Loyalty Programs: The Path to Saving Costs

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Tightening belts is not a new concept for any company, but too many are overlooking one of the most efficient way to keep costs down: fostering a stronger relationship with customers through a loyalty program.

How does customer retention translate cost savings? Take a look at the cost of serving a long-standing customer versus the cost of acquiring one. Acquiring a new customer can be a long and expensive process for a business, advertising and marketing cost is high during this stage. To put a number to it, courting a new customer can cost five times more than satisfying and retaining current customers.¹ Businesses need to retain customers for at least 12 to 18 months to break even on the cost of acquisition.²

The value of customer loyalty is not just a nice-to-have but it's a must-have to keep a business afloat.

Across a wide range of businesses, customers drive increase in revenue each year they stay with a brand. Return customers tend to buy more from a company over time. As it follows, the operational costs of serving return customers get smaller. A study showed that 2% increase in customer retention has the same effect on profit as decreasing operating costs by 10%.³

Establishing a loyalty program builds a long-lasting relationship between a brand and its customers.

79% of consumers ⁴ say loyalty programs make them more likely to continue doing business with brands.
37% of customers⁵ are willing to pay to upgrade to an enhanced tier of a loyalty program.
Loyal customers are also your advocates and promoters, 73% of consumers⁶ are more likely to recommend brands with good loyalty programs.

Loyalty program, if done right, results in higher profits and overall brand success.

Each customer is unique to its own and not every customer has potential to be a long-standing profit generator. Cost-effectiveness is achieved through intricate segmentation by identifying which group returns the most of investment.

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