brand.

Moreover, a Customer Club can help attract new customers by using customer referrals and leveraging satisfied members to recommend the brand to their family and friends. Additionally, by gaining insights into the preferences of existing customers, the company can develop new products that meet their needs and desires, resulting in increased sales and revenue.

A well-designed customer loyalty program can benefit consumer goods brands in numerous ways. It can enhance the bond between the company and its customers, increase profitability, attract new customers, and provide valuable insights for future product development.

The Importance Of Collecting Data To Turn Existing Clients Into Loyal Customers

Collecting data is crucial to building successful customer loyalty programs. By gathering data on customer behavior, preferences, and purchasing patterns, businesses can tailor their loyalty programs to meet their customers' needs and increase engagement. Here are some reasons why data collection is essential for building effective loyalty programs:

1. Personalization

Collecting customer data allows businesses to personalize their loyalty programs, tailoring rewards and perks to individual customers based on their preferences and purchase history. This level of personalization can make regular customers feel valued and appreciated, encouraging them to continue engaging with the business.

Collecting information about your customers is pivotal to create an effective customer club and boost loyalty. The more personalized your offers are, the higher the probability customers will spend more on your products, the more you will retain them over time.

2. Targeted Marketing

Data can help businesses identify which customers are most likely to engage with their loyalty program and which rewards will be most appealing to them. This information can be used to develop targeted marketing campaigns that promote the loyalty program to the right customers and incentivize them to sign up and engage.

The information on existing customers are crucial not only to improve the experience for the ones who are already your company's customers but also for new customers. Targeted marketing is a great tool to attract new customers and boost acquisition. Layerise offer SMS targeted campaigns, which have proven to be way more effective than email targeted campaign.

3. Program Optimization

Data collection also allows businesses to track the performance of their loyalty program and identify areas for improvement. By analyzing customer behavior and program engagement, businesses can optimize their loyalty programs to increase customer retention and repeat business.

4. Competitive Advantage

Collecting data on customer behavior and preferences can also provide businesses with a competitive advantage. By using customer data to create unique and personalized loyalty programs, businesses can differentiate themselves from competitors and attract and retain loyal customers.

Collecting data is essential for building successful customer loyalty programs. By using data to personalize rewards and perks, target marketing campaigns, optimize loyalty reward program performance, and gain a competitive advantage, businesses can drive customer loyalty and increase revenue.

Start Building Your Customer Club Today With Layerise

Are you a manufacturer who sells through retailers and wants to enhance the customer experience and communicate more effectively with your customers? Look no further, we've got you covered!

At Layerise, we can assist you in creating a direct-to-consumer (D2C) channel to communicate with your customers effectively. By placing a QR code on your product, we connect you with your existing customers.

We empower your business to take ownership and control of the onboarding process, enabling you to collect customer data during their most engaged time. This data can then be used to personalize the user journey, unlocking sales opportunities through tailored experiences.

The most important step in the onboarding experience is the customer registration event.

As a consumer goods brand, customer registration is crucial when building a customer club for loyalty purposes. By encouraging your customers to register, you are able to funnel their intent to your club or to multiple marketing campaigns. You gain access to important information about your customers that can help you create a loyalty program with personalized experiences and build long-term loyalty.

First, customer registration allows you to collect valuable data about your customers, such as their contact information, purchase history, and preferences. With this data, you can create targeted customer loyalty program ideas and marketing campaigns and personalize communication with your customers, making them feel valued and appreciated. Also, your customers expect that their data is used to their benefit, therefore providing a personalized experience is a must.

Moreover, data collected through customer registration provides you with crucial insights into customer behavior and preferences. By analyzing this information, you can better understand your customers' needs and wants, leading to a stronger, more loyal customer base. Without such data, brands are limited in their ability to offer personalized experiences, which can have a negative impact on the success of their paid loyalty programs and club objectives.

If you want to learn more about how Layerise works, you can book a free demo today. See you there!