How do loyalty programs increase customer retention rates?
December 19, 2013

By offering gift card programs and loyalty programs, store owners can avoid some of the biggest challenges associated with operating a small and medium-sized retail business. Whether in an online, brick-and-mortar or multichannel setting, the process of finding new customers is expensive. The online publication MarketingProfs cited data from Lee Resources, an international consulting firm, that said reaching out to new clientele costs five times more than it does to retain existing shoppers.

Loyalty programs represent a simple way for stores to refocus their expansion efforts to maximize sales from the customers who are already most interested in the brand. Here is a closer look into why these tools are so effective:

They create a reason for shoppers to come back
The prospect of earning rewards for continued purchases is an attractive perk for many consumers. People are likely to feel more engaged in the purchasing process if they are working toward a specific goal. According to MarketingProfs, loyalty programs don't have to be elaborate and complicated. In fact, even the simplest setup can encourage shoppers to keep coming back in the long run. They may even be more inclined to spread good word about the brand if they had a positive experience earning a specific reward. As a result, loyalty programs ultimately become a much cheaper acquisition tool.

They create a more personalized shopping experience
The growing popularity of e-commerce and mobile shopping technology has also created new opportunities for stronger customer retention rates. The online publication Econsultancy said retailers can take advantage of these trends to offer more personalized rewards that satisfy individual shopper preferences. Consumers now expect to be understood by their favorite brands more than ever before. With the right planning, small or midsized stores can secure a loyal customer base both online and in person.

Nexus: G-WEBCD2