Attracting new customers is key to the success of any business but encouraging loyalty in existing customers can also benefit you significantly and shouldn’t be overlooked. Indeed, studies have shown that increasing your customer retention rates by as little as 5% could boost your profits by as much as 95%. In order to retain existing customers, many companies are making use of a loyalty business model. But what is a loyalty business model, and how can loyalty benefit your business?
What is a loyalty business model?
A loyalty business model is a business model wherein company resources are used to increase the loyalty of customers. Simply put, it means utilising several different methods to keep customers coming back to the business, thereby increasing profitability. When done right, it can be of great benefit to both the customer and the business. While attracting new customers is an important part of any business, retaining these customers can make a big difference in how successful your business is. Having a robust it program is a great way to keep these customers coming back and improve brand loyalty.
There are many different types of loyalty programs that your business can make use of. These programs are highly customisable, so you can tailor yours to perfectly suit your business. One of the most common is the earn and burn approach, wherein the customer will take the preferred action, be it buying a product or otherwise utilising your business, and will receive points in return, which they can then use for a reward, and so on.
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This is a good approach as it’s easy for the customer to understand and is seen as a great deal, thereby encouraging . For an example of this method, look at the many major supermarket chains who make use of cards, such as MyMorrisons or Tesco’s clubcard scheme.
You can also use a tiered approach. This is more complex than earn and burn but using tiers with the promise of bigger and better rewards can encourage customers to spend more with your business.
Getting your loyalty program right is vital. Thankfully, there are many companies you can work with to ensure your brand loyalty products are right for your customers.
How can a loyalty business model benefit your business?
Having an effective loyalty model can make a big difference in attracting and retaining customers. Studies have shown that many customers believe that working towards a goal or reward makes them loyal to a business. Additionally, a customer who signs up for a it program is much more likely to buy from you again.
Not only will these customers be loyal to your business, they’re also more likely to recommend your business to friends and family. So not only can loyalty programs retain existing customers, but they can also be a good way to gain new customers.
Ultimately, a loyalty business model is cheap and easy to implement and can be a great way to retain customers and boost profits and could be the strategy that takes your business to the next level.