Pros and Cons of Customer Loyalty Programs

Creating customer loyalty programs can take a lot of effort, time, and diligence. But it can eventually be advantageous and productive in a way that gives the customers a high sense of worth and importance. When existing customers trust your business product or service well, they do not bother to go to your competitors but rather stick to yours. More so, when you add some rewards for their loyalty, they are more willing to spend their last dime on a trusted brand than an unknown one.

What does the Customer Loyalty Program mean?

Customer loyalty programs refer to all kinds of reward system that a business or company create to pay back their regular customers. Such programs intend to gain trust and build a long-lasting relationship between the customer and the business. For instance, the company may design a loyalty program to incentivize every purchase that a customer makes and rewards them accordingly.

One way to recognize the most loyal customers is by creating a point system over a specified period. In other words, when a customer makes a purchase, they earn some points that are accruable and redeemable after the specified period. And anyone who reaches the specified number of points wins the special offer. The special offer can be in the form of a free item, a discount, or a promo attached to each guarantee level. 

Depending on the nature of the business, the type of product you deal in, or the service you offer, different customer loyalty programs can be applied. Besides, these personalized experiences with their associated programs can eventually become the best marketing decision a business owner can ever make when on point. However, customer loyalty programs have their benefits or advantages and downsides or disadvantages, which this article discusses.

Pros or Benefits of customer loyalty programs

  1. It solves the customer retention problem

Perhaps, the most notable benefit of trying out the customer loyalty programs is to improve a business’ chances at retaining customers. Companies that otherwise would find it challenging to retain customers may do better with the customer loyalty program’s right choice. This way, the program can inspire and enable buyers to become loyal customers. As you appreciate their purchase, they build more love and loyalty towards your brand better than your competitors.

  1. Promotion of brand awareness, popularity, and acceptance

An enhancement to promote your brand awareness, popularity and acceptance are other essential benefits of customer loyalty programs. If your business is relatively new and you still need to build awareness in the locality, then you can begin to create a good impression on anyone that comes around. Indeed as the excellent impression continues, the satisfied customers tell others, who in turn tell others too. As times go by, the satisfied customer who also gets an extra value through your reward program begins to think of your brand first and above others.

  1. Boosts customer or user experience

A customer loyalty program gives the business an excellent chance to boost the customer and user experience. In one way, the customer can give feedback while the business owner can monitor the product or service’s impression on the market. Simultaneously, the loyalty programs create a better user experience as they now focus more on satisfying their customers. Consequently, while maintaining the quality of product or service, the satisfied customers get more rewards and are thereby retained.

Cons or downsides of customer loyalty programs

  1. Extra effort

It requires some effort to choose the right customer loyalty program, set it up, and maintain it over time. As good as the reward program is, choosing the right skills is vital for the whole process. More so, the process begins from choosing which of the available options is most suitable for your kind of business. Afterward, it is crucial to building it the right way while making efforts to document the process. When the program is underway, it requires some maintenance strategies to achieve the desired goals.

  1. Professional hands with extra technical skills

Customer loyalty programs may require bringing in some experts such as IT experts or data analysts to sort things out. In other words, if you need to create new features in your app or create a new app altogether, that may require some IT skills. If the business cannot afford to recruit a full-time programmer, one may outsource the project to another company or professional IT specialist. Another option may be to secure the services of an IT expert on a part-time basis. In addition to extra hands on deck, the company has to designate some of the budgets.

  1. They can also hurt your business

On a general note, a careless handling customer loyalty program can hurt your business in a big way. For instance, the reward program can cause money loss or even lead to giving too many discounts than the actual sales you are making. The loyalty program may not make financial sense as it may hurt the business. On the other hand, if the business cannot still afford to generate enough money over the designated time. 

The final question may be, can these loyalty programs make or mar your business? The answer lies in the way the business owner optimizes the benefits and mitigates the shortcomings. An expert handling of these crucial facts makes an effort worthwhile.  For instance, the business owner still has to decide if it is the right choice to invest in the customer loyalty program to boost the business. 

Whereas, while deciding on the choice of the loyalty program to use, the business owner should also consider the benefits to the business and what the customers also start to gain. Besides, other workable ways to manage your loyalty programs reduce all the possible risks and tie the loose ends. It is, therefore, the responsibility of the business owner to look for these ways.