How does the Right Loyalty Program Help in Lowering Operational Costs?
- Posted on May 25, 2022 by Robert
- Reading time about 5 minutes
Winning customers’ hearts is the motive of every business owner, irrespective of the industry they belong to or the business size. A loyalty program can play a great role to help brands who want to reward their customers the right way and build a healthy relationship with them. With customers having more brand options than ever, businesses are struggling to make a difference and deliver exceptional experiences to retain customers for a longer time.
After the pandemic outbreak, customers no longer hesitate to try different products from multiple brands. With the fierce competition in the market today, choosing the right loyalty management system is essential not just for the retention of customers but also for the reduction of operational costs.
Benefits That Businesses Can Get Using the Right Customer Loyalty Software
With the dedicated customer loyalty software, your business can achieve huge benefits i.e. higher retention rate, increase in average order value, and order frequency. Apart from the enrollment fees of a loyalty program, customers are required to make a minimum purchase to get the benefits of the program, thereby increasing the average order value. More orders mean higher average revenue per user.
Companies using such reliable loyalty programs witnessed a rise in referral traffic from different websites that mention rewards program details in their content. Here are some of the best benefits-
- Reduce Marketing Spend
A loyalty program built with a well-planned strategy can help brands in improving the rate of repeat purchases. Buyers like being rewarded for their continued business with the brand and continue to buy frequently, which means brands don’t need to spend efforts and money on marketing, lowering their marketing spend to a large extent.
- Improved Repeat Purchase Rate
Successful firms are the ones who can keep the repeat purchase rate between 20-40%. On the other hand, some brands that cannot reach the repeat purchase rate of even 20% can find it difficult to survive for a longer time.
Spending a huge amount of budget on marketing is essential for new businesses to acquire first-time buyers. But big brands can benefit by focusing on retention & improving repeat purchases as 40% of overall business comes from only 8% of the customer base.
- Motivate Customers To Spend
The right loyalty program can benefit both customers & businesses in different ways. Customers can save money not just on purchases but also get more benefits or incentives. On the other hand, businesses can increase revenue spend from loyal customers enrolled in programs. Multi-tier loyalty programs help in dividing customers into many tiers, which influence customer purchase behavior to upgrade the tier level.
- Lower Customer Support Costs
If your customers are loyal and are with you for a long time, they probably know about the brand and its services. This means they won’t contact the customer service or support team unless very essential.
Only new customers need assistance from your brand during their first few months. This is how retaining existing customers using a loyalty program helps in lowering support costs.
How do Loyalty Rewards Program & Marketing Complement Each Other?
Undoubtedly, loyalty programs help in reducing marketing costs but marketing campaigns play a great role in ensuring that people stay aware of the brand from time to time. Without the right marketing strategies for social media, retaining customers would be difficult. Apart from that, content marketing help in continuous branding and maintain customer loyalty.
Well-strategized content on social networking sites will ensure that customers stay aware of new products and services. Other types of marketing such as Facebook Ads, email marketing, guest blogging, and marketing firms need to be planned and executed from time to time. The right loyalty program customized as per customers’ needs and the latest market trends helps in providing the best service offerings and relevant rewards, which ensures that the brand stays ahead of the competition.
How Can You Calculate the Costs Involved in Running a Loyalty Program?
The effectiveness of your loyalty rewards program can be measured based on aspects such as positive customer reviews, higher loyalty program membership rate, direct website visits, social shares, backlinks, etc.
As every loyalty program works differently followed by a unique structure and rewards/incentives offering, we cannot calculate the net gain and cost for the program straightforwardly. The biggest finance firm PWC came up with the calculation that is often considered to be one of the most logical ones i.e. “The cost for a loyalty program can be calculated by subtracting incremental costs from incremental revenues/gains.”
Some of the main incremental gains of the loyalty program are an increase in referral rates, decreased consumer churn rate, increase in the number of customers ready to pay a premium, higher purchase frequency, and additional revenue in the form of membership fees. Whereas the incremental costs include your investment in IT, business overhead costs, R&D costs, the cost involved in reward offerings, member events, etc.
Whether you are a startup or an established business owner, having a dedicated loyalty program can be very beneficial in multiple ways. However, without a proper technical expert team expertise, it can be difficult to build, monitor, and manage a loyalty program.
If you looking for a loyalty program for small business or an established brand, the Novus platform is a perfect fit to meet the requirements of any specific business needs. From designing to categorizing, deploying, and monitoring the program performance, we offer flexibility to develop desired rewards programs at an affordable cost with features aligned for both small and big brands.
If you are interested to know more, feel free to book a demo of Novus or connect with our expert team to discuss your specific needs. It’s time to enjoy the immense benefits of the loyalty program and reduce operational costs to a huge extent. We hold expertise in building solutions for clients across the globe covering various industry sectors across the world.