Loyalty and Retention

What is Loyalty Marketing and Why Is It Important?

May 24, 2020
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Loyalty. It’s a word and emotion we learn early in life. It’s something that we ‘feel’ towards family and friends. And as we grow up towards certain institutions and organizations like college and work.

But things have changed and evolved until the term 'loyalty marketing' was born.

But what is loyalty?

The Oxford Dictionary explains loyalty as the quality of being loyal and more importantly as “A strong feeling of support or allegiance.”

When a friend is in distress, your loyalty to them makes you want to help them. If they are in competition with someone, you feel an obligation or a desire to support them against their competitor – and in some cases even when the competition proves better than your friend, but we’ll get to that later.

Loyalty is something that is dynamic and evolving. Just like the loyalty we feel towards our family and peers, loyalty has grown to encompass more modern or contemporary ideas like marketing, bringing to life the idea of Loyalty Marketing.

What is loyalty marketing?

Loyalty marketing is defined as a marketing tactic or approach. When conducting loyalty marketing a company seeks to grow and retain its customers by offering enticing incentives so that they feel loyal towards the company and keep purchasing its products.

Similarly, HubSpot defines Customer Loyalty as “a customer’s willingness to buy from or work with a brand again and again, and it’s the result of a positive customer experience, customer satisfaction, and the value of the products or services the customer gets from the transaction.”

With the emergence of loyalty marketing, other ideas and tactics have also come to the limelight like ‘loyalty marketing strategies’ and ‘loyalty programs.’

Like any type of marketing, having a strategy is essential. “Loyalty marketing strategies involve rewarding recurring customers for continually using a specific company’s product or service,” explains CustomerThink.com.

A customer loyalty program, on the other hand, is what a brand or company does to retain its customers and attract new ones.

The company creates a program that rewards customers for being loyal to the brand. Through the program, companies and stores can offer discounts, rewards, special offers, and free gifts when customers buy more or when they perform certain actions on a brand’s website.

One of our unique customer engagement tactics at Gameball is offering challenges that engage customers and build their loyalty.

Statistics on loyalty

Data shows that it is better and more cost-effective to retain existing customers than it is to acquire new ones.

Depending on your industry, a company can spend 5 to 25 times more on acquiring a new customer than on retaining an existing one.

Acquiring a new customer involves time, resources, and money, and then convincing that customer to buy from you, whereas with the customer you already have, all you have to do is keep them happy, according to the Harvard Business Review.

Moreover, research conducted by Frederick Reichheld of Bain & Company, who invented the net promoter score, shows that raising customer retention rates by 5% boosts profit by 25% to as much as 95%.

Recognizing loyalty marketing

Using loyalty in marketing has been around for some time. Perhaps not under this exact term but businesses have been testing loyalty for decades, actually centuries!

In the late 18th century, retailers in America gave customers copper tokens when they made purchases at their stores. Customers could then redeem these tokens for products and services in the future.

Bit by bit, the retailers realized that these tokens were expensive to make and offer. So, they developed other means that later formulated what is now known as a loyalty program.

Fast forward about a hundred or more years, and you’ll find Betty Crocker who launched a loyalty program in the late 1920’s.

And so the development of loyalty programs began.

To-date, loyalty programs are growing, changing, and evolving. Whether you have an online business or thinking of starting an online store, a customer loyalty program should be part of your loyalty marketing plans. A great way to go about this loyalty business is to brand your program

Now what?

Now that you have connected the dots between the idea of loyalty and why it’s important for your customers and ultimately your business, it’s time to consider a loyalty program for your store or business.

Gameball offers exactly that. A unique customer loyalty widget that you can easily embed in your e-commerce website to retain your current customers and acquire new ones.

Install Gameball via your website or mobile app, Shopify, WooCommerce, or Magento.