This week’s post is the next installment in our continuing return on investment series and the focus this month is on customer loyalty programs. These reward programs benefit businesses in three main ways: encouraging repeat business, promoting referral activity and inspiring grassroots marketing campaigns. All of these benefits can greatly reduce the amount of marketing budget a company utilizes in order to grow both sales and customers.
Encouraging Repeat Business
“It costs anywhere from 5 to 8 times more to gain a new customer as opposed to retaining your customers,” Chris Philippi reports in an article on ZeroMillion.com titled “Five Ways to get Repeat Business”. Laura Lake adds in her article on About.com titled “Customer Relationships Are Key to Your Marketing Strategy”, repeat customers spend up to 33% more than new customers or clients. In fact, due to the high cost of advertising, marketing and research, it can cost a company 6 times the amount to sell something to a new customer than it would to sell the same product or service to a current customer. Marketing budgets are often exclusively geared towards attracting new clients or customers to a business. By dedicating a portion of a marketing budget to a customer loyalty program, companies can increase sales and encourage repeat business through improved client or customer retention.
Promoting Referral Activity
Lake also cites a study showing referrals among repeat customers are 107% greater than non-customers. Banks or credit unions and other membership-based companies often advertise referral reward opportunitiesto their patrons to entice and promote referrals. Customers or clients are presented with different kinds of rewards that can be earned for providing valid referrals. It is important to inform customers of referral reward opportunities regularly as this forms a link between what a person can do to earn a reward and the types of merchandise a person can earn for participating in the reward program. Customer referral programs can help to create a fiercely loyal base of customers who help to keep the company afloat in prosperous and not-so-prosperous times.
Inspiring Grassroots Marketing
Customer loyalty programs not only increase sales and referral activity, they can help to inspire customers and clients to become advocates of your products and services. Social networking websites allow people to be connected like never before and these online communities can effectively turn clients and customers into a second sales force for your organization. Companies can monitor and track the conversations people have online about their products and services on websites like Twitter and Facebook. With modern social media, companies can actually determine the value online grassroots efforts are providing, which is often priceless.
By dedicating a portion of a marketing budget to customer loyalty and retention efforts, companies can increase the average spend per purchase, boost referral activity and reduce the marketing budget for attracting new clients and customers. Sales can be increased by up to 50% without an increase in the marketing budget when companies implement reward programs designed to increase customer loyalty and retention.
Please check back next month on June 14th for the next installment in our return on investment series.
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