Do Loyalty Programs Increase Sales?

We’ve all taken advantage of a coffee shop’s loyalty program to edge our way towards that free coffee, or signed up to a clothing store’s rewards program so we can eventually get that free pair of socks or discounted jacket.

But do loyalty programs increase sales? Or do they simply allow existing customers to enjoy free products and rewards for purchases they would have made regardless?If you’re a business owner considering implementing a loyalty program, this is an important question to ask.

Do Loyalty Programs Increase Sales?

The short answer is yes; loyalty programs increase sales. However, it’s not as simple as creating a loyalty program for your brand and watching your profits soar through the roof. A loyalty program needs to be well-designed and implemented in order to have a highly positive impact on sales.

The 2018 Bond Brand Loyalty Report revealed that 70% of consumers are more likely to recommend a brand with a good loyalty program, while 77% of consumers say they are more likely to stay with a brand that has a loyalty program.

Not only that, 63% of consumers say they’re prepared to modify their spending habits in order to maximise the benefits of a loyalty program.

All three of these statistics suggest that loyalty programs encourage spending and thus result in more revenue for the brand.

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However...

‍Rather than saying loyalty programs increase sales, we’d rather say that a loyalty program CAN increase sales, when done properly.

It’s not as simple as creating a loyalty program for your brand and watching your profits soar through the roof.

Predictive intelligence company Motista conducted a study which found that consumers who are emotionally connected to a brand have a 306% higher lifetime value, stay committed to said brand for an average of two years longer, and are much more likely to recommend the brand to friends, family and colleagues.

So really, it’s not about creating a loyalty program – it’s about creating an emotional connection between your brand and your customers, and loyalty programs are the best way to do this.

‍For example...

Let’s take a look at international beauty chain Sephora. Over the last few years, Sephora’s Beauty Insider Program has become a hugely successful loyalty program, boasting more than 10 million members.

Sephora’s three-tiered system (Beauty Insider, VIB and VIB Rouge) sets clear goals that encourage customers to try to achieve top-tier status. The fact that such a small percentage of its loyal customers sit in the top tier of the loyalty program makes it exclusive and desirable.

That being said, entry level loyalty program members still enjoy enough perks for the program to be engaging, and the personalised experience begins right from your first purchase, with recommended products based on your spending habits and preferences.

The brains behind Sephora have a few other tricks up their sleeves, too.

When Beauty Insider members accumulate points, they can cash them in for other Sephora beauty products – rather than receiving a discount on an existing product, they are now expanding into other Sephora products.

The customer feels more emotionally connected to the brand, while the brand is upselling and cross-selling more products.

Here are some techniques for creating a loyalty program that increases revenue...

1. Keep it simple.

Referring to the Bond Brand Loyalty Report once again, 56% of consumers will choose one loyalty program over another if they find it easier to use.

The simpler your loyalty program is, the more likely customers are to sign up, stay engaged, and spend more money with your brand.

Steer clear of creating a tedious signup process; make it a handy mobile app so that it’s convenient for customers to download, sign up and start redeeming. As for your deals, keep them simple too: “Buy X, Get Y” or “Spend X, Get Y”.

2. Personalisation.

Gone are the days when it was enough to offer your customers a generic one-size-fits-all reward for repeat purchases. People don’t want to be “just another customer” anymore; they expect to be treated as a unique, valued, individual customer.

Your loyalty program is much more likely to increase sales if you send new members a welcome email, thank them for signing up, address them by their first name, offer them a free or discounted product on their birthday, and check in with them from time to time via SMS or push notification.

This goes back to the emotional connection point mentioned earlier!

3. Gamification.

The most successful loyalty programs are the ones that inject a bit of fun into the process, and keep customers engaged through gamification.

As an example, Stamp Me offers a Scratch & Win feature where customers run their fingers over their smartphone screens to reveal prizes that can be redeemed in conjunction with their other accumulated rewards points.

4. Educate Staff.

Your staff are the faces of your business, and they are the ones who are interacting with your customers. The more they know about the loyalty program – all of its perks, its features, its benefits, etc. – the easier they’ll find it to promote to your loyal customers.

Brands that offer their staff rewards for educating themselves on the loyalty program via quizzes and self-training exercises enjoy the most success, because their staff can enthusiastically discuss the loyalty program with customers.

So the long answer is yes, loyalty programs increase sales… but only when done properly.

The bottom line is, new businesses are implementing loyalty programs every day – some of them enjoy a boost in revenue, and some don’t.

But the businesses that take the time to choose the right loyalty program provider to suit their business model, actively promote it, dedicate time and resources to maintaining it and adjusting it as required to stay current, and (most importantly) pay attention to their customers’ needs and wants – those are the businesses that see clear results from their loyalty program.

For more information on how to make sure your loyalty program achieves results, read our six tips on how to create a successful program and make sure you avoid these loyalty program mistakes.