10 Pros and Cons of Loyalty Programs Every Business Owner Should be Acquainted with


Customer loyalty programs are planned to reward the best customers. Business owners choose to reward customers in order to retain them for a longer period of time. Traditional loyalty card solutions have plenty of advantages for small businesses. With the help of these programs, customers are compelled to purchase again and again.

Studies on business growth have shown that online gift card solutions have increased brand awareness and generated a positive return on investment.

Before you opt your customers get the best of merchant gift cards, let’s dive deeper into details of the loyalty program.

Businesses around the world worship customers

What is a Loyalty Program?

Businesses around the world worship customers; it is the customers who run the show and help enterprises survive globally. Enticing a new customer to purchase a product or service isn’t the real deal, the hard part is to retain the existing customer and compel him/her to make purchases.

This is where loyalty programs come into play. Businesses of all sizes entice their existing customers with by offering them incentives, discounts, gifts, and much more. For instance, a customer will earn points for each purchase which they can redeem and get discounts or a gift item.

Now that we know what loyalty programs are; let’s see what difference do they make on businesses?

Importance of Loyalty programs for Businesses

When competition grew fierce among businesses, some smart marketing experts thought of a trick that would help to retain their existing customers by turning them into the most faithful ones. Although customer loyalty is a rare entity, but businesses are seen relying on this trick to maximize their sales in both on and off-seasons.

We just can’t simply recommend you to get it for your business but rather we can share with you the pros and cons to let you decide what is right for your company and audience.

When competition grew fierce among businesses

Pros and Cons of Loyalty Programs

 

Pros

1. Direct Customer Communication

A loyalty program offers a better communication line to customers and minimizes the buyer and seller gap. Announcing new products and services, sending sales-oriented messages, and facilitating recalls are some notables that are possible due to this communication. The recall notice works effectively as it is against the consumer’s purchase of the actual good. Thus, the chance that the email recall notice will get read by your consumers is pretty high.

The minimized gap between buyers and sellers fosters trust and boost brand loyalty.

2. Improved Customer Retention

In the list of benefits of having a loyalty program, customer retention is the ultimate aim. The main motive behind is to retain existing customers and make the most out of them. Loyalty exists when a person patronizes the business/store/shop and trusts in it completely.

The direct impact of the retention strategy on the bottom line business is evident. Increasing the retention rate by 5% will boost the business by 20% to 50%. The increased interest of SMEs has led to the formation of loyalty card solution companies. They offer eCommerce payment processing solution, clover payment terminal, online ebt processing, and smart fleet card online.

3. Relevant Consumer Data

The consumer data gets registered once the transaction is made. This database is later used for loyalty programs and target customers as per their likes and dislikes. Since the database gives enough insight into the customers’ buying habits and behavior, it makes it easier to tailor a promotional plan.

The gathered data after a campaign enables marketers to measure the results of special promotions and plan accordingly for the next one.

Customers’ reaction to the promotional loyalty campaign speaks volumes about their buying preference. Companies like EmpirePaytech, which offeronline gift card solutions, believe that a loyalty program can tell more about customers in 2 months than in 30 years of traditional shopping.

4. Segments Customers

This is often overlooked as a benefit of going for a loyalty program.  A well-designed promotional loyalty campaign discovers profitable and unprofitable customers. It helps companies understand which customers are only going for a discounted campaign and who genuinely are buying premiums as patrons. Profiling customers in such a way allows businesses to focus and target customers accordingly.

You can opt to only reward customers who have been promising and profitable to the business; this way, you will retain the customers who generate the most profit.

5. Increases Demand in Slow Seasons

Since companies use consumer data to up-sell and cross-sell their items in off-seasons, it also offers extended warranties for specific items. The loyalty program brings relief in slow seasons by luring in existing customers to make a purchase. Airline companies use this trick so well in their mileage program in selected flights. Due to less wastage, such targeted campaigns yield satisfactory results.

Enough of the benefits of loyalty programs, now it is time to share with you what no one does, the hidden disadvantages of loyalty programs.

We aim to bring a clear picture for you businessmen, as we believe a true picture will help you back your decision to go for merchant gift card solutions in Houston.

The consumer buying behavior depicted as in loyalty promotional campaign can be limited and may not showcase the exact buying trends of the consumer

Cons

1. Limitations of Loyalty Data

The consumer buying behavior depicted as in loyalty promotional campaign can be limited and may not showcase the exact buying trends of the consumer. It does not represent the consumer’s interaction with other brands; also, some consumers might feel uncomfortable sharing their buying behavior with your brand in order to get incentivized.

2. No Guarantee Profit

It is an un-denyingfact that loyalty programs bring repurchases based on the historical behavior of the consumer. However, one thing which cannot be ignored is that their buying capabilities and behavior might change with time. Change of lifestyle, needs, and income may hinder the results of consumer behavior, which may not end up satisfactory for the company.

3. Saturated Markets

The overuse of a promotional strategy in the market kills its very reason for existence. Since loyalty programs have been one of the finest ways to engage existing customers and lure them in buying the product/service again, it has been adopted by many in recent times. The saturation of likewise products and loyalty programs have now compelled firms to pull-back from their campaign.

If a consumer gets over five reward programs for products that he/she bought last week or last month, why would he/she bother to buy new products that aren’t unique?

Designing a loyalty program that sustains a competitive edge over the competitor is not only challenging but requires extensive marketing skills. EmpirePaytech offers loyalty card solutions for businesses looking to maximize their profit with apromotional loyalty campaign.

4. Difficult to Judge Customers’ Loyalty

In a loyalty program, a business relies heavily on consumer behavior. It tries ts best to lure them in to buying again. However, it does not mean that one who is a frequent buyer is loyal as well. He might be buying just because it is convenient or him, or simply because he wants to make the most out of the benefits of the loyalty program. Loyalty is an emotion and cannot be gauged by a promotional loyalty program.

Merging loyalty programs with marketing tactics can yield the desired results your consumers can refer their relatives and friends.

5. Balancing Bottom Line

No business likes giving discounts; it is the dire need of time that they decide to give their customers discounts and lure them in buying their products. Discounts damage the financials of the business;however, companies tend to bear the damage by increasing sales andcovering it from there. The key to moving forward is to make sure that the discounts are fairly priced, and the program increases repeat purchases to balance the financials of the business.

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