Proven Loyalty Effect: Do Loyalty Programs Really Work?

As a marketer, you aspire to not only enhance the customer experience but also contribute to substantial financial gains for your company. One highly effective method you employ to achieve this is by implementing a loyalty program. However, you might be often asked to provide a proof of the so-called loyalty effect. In this article, we present quite a few thought-provoking facts and figures. They reveal what value an engaging program run with the use of a modern loyalty management platform brings to marketers… and their executives. Buckle up!

What revenue do loyalty programs bring to companies? While day-to-day benefits of running a loyalty program are quite clear to the marketers, they are often challenged by C-level executives on the strategic level both when it comes to the loyalty effect and its measurement. So is that true that running a loyalty program is only a burden to the company’s budget? Definitely not, and here is why.

 First, 75% of participants in highly successful loyalty programs changed their behavior in order to generate greater value for businesses

With the right strategy and wise leadership the results might be incredible. The Loyalty Survey from McKinsey shows that 64% of program members are more likely to purchase more frequently while 50% are more likely to recommend to others. What’s more, almost one third of them is willing to pay a higher price to stay with a brand. Converting customers to members brings a measurable effect that is for sure convincing for the executives.

Let’s take a look at statistics coming from brands that have already invested in their loyalty programs and measured the results. Out of the companies that track the return on investment (ROI) of their loyalty program, 80.0% indicated a positive ROI, generating an average of 4.9 times more revenue than their expenses. Moreover, among the participants whose companies have a loyalty program, 81.9% have plans to either increase or significantly increase their investments in customer loyalty within the next three years. Which brings us to another argument…

Second, the loyalty management market is projected to demonstrate a CAGR of almost 24% in the next 7 years

No wonder companies are about to invest in enhancing their loyalty programs – there’s a lot market reports showing that coming years will bring a dynamic growth in this field. According to Fortune Business Insights, in 2022, the worldwide market for loyalty management had a value of $5.29 billion. It is expected to increase from $6.47 billion in 2023 to $28.65 billion by 2030, demonstrating a compound annual growth rate (CAGR) of 23.7%. 

What will play a crucial part in this market boost is the loyalty management technology. Based on the survey findings, 44.6% of companies that are implementing a loyalty program intend to utilize third-party technology provided by a specialized vendor. On the other hand, 21.4% plan to internally manage their loyalty program, while 33.9% remain undecided. The survey also revealed that 49.1% of loyalty programs are overseen by a loyalty technology solution vendor, whereas 50.9% are managed using in-house technology.

Why is loyalty management technology a key engine in driving both loyalty and financial growth? Behind all the figures we mentioned above stands a really complex process executed day by day by the marketers. Thanks to a robust loyalty platform, marketers are provided with everything they need to build, run, and manage a successful loyalty program.

How loyalty management platform helps marketers secure customer retention and boost company’s profit?

1. Data collection and analysis

Thanks to a robust loyalty platform, marketers can better understand the motivations, buying behaviors, and shopping journeys of each customer.

Acquiring a loyalty management system to automatically gather customer information from all sales and marketing channels is a real game changer. Utilizing this data to create enticing promotions, offers, and even an entire loyalty program that will greatly appeal to customers – another practical functionality. Once a program is active, marketers can use integrated analytics models to analyze member data, identify behavioral patterns among their clients, and deliver the appropriate message at the perfect time and location.

2. Customer segmentation

Based on data, marketers can put customers into different segments. 

Thanks to knowing, who the brand audience is, as well as their needs, and behavioral tendences, marketers can define  segmentation strategy. Modern loyalty management platform allows marketers to divide program members into groups on a broad spectrum of customer data points. There are multiple models of segmentation available, depending on defined data points, such as: demographic, psychographic, customer behavior, campaign responses, and more. Customer segmentation is the layer on which marketers can base their next step towards achieving best ROI from promotions and campaigns. 

3. Content personalization

Once segmentation is done, marketers can target a given customer with personalized content, including offers and relevant messages.

Utilizing such tools as a promotion engine allows to influence how customers perceive a brand and to steer them towards their next purchasing choice. The ability to customize loyalty offer gives marketers the real power – different types of promotions, such as points, discounts, coupons, and product giveaways, based on virtually any activity across various channels (including purchases, online reviews, app downloads, and more), is also available with the use of solid loyalty management software. Furthermore, even if a program is going to by managed by someone who lacks expertise in this field, pre-designed templates can be employed – best, Artificial Intelligence-driven and Machine Learning-powered platforms provide recommendations to effectively capture customers' interest.

Key takeaways

When done right, these steps lead to loyalty program members shopping more, more often and for a higher value. Now, if you’re in the middle of a discission whether the loyalty program is only a burden for your company or an investment, just check out the numbers. It’s one of the most effective ways of keeping the customers and their wallets with you.

If you want to gain deeper insights into how a modern loyalty management platform can support you in building and executing a highly effective loyalty marketing strategy, request a demo with our team of Loyalty Experts here!