5 Benefits of Customer Loyalty Programs

Almost every big business giant has implemented some sort of customer loyalty program.  Whether it is Royal Caribbean Cruise Line, Disney, Walmart, McDonald’s, Costco, Amazon Nike, or Adidas, customer loyalty programs are available in a wide variety. The reason is obvious, these businesses are aware of the fact that these loyalty programs play a significant role in retaining loyal customers and materializing the financial gains associated with customer retention and loyalty.

Why Focus on Customer Loyalty Programs?

Customer loyalty programs have received a lot of attention over the past few years and this is not happening without a reason. With a well-thought loyalty program, businesses can capture desired market share. That’s why almost every industry ranging from food & beverage, cosmetics, pharmaceuticals, retail, beauty, travel, tourism, gaming, and education is taking advantage of these programs. No other effort can gain you as many results in establishing customer loyalty as a customer loyalty program does.

Let’s take a deeper look at customer loyalty programs, the benefits associated, and how it works.

Happy client

1.    Retain Existing Customers

Customer retention is much more valuable than customer acquisition. For example;

  • It can cost you five times more to acquire a new customer than to retain an existing one. Why not invest in retention for that acquisition if it costs less?
  • If your customer retention is increased only by 5%, you can expect a profit surge of 25-95%.
  • The chances of selling to an existing customer are 60-70% as compared to selling to a new customer which is 5-20%.

Because a customer loyalty program is a proven way of retaining existing customers, you can expect a reasonable increase in sales volume and profit margin.

This IS HOW IT WORKS. When customers realize that the company values every purchase they are making and offer them some sort of rewards, bonuses, or points, they feel more connected to the brand and stay loyal to the brand due to the natural human emotion of gratitude and the desire to reciprocate.

2.    Increase Customer Lifetime Value

When you have a loyalty program established, you can expect your customers to spend more on your product/service in the hope of more bonus points, coupons, or discounts.

It is also likely that they will make a repeat purchase to increase their points. Thus, a well-planned and effective loyalty program increases the lifetime value of your customers.

Summing up, here are two ways through which loyalty programs create a direct impact on a customer’s lifetime value

  1. Increase the expected amount they spend on your product/service
  2. Increase how often they spend on your product/service

3.    Stop Competing on Price with Competitors

Pricing was traditionally the basis of competition. If you were able to deliver the same product and service quality at a comparatively lower price, you had a competitive edge. But with loyalty programs, price is not the ultimate consideration when making choices. The benefits and bonuses associated with being a loyal customer of a brand matter now. The customer considers their overall experience and history with a brand and not solely the one-time price they pay.

4.    Build Personal Relationships

One way to create loyal customers is to nurture strong personal relationships with your customers.

These personal relationships are cultivated in several ways such as sending your customer personalized greetings on special occasions, offering special incentives on occasions such as birthdays and anniversaries and offering discounts on making certain amounts of purchases.

A loyalty program thus forms a strong bond of association between the customer and the brand. You start owning the customer and the customer starts owning the brand.

5.    Create Brand Advocates

Marketing is a major expense for businesses of all sizes. Marketing costs can be reduced significantly if you have a loyal customer base.  Increasing retention can reduce your required expenses on customer acquisition.  You can also reduce acquisition costs through referral programs. This is because your greatest brand advocates are your loyal customers. People love to share their experience with a product or service with friends and family and on social media platforms.  Loyalty programs mean people will talk about these incentives and motivate others to experience the same.

Simply put, it becomes easy for you to get more positive customer reviews, testimonials, likes, and followers along with getting new customers through referrals. If you are an eCommerce business, using Shopify,  WordPress, WooCommerce, or Magento, you can start one almost instantly!

loyalty program


Customer loyalty program brings tremendous benefits to all types of businesses. This includes but is not limited to retaining customers, increasing customer lifetime value, building personal relationships with customers, and standing out in the competitive business world.  If you are also looking forward to reaping the advantages associated with customer loyalty programs and penetrating the market, contact us!