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Does loyalty marketing actually increase ROI and if so, how?

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Loyalty marketing really is the metaphorical place to be in 2022. Research shows that loyalty programs alone can increase a brand’s market share by 20 percent! Keep reading to find out if loyalty marketing actually increases return on investment and if so, how it does it. 

What is loyalty marketing?

Loyalty marketing is an approach to marketing where the business focuses solely on retaining their existing customers by providing incentives. Some of these strategies include rewarding returning customers with promotions, discounts, free products and other rewards. 

This type of marketing has been used for hundreds of years and was first used as a marketing tool in the mid-1990s. The Pareto principle explains why loyalty marketing is so important. Essentially, the top 20% most important customers will provide 80% of the revenue. Anything that makes customers feel appreciated and special within the brand will entice them to buy from the same brand again and again.

Does loyalty marketing increase return on investment?

We already know that loyal customers are profitable to a business, so it’s safe to say that loyalty marketing itself does increase return on investment. A 2013 study found that when a company retains 5% more of its customers, profits increase by 25% to 125% – a prime example of how higher retention of existing customers reduces marketing costs. 

When a brand has generated loyalty from customers, their customers become less sensitive to the marketing efforts of competitors, so it makes sense for businesses to focus their energy on strengthening relationships with customers and enhancing their loyalty. 

By using research methods such as customer surveys to determine the experience of customers, these customers will be more likely to tell their loved ones about your business. There is a direct correlation between higher satisfaction and positive word of mouth intent!

How does loyalty marketing increase ROI?

Customer loyalty is less expensive than customer acquisition.

Whilst a loyal customer who makes a repeat purchase spends the same amount as a new customer’s first purchase, the vital difference is that it’s easier and cheaper to earn revenue from a loyal customer.  

You can skip the steps of making a customer aware of your brand, showing them a relevant offer and making them choose you over a competitor because a loyal customer has already chosen you. 

Loyal customers spend more 

The very definition of a loyal customer demonstrates how these customers tend to purchase more often and buy more over their lifetimes. By building customer loyalty with membership programs and associated perks with TCC Global, you can solidify that value to an even greater extent.

Customer loyalty programs offer valuable data 

There are a wide range of benefits that come with collecting customer data, including the ability to create personalized offers and develop new products. However, with the deprecation of cookies, it’s becoming harder for brands to collect customer data. This is where loyalty programs can help. Collecting first-party customer data like address, gender and phone number can be collected and then rewarded through a loyalty program which can then be used to inform other areas of the customer experience. 

With all this in mind, it is clear that loyalty marketing does actually increase ROI, and how you can ensure that this is a given.

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