Home » Customer loyalty » How Rewards Create Customer Loyalty
Last edited: January 10, 2022
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Building customer loyalty can be a challenging task, but one that pays off. Loyal customers are more likely to make frequent purchases and spend more money on your brand. They’re more likely to recommend your business to their friends and family and boost your brand awareness. And they’re much more likely to leave positive reviews and provide social proof that helps you generate more leads.
While there are a great many benefits of having loyal customers, the question remains – how do you build loyalty? How do you improve your retention rates and inspire trust and loyalty among your consumers? The most effective way is through rewards.
Now, your customer loyalty will likely fall when you use generic rewards programs that don’t really bring much value to the consumers and don’t actually take individual customer’s wants and needs into consideration.
But it’s a different story when you use high-quality rewards that benefit your consumers and your business. See how rewards create loyalty.
Personalization is the name of the game. While all customers enjoy feeling like they’re part of your brand community, they still want to be treated as individuals who have their own unique needs that you recognize.
Your customer loyalty will likely fall when you treat all customers the same – why would the 42-year-old Mike who’s spent thousands of dollars on buying your expensive watches want to get a $10 off coupon on cheap earrings? The reward holds no relevance for him, and he’ll ignore it at best and feel underappreciated by your brand at worst. Perhaps the 16-year-old Anne would feel like that reward is targeted to her, but Mike certainly wouldn’t.
Over 77% of consumers have picked, recommended, or paid more for a brand that offers a personalized experience. So, personalizing your rewards programs isn’t an option; it’s a must if you want to boost your sales and inspire loyalty among your consumers.
A huge part of personalizing your rewards is making the customer feel special. You’ll want to show your customers that you care about them and that you appreciate them by using meaningful rewards. But be careful, as this can be a double-edged sword if you get the reward wrong.
The aforementioned wristwatch enthusiast Mike will not only feel that a coupon for earrings is irrelevant to him. He’ll feel like your brand doesn’t understand his needs and doesn’t appreciate his business.
On the other hand, a nice discount on his next watch purchase or complimentary annual watch cleaning and maintenance can show that your brand really does care about him. By doing this, you’ll show that you’re not only focused on making a sale but that you’re dedicated to keeping your customers happy and making them feel special. And that’s precisely what your rewards programs should be at its core.
The best rewards will offer excellent value to the customers without negatively affecting your business. The more valuable a reward is, the more special your customer will feel, and the more they’ll appreciate your brand.
When creating your rewards program, keep your best customers in mind. Do thorough research to understand who they are and what they want from your brand. Only then will you be able to understand how to give them value.
However, when designing your rewards program, you’ll also want to ensure that you’re getting something in return. The program has to be self-sustainable and has to pay for itself. If it only costs you money without helping you increase sales or retain customers, it won’t be worth it. So, keep a close eye on the program while it lasts. Analyze and monitor it to gauge its performance and see what it’s giving your business.
Rewards programs act as positive reinforcement – you’re essentially praising your customers for choosing your brand and doing business with you. That can push the consumers to keep doing business with you and keep reaping the benefits of it. But only if your rewards programs are designed to encourage loyal behavior.
Unfortunately, many businesses create rewards programs that actually encourage disloyalty – free shipping on your first order, 50% off on the first purchase, gifts and bonuses for new signups, etc. All of these put focus on new customers.
You’re leaving the impression that new customers are all that matters, so your old customers feel like they’ve been loyal without getting much in return. Therefore, they go to your competitors, who are also rewarding new customers only and encouraging disloyalty. It’s a vicious cycle.
Use your rewards programs to promote the desired behavior – encourage customers to keep returning to you and to keep buying from you.
Your rewards programs should reflect the customer journey – as the customer evolves from a window shopper to your best brand advocate, so should the rewards program. You should first start with offering incentives to consumers to join your loyalty program, then slowly progress the rewards as customers get better acquainted with your goods and services and as they keep returning to you.
The best long-term reward programs are often tiered. The first tier offers smaller rewards that get a new customer interested. The second tier promotes the desired behavior and gets customers to keep returning. The VIP tier provides the greatest value and shows your most loyal customers just how much you care about them. That’s how you provide lifetime value and how you get loyal customers.
One of the greatest benefits of using rewards programs is that they help your customers get attached to your brand. You’ll show your consumers that you understand them, that you’re interested in making their life better, that you want to provide them with the best experience. By caring for your customers, you’ll encourage them to care about your brand and you’ll establish a valuable two-way relationship with each and every one of them.
Both you and your most loyal customers will reap the benefits of a good rewards program that inspires emotional connection. Over 83% of consumers are more likely to shop with a brand they have an emotional connection with, so it’s evident just how beneficial this can be for you.
Well-designed rewards inspire customer loyalty and provide a number of benefits to your brand. They can improve your sales, enhance the customer experience, boost brand awareness, and even help you establish a strong, positive reputation.
Don’t neglect a good rewards program. It’s just as valuable to you as it is to your customers.
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