Reward Schemes – The Key to Customer Retention

When choosing between attracting a whole new set of customers or investing in your current customers, investing in your current customers will always yield a greater return. 

The cost of acquiring new customers, through both time and money, is five times higher than retaining your existing customers. It’s time to get creative and come up with strategies that keep your customers coming back time and time again.  Whilst all business growth is about balancing the two, many businesses could benefit from turning their focus to their current customers and finding ways to retain them. 

One of the certified ways of keeping loyal customers engaged and returning is through utilising an appropriate reward scheme, a strategic tool that can ensure your customers are in it for the long haul. 

To help you understand the benefits of reward schemes and how they play a key role as customer retention strategies, we at Loyalty Works wanted to put together a mini-guide on the purpose and benefits of reward schemes. 

Why Reward Schemes Work

Reward schemes are effective for several reasons, but if we were to sum them up, we would say that it is because they give your customer a sense of reciprocity, in that customers receive something for their transaction, above and beyond the value of the transaction itself.

They provide a sense of appreciation, in which most of the time the customer would have bought that product or service anyway. By being rewarded for doing so, a customer can feel appreciated for doing business with your brand over a competitor.

This is important because these two things create a positive emotional experience for your customers, which naturally makes them want to return to you over competitors. This often leads to repeat purchases, and a sense of trust and appreciation and even entices many customers to spend more, more frequently for the chance of larger rewards. 

So, we can utilise reward schemes to develop our relationships with our customers. They are a personal point of contact which evolves beyond mere transaction and instead becomes an exclusive and meaningful experience. 

The Impact of Loyalty Programmes on Customer Retention

A loyalty programme is geared up and ready to provide customers with a reason to remain loyal by providing both a means and a motive for a customer to keep coming back for more.

Loyalty programmes approach customer retention on several fronts, with each providing greater motivations to remain loyal, and the natural tendency of loyalty directs those customers we’ve retained towards engaging in greater or more frequent purchases, so we see an increased Customer Lifetime Value (CLV) too. 

By utilising the profound reams of data that loyalty schemes produce and offering suitable and personalised rewards, you create a direct personal connection to your customers, which allows their experience with your business to feel tailored to them. This sense of feeling that the experiences revolve around the customer is what reinforces much of the appreciation a customer feels, and is one of the large motivating factors pulling customers back. 

Loyalty programmes do increase customer retention and are very effective at doing so, when implemented in the right way and with the help of experts like ourselves at Loyalty Works. The retention of these customers is much more cost-effective than acquiring new ones. Add the fact loyal customers are likely to spend more, and more often, you can see excellent value for money.

Types of Reward Scheme: Points and Tiers

Reward schemes can be made of multiple components and come in various forms but there's a general blueprint we can follow that highlights some of the main elements we want to include. Depending on your specific needs, goals and desires, the inclusion, or exclusion, of any of these, may change, but these are the qualities and features that have proven to work and that you will find in many loyalty and reward schemes you encounter in the wild.

Points Based Reward systems

Points-based reward systems, for example, are the most ubiquitous form of reward scheme and one that any reader will be familiar with. Points-based loyalty programmes function as a kind of system of credit, in which each transaction or form of engagement earns the customer a certain amount of points. These points add up to be claimed for rewards at certain thresholds of value.

These are great options to combine with other elements of reward schemes and so you will find this one most often integrated as the foundation of the majority of reward schemes thanks to their versatility and how easy they can be to set up.

Tiered Reward Schemes

Tiered reward schemes, however, take this concept one step further, providing ascending levels of rewards the more loyal a customer shows themselves to be. How this is implemented depends on the needs of the business and the goals they would like to achieve, but it can be implemented in several ways. By combining a tiered scheme with a points-based scheme you can allow your customers to unlock greater rewards if they save up their points, which can provide a further sense of engagement and desire to reach those higher rewards, which can be more motivating than simple discounts for every distinct chunk of points. 

Tiered reward schemes can also be subscription-based, allowing customers to pay for the privilege of access to the rewards scheme, but with greater rewards and exclusive discounts received if they choose to belong to a higher-class membership. 

By combining points, memberships, and tiered systems we can craft reward schemes that cater to the needs of any business, providing a means by which we create greater engagement, enhance retention rates, increase customer value, and of course provide a wellspring of loyalty that can keep your business secure for years to come. 

Retain Your Customers with Loyalty Works

So, if you'd love to reap all of these benefits then why not reach out to us here at Loyalty Works? Our experienced and enthusiastic team will be more than happy to take care of you.

But is there any reason you should choose us over striking it out on your own? Absolutely!

Creating reward schemes is a cost and time-intensive process. It requires gathering lots of data about your customers, understanding your goals and finding the best ways to achieve them, whether that's through reward schemes, engagement programmes, or some other avenue. It requires investment in the right kinds of tech, and if you are inexperienced in the field, it will cost a lot of money and time to find what doesn’t work before you discover what does.

Whilst an in-house loyalty scheme might appear like a great idea, it will require a whole new department and team of experts, as well as heavy investment, to even get started, which we understand is simply not feasible, or reasonable, for many businesses. A loyalty scheme could benefit you today, so why wait years to develop your customer engagement tools? Instead, partner with an expert who lets you focus on running your business while they handle all your loyalty needs, including customer service.

At Loyalty Works, that’s exactly what we offer. Our professional work is providing businesses like yours with the means and mode to bring their goals to fruition by utilising our expertise in customer engagement, maximising customer loyalty, and enhancing lifetime value.

Let us utilise all our tricks of the trade to craft you the perfect reward scheme that you and your customers will love so that you can get back to driving the business you love and finding ways to innovate and expand, whilst we keep your customers motivated, happy and returning to you time and time again. 

Conclusion

As we have come to learn today, reward schemes are foundational in providing a mode of connection between you and your customers that enhances appreciation through a process of reciprocity. This means as you engage with your customers, they are incentivised to engage with you, and when these incentives are managed through a world-class reward scheme, those engagements create positive bonding experiences for your customers. 

With Loyalty Works at your side, you'll be partnering with experts who can deliver on their promises, and then some. If you want us to start crafting a bespoke reward scheme for your business and implementing proven loyalty solutions today, then contact us and find out how we can help you retain more customers, for longer!