What is a Customer Loyalty Program?

What is a Retail Customer Loyalty Rewards Program?

A Customer Loyalty Program is a marketing tool used by all types of businesses to motivate repeat customers by offering some type of reward system. Customer Loyalty Programs are used by the largest U.S. retail and restaurant chains, customers have come to expect some type of Customer Loyalty offer.

Find the definition of a Customer Loyalty Rewards Program, along with examples of current successful loyalty programs running in retail and restaurant chains.
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 behaviour.

Successful programs are designed to motivate customers in a business’s target market to return often, make frequent purchases, and outshine competitors. In retailing, these programs generally reward loyal customers with discounts, special offers, rebates, points, or freebies.

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, loyalty platform.

Common Misspellings: customer loyalty program, customer loyal program, customer loyalty program, customer loyalty program, customer loyalty program

Examples of Current Retail and Restaurant Customer Loyalty Programs

• Five Star Loyalty
• Stampwallet Loyalty
• Loyalzoo
• Stampme
• Piggy
• Domino’s Piece of the Pie Rewards Program
• My Chili’s Rewards
• Texaco Stars
• Starbucks Level

What Are The Goals of Retail Customer Loyalty Program?

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.

What Are The Customer Loyalty Program 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% 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 and 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 Customer Loyalty 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’s some key data that reveals why customer loyalty programs can give retailers a competitive advantage.

• 73% 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% 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% of the affluent middle class belong to a grocery store customer loyalty program to save money (source: Collinson Group)
• 48% of loyalty program members say they would be willing to pay a membership fee to continue receiving the rewards club benefits (source: Maritz)