How Important Are Customer Loyalty Programs To Your Inbound Marketing Efforts? 

In this fiercely competitive world of social marketing, having loyal customers can help you hold off the constant onslaught of your competitors. Latching on to existing customers is easier and more affordable than acquiring new ones. It is extremely difficult especially if you are a player in a homogenous market selling me-too products. Me-too products are hard to promote because they often lack a unique differentiating factor. 

Buying is a psychological process. It is more instinctive and impulsive than planned. So, you will have to give your prospects a reason to buy your products even if they are apparently not much different from those promoted by your rivals. Your inbound marketing efforts can bring in more traffic and generate leads. But, finally whether you can sell your ideas or products to them would depend on the psychological state the prospect at that point in time. There are customers who get convinced by your marketing efforts but need a final push to make them buy your products. Loyalty programs can provide that psychological boost. It can provide the motivation needed to act positively to your CTA. 

What is a customer loyalty program? 

A customer loyalty program is a practice under which sellers and marketers reward a customer for their buying behavior. A customer loyalty program is an attempt to induce frequent purchase and thereby rewarding every purchase. One reward induces another and this process continues. A customer loyalty program may give a customer a special membership and points may be added to it with every purchase. The points may be converted into cashback offers, special discounts, buy one get one free kind of offers, special holiday packages, air tickets, automatic entry into sweepstakes, complimentary passes to shows, etc. 

Customer loyalty programs issue an identifier which could be an ID card or a card like a credit or debit card using which points can be added to your account or other transactions with the retailer can be facilitated. The biggest benefit of a customer loyalty program, be it at a brick and mortar store or a website/ blog, is the wealth of customer information that you can collect. That means you can study the vast data to identify certain trends in his buying behavior, be it the time of the year or month when he buys most, the places that he buys from, the items that he buys most and a host of other interesting information that would allow you to make customized offerings that he would like. Customer loyalty programs may be more effective for high value customers because you can create unique offers for him even during times when there may be no offers for others and entice him to make a few high value purchases. 

If you own a blog or a website, you can offer freebies to make your visitors sign up for newsletters and subscribe for blogs that can allow you to promote your content and induce them to make purchases or providing an advertiser with a large customer base to explore. 

Customer loyalty programs also give marketers a clear understanding of the marketing efforts which are bearing more fruit than others, especially in case of this particular account. They can also analyze and sketch the overall impact of these efforts on their business and sales. 

The customer data collected can also be used in customer research to study current marketing trends.    

Some interesting statistics 

According to SelfStartr, there are 3.3 billion loyalty program memberships in America and there is an average of 29 memberships per household as of 2015. However, Hubspot quotes the 2015 Colloquy Customer Loyalty Census which states that out of these 29 memberships, only 12 are redeemed every year. This means that a lot of these loyalty programs are failing to generate sales for the businesses and are also failing to add value to the customers. However, SelfStartr says that 76% of the interviewees in a survey felt that customer loyalty programs are an important part of their relationship with a business or a brand. Also, the number of memberships is steadily on the rise in the US. 

The same article also states that it is 6-7 times more difficult to acquire new customers than retain old ones. The probability of conversion in case of an existing customer is 60-70%. In comparison, it is not more than 20% in case of new customers. Almost 75% of US companies have also admitted that having loyalty programs have generated healthy return on investment. 

Importance of customer loyalty programs 

Customer referrals

A points program encourages customer referrals. There are many businesses that reward a customer for referring the program or the brand to a friend and in the process both the referrer and the referral are rewarded. This helps you to expand your customer base and can have a direct impact on your bottom line. It also increases your brand visibility and also your reputation.

Customer lifetime value

An effective loyalty program can help increase the customer life time value significantly. Customer lifetime value is the total sales that a customer provides over the total period of association with a business. A loyalty program is successful if it manages to provide a very good customer lifetime value. Looking at the current value only will not provide a good assessment of the program. Companies are increasingly using different software and computational tools to ascertain or predict even the future business a customer would provide. Long-term association is more important than a short-term purchase and loyalty programs help in this regard.

Keeping your loyal customers interested

Loyalty programs help you to position your business topmost in your customers’ mind. Since you keep reminding them of new offers, awards, arrival of new products, launch of new services and constantly give them a casual reminder to redeem their loyalty points, they stay invested emotionally in your business. It brings them back either to your physical store or your online facilities like blogs, newsletters, whitepapers and websites. They are also more likely to provide helpful feedback that can be used to improve certain aspects of customer service or the overall business, since they have a direct connection with the welfare of the business. The attitude is generally very different when they make anonymous purchases.

Get more business

Customer loyalty programs can not only increase the frequency of purchase but also the value of purchase per transaction or per customer. Many loyalty programs encourage customers to increase the value of transaction per visit to the website or store by offering them to move to a higher segment in the loyalty club that offers more benefits. Many customers do it both for the benefits and also from a sense of social status augmentation. An empirical observation in retail management says that 20% of your customers provide you with 80% of your business which is known as the 80:20 rule. So, there is an incentive for the business also to move a customer from a lower spending segment to a higher one.

Co-branding and getting into a partnership with another entity to provide a customer loyalty program

Sometimes, different companies or verticals under the same parent company issue an all-inclusive single loyalty card which can be used across multiple stores and portals. This can offer more value to the customer and bring in more sales to the partners. A partner can use the other’s reach within a specific target group to acquire new customers. They don’t compete but complement each other. That is why it is necessary to tie up with allied businesses which provide complementary products or services. Partners can feed of each other’s strengths to grow their customer base as well as generate more sales.

Customer retention

A loyaltyprogram is the right incentive to keep your customers attached with your business. A loyalty program provides a number of benefits that ordinary, anonymous customers don’t enjoy. So, customers increase the frequency of purchases and also value of each purchase to add more points to the loyalty program which can be redeemed at an appropriate time. A customer prefers to transact business with one online or offline facility rather than moving around like a tramp from one venue to another or one website to another. This further strengthens the logical reason to stay. With more information, a business gets more insight into buyer behavior that helps in market segmentation, product positioning and a cache of information that can help it to predict any change in the future.

Reduces drainage of resources required to acquire new customers

It has been proven time and again that the real cost escalation occurs when you try to target and acquire new customers. The problem compounds because you are not sure whether the lead will convert and whether the lead will stick around to give a high customer lifetime value. The initial cost invested to start a loyalty program is soon offset by the increase in business and reduction in loss of customers that a loyalty program can guarantee.

Targeted promotion

The useful information that you collect through points programs allows you to target your advertisements and promotional efforts better because you can choose the demographics or a segment which has given you the best returns. That would loss of social media and traditional advertising resources would be marginalized. 


You should be warned however that a loyalty program is as effective as your service. If your service, the quality of your content or product is below standard or fails to satisfy the needs of the customers effectively, the program would fail. It might create an initial flutter but the excitement would soon fizzle out. Inward marketing will also thrive and have a positive impact when combined with exciting loyalty programs if the content is exciting, entertaining or useful.