For the past number of years, more and more company executives have been putting the spotlight on customer retention. With 65% of marketing officers stating that loyalty strategies are essential to marketing success, it’s no secret that customer rewards programs are a good idea. So why do so many companies end up stalling their loyalty program’s launch?
Like any major decision, it can be tough to pull the trigger on something that requires so many resources. Between branding, promoting, and communication, there’s a lot that goes into a loyalty program- especially if you want to get it right the first time.
In order to maximize its benefits, you want to make sure that you launch a loyalty program that’s as close to perfect as possible, no matter how long that program takes. But is perfection worth the wait?
What if I told you that every day you wait is costing you money?
Losing Without Loyalty
While it may sound insane, you’re actually doing your business more harm than good when you wait to launch a loyalty program. Studies have shown that 81% of consumers are more likely to continue doing business with brands that offer loyalty programs, meaning your repeat customer rate can skyrocket!
In case you’re still unsure as to how you’re losing money, I will now outline four critical considerations that clarify why you need to launch a loyalty program sooner rather than later for your revenue’s sake.
1. Loyal Customers Bring More Revenue
This one sounds like a no-brainer, but your doubt makes it necessary to reiterate. Even though they only make up 8% of your website’s traffic, repeat and loyal customers represent 41% of your total revenue.
This staggering figure clearly states that delaying your decision to launch a loyalty program will also delay your continued financial success.
Still not convinced? That’s OK, I’ve got more reasons.
2. Repeat Customers Cost Less
Investing in a loyalty program brings you nothing but revenue. Not only do repeat customers make up 41% of your sales, they also cost 7 times less to retain than it does to acquire a new customer.
I’ve found in my experience that equations really help hammer simple-but-effective points home, so I’ve put together a hypothetical scenario for you:
Just imagine that your store makes $1,000,000 a year in revenue (I’ve chosen this number because it’s nice and round and is easy to work with). You have two possible paths you can take in your quest for additional revenue: acquisition or retention.
If you choose acquistion, let’s say that you commit to paying $10,000 per month in your quest to acquire new customers. Over the course of the year, this will cost you $120,000, making your yearly revenue $880,000. Retention, on the other hand, will cost you 7 times less than that, making your yearly costs no more than $17,145. These costs allow you to keep your yearly revenue around $982,855.
When you line the two costs up beside each other, the difference between the $17,145 required to retain your existing customers and the $120,000 spent to bring in new business is staggering. This model of gaining business is ultimately not sustainable, but when you launch a loyalty program your first time customers will quickly become returning customers, reducing the need to spend money in order to attract new business.
3. Loyal Customers Significantly Impact Annual Revenue
If repeat customers cost less and bring you more revenue, it stands to reason that they can have a significant impact on your annual revenue. Repeat customers bring a 28% sales lift to your business annually, and what better way to make more return customers than a loyalty program? When you fail to launch a loyalty program quickly, you’re losing out on the potential for huge financial gains.
Let’s lay it out again. If you make $1,000,000 in one year, 28% percent of your profits comes to $280,000. That means that each year you have a loyalty program, you could be making an additional $280,000.
In other words, for each month you don’t launch a loyalty program you’re losing almost $23,500.
Delaying your program by fourth months has an opportunity cost of $94,000, making it clear that the sooner you launch a loyalty program, the sooner you can increase your repeat customer rate and revenue.
4. Repeat Customers Increase CLV and AOV
Last but not least, your repeat customers have a huge impact on customer lifetime value and average order value. Loyal and repeat customers tend to spend 3 to 5 times more per purchase than first time customers, and can increase the average CLV by up to 40%.
With these types of stats in hand, you don’t even need an equation to see how valuable a loyalty program can be to your store.
The Sooner the Better
As you can see, building your loyal customer base is key to growing annual revenue. Representing a significant chunk of your annual income and armed with the power to make considerable contributions to yearly figures, your brand can definitely benefit from the power of a loyalty program.
So what are you waiting for? Launch a loyalty program today, and I can assure that the long term benefits severely outweigh the short term costs and stresses. You (and your repeat customers) will be singing your program’s praises in no time.