Loyalty programs are designed to incentivize your customers to buy again.
Not every store should use a loyalty program though.
Some stores already have the customer behavior they need. An extra incentive might not be worth the cost and could cause customers to game the system.
On the other extreme, some stores don't have any customer loyalty. Customers buy just because it's the cheapest, the one they found, etc. A loyalty program there would fall flat and be a waste of your time and money.
You can experiment with adding a loyalty program to see how it performs. Just be careful if customers start to depend on it. If it doesn't produce the results you want, removing it might upset your most loyal customers.
A better option is to do some measurements of your customer loyalty up-front and see if a program makes sense. From what I've seen in Repeat Customer Insights I'd recommend checking two things:
- that the Repeat Purchase Rate is above 15% but below 50%
- the Average Number of Orders is above 3 but below 20
If you fall on the low end of those metrics, that's a sign that you have other work to do with customer loyalty before you introduce a program. Simple things that will have a larger impact than a full program. e.g. New Customer Welcome Campaigns, proactive customer service, etc
If you fall on the higher end of those metrics, a loyalty program might be too expensive to implement. Meaning you have really loyal customers already so giving them incentives would just eat at your profit with no benefit.
The middle range is the sweet spot for loyalty programs. That's where there's a lot of improvements possible.
Eric Davis
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