Customer Retention –The Importance of Loyalty Programs amid Economic Downturns

    Loyalty Programs

    Retaining customers with the help of a loyalty program could help businesses run during the widespread crisis and keep running.

    With the spike in the COVID-19 outbreak, the world had already halted most commercial and travel activities since late March with no definitive end. As a result, the business landscape has been drastically impacted, and a majority of economists and experts had indicated a global recession. However, the world is adjusting to its “new normal” amid the ongoing crisis, and regardless of this downturn, most organizations are still functioning. Businesses of all sizes are developing their marketing strategies and budgets to navigate through this phase successfully.

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    Market leaders are raising their attention and available resources to ensure the right marketing mix and loyalty programs. Retaining customers in this challenging economy is one of the primary concerns now. Hence, bigger brands are committing more time and resources by far to run valuable loyalty programs. Investing funds to attract target audiences has always been difficult and expensive. Given the current situation, the pool of new potential customers is shrinking in this downswing business ecosystem. According to research by Bain & Company that was published in the Harvard Business Review, a 5% surge in customer retention increases business profits by 25 to 95%.

    Clearly, an effective loyalty program is a robust tool for customer retention. When customers choose to get into a loyalty program, they are showing their willingness and preference for a particular brand. Basically, the purpose of brands implementing a loyalty program is to build a convincing value proposition. This will influence existing customers to see that shopping with a competitor brand is of higher costs to consider. Intending to receive attractive benefits and offers, the members of a brand’s loyalty programs receive are more likely to stick around for the long-term.

    Now a question may arise – How do these loyalty programs help businesses recognize their audiences?

    While committing to provide “more benefits” is an excellent initiative, in a crisis, it is crucial to design and deliver a program that will offer the required value. To ensure that customers remain loyal, businesses have to come up with offers that would resonate with customers at the moment. Hence, the process demands more research and data analysis and loyalty programs. By nature, the loyalty programs generate a hefty volume of convenient customer data and with the right technology –this can be used to develop personalized strategies. Undoubtedly, they could be appealing to individual customers and their choices, helping brands to yield the most revenue!

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    With this strategy,  marketers can be adequately agile while still being flexible with their marketing mix. The decision-makers are already stressed with the budget constraints and the necessity of achieving maximum value against their spending. Underpinning the loyalty of existing customers is any day a smarter business strategy. If they are utilized well, brands can optimize and enhance their offerings in a way that complements their loyalty.