5 Most Important Reasons to Have Customer Loyalty Cards

Cynthia Vespia9/30/2021

What are loyalty cards ?

Loyalty cards are a marketing strategy that rewards customers for their repeat visits and purchase. They are a useful marketing tool that can help you retain your customers and build your brand. This article explores the basics of a loyalty card marketing strategy.

What are Loyalty Cards?

Loyalty cards are a marketing tool used by businesses both big and small to attract long-term customers. They are designed in a similar manner to frequent flyer programs on airlines or dining rewards. However, a loyalty card offers more generous rewards.

Each time the card is scanned, the customer receives points that can be cashed in at a later date. The cumulative points can be redeemed for rewards offered by the company. This can be discounts, cashback offers, or other items. It is up to the company to decide the details of the program and up to the customer to decide how to spend the points.

Over 90% of businesses have introduced a customer loyalty program. Customer retention efforts using loyalty programs are an incentive to include loyalty cards. Almost 85% of customers have stated their willingness to stick with a company that offers a loyalty program. Another 66% have said that the rewards points will influence their spending habits.

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Features and Benefits of Loyalty Cards

Loyalty cards enhance the customer experience. Customers earn discounts or other benefits in return for their continued patronage while business maintain a healthy customer base. Here are a few of the benefits loyalty cards and loyalty programs include-

1. Customer Retention

As mentioned, the main reason companies provide a loyalty program is to keep customers shopping their brand rather than at a competitor. By offering a reward for repeat business, the company is more likely to see those customers continue spending on their products or services. A customer loyalty program offers a motive to keep customers interested in brand loyalty.

2. Relevant Customer Data and Consumer Trends

Another key factor in implementing a loyalty program is in collecting consumer data with every scan of a loyalty card. When a shopper registers for the rewards card, their data is stored in the company database. The data from the loyalty program provides a clearer picture of what customers spend on and preferences directly related to customer behavior. This consumer data is then used as a profiling factor for companies to tailor their offerings more specifically to their target shoppers.

3. Reducing Unprofitable Customers

A benefit of loyalty cards that is sometimes missed is discovering which customers aren't generating revenue. For example, when an email campaign goes out offering discount codes and a customer hasn't opened any emails in a long while, it's safe to remove those customers from the list.

The most well-structured loyalty program will provide companies enough data to create segments which highlight profitable and unprofitable customers. Using a well-thought-out rewards program gives businesses the opportunity to reward loyal customers whom are initiating a more profitable return.

4. Better Customer Communication

A loyalty rewards program offers a chance to create open communication with customers. This doesn't just refer to a help center but rather is a direct line to customers to facilitate communicative efforts. This enhanced customer communication can be used to announce new products or services, promote upcoming sales, or notify customers about upcoming sales or even product recalls.

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What are the Pros and Cons of Loyalty Cards

Loyalty cards can keep customers coming back to businesses for their future purchases. The rewards card builds customer loyalty while simultaneously exposing a small business to new customers. However, for all the pros of a loyalty rewards program there are some cons as well. Loyalty cards take alot to maintain but it's the financial component that can be a major drawback of loyalty programs.

Regardless of the types of discounts initiated they will ultimately upset the bottom line of company profits. For example, $50 in sales is broken down into $40 of costs with only $10 in profit for a typical sale. When customers use loyalty discounts it impacts the sales result. A 5% loyalty reward on a $50 price tag will decrease the profits. Instead of the sale resulting in a $10 profit, it is reduced to only $5 on each sale. Over time, even what seems like a small discount, can add up and impact the sales revenue.

Moving past this particular sticky point from a loyalty program is to ensure the pricing is both fair and effective. So long as the discounts are balanced in a way to recoup losses the loyalty points won't impact the average order to extreme loss.

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How to Use Your Loyalty Cards

The answer to how a loyalty card is used comes down to balancing customer needs with business needs to create the required outcome. Focusing solely on one or the other would only prove to complicate matters. Therefore, implementing a good loyalty card program would include the following-

1. Easy to Follow User Experience
If the interaction with a loyalty program is too complicated to understand or navigate it might lead to customer's departing from it. The loyalty platform should be easy to navigate with simple instructions and a clear CTA. Maintaining the overall brand messaging is also important so the customer knows who they are dealing with and what to expect.

2. Strong customer service
A clear outline of steps to initiate and start using the rewards program should be laid out before sign up. Any follow up questions a customer has should be answered quickly via customer service. When someone reaches out to customer service with an inquiry the response time should be minimal with clear feedback on whatever the question may be. If customer expectations aren't managed in this important area it can negatively impact the success of a loyalty rewards program.

3. Ongoing engagement strategies
Investing time in a loyalty program shouldn't stop with the initial creation. Keeping customers coming back takes more than an average card program. While the loyalty rewards program will entice new customers, the engagement strategies should be constantly evolving to maintain customer loyalty.

Tiers have been proven effective to reward customers who have been engaged in the card program long term. Additionally, the program can use loyalty tiers as incentive to mid-range customers to push for more loyalty points which would move them up into another level. Behavioral activities where customers earn loyalty points for participating in a survey or other means is another way to rejuvenate a loyalty rewards program.

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How Loyalty Cards Work

A customer loyalty card is a customer retention strategy used to develop brand loyalty. The loyalty rewards programs reward customers who keep coming back to the brand for repeat business.

The more customers spend, the more loyalty points they earn. These loyalty rewards are then redeemed for free products, discounts, insider perks or other custom loyalty rewards. The goal of using a loyalty card is to encourage new customers to become loyal customers. It also builds trust between brand and consumer.

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Why Use Loyalty Cards?

Selling to return customers costs less than trying to acquire new customers. This is why more businesses turn to loyalty programs. A customer loyalty program will fall into one of these four categories-
  • Loyalty Points
  • Tiers
  • Social Media
  • Paid Programs
Even though these methods have been proven successful, there is always room for new ideas to build customer loyalty through a rewards program. But while each of the loyalty programs has their differences, the main purpose remains to encourage repeat business by building brand loyalty.

Loyal customers will increase sales growth through their purchases and by introducing new customers to the card program. When the loyalty program is managed correctly, regardless of concept, it will be a boon for profit increase going forwards.

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Digital Use of Loyalty Cards

As loyalty cards and the concept of rewards programs grew in popularity, more businesses started to introduce them. Similar concepts are also flooding the marketplace as small businesses, and even online sources, all vie for the competitive advantage.

The customer loyalty programs that continue to achieve the best results lay in rewards and referrals programs, along with discount rewards. Each example builds brand loyalty as more customers continue with repeat business purchases.

How to build a customer loyalty program-

Customer loyalty programs are known for a sense of VIP treatment. The rewards program will offer perks that non-members don't have access to. For example, reward points could be redeemed for exclusive trips, hotel stays, airline fares or specialty items. The loyalty program and its rewards should speak to the brand its specific client base.