Customer Loyalty Programs: The Pros and Cons
Customer loyalty programs can be an effective way to cultivate and maintain a customer base. And that’s important: As Forbes contributor Nicole Leinbach-Rehyle writes, “customer retention is vital in sustaining a healthy business.” But there are some drawbacks to customer loyalty programs you should be aware of before launching one. This article looks at the pros and cons of such programs.
Pro: Incentivizes Returns
By rewarding customers, loyalty programs give them a reason to come back. They can also serve as a tiebreaker when a customer has multiple businesses to choose from. For example, a given shopping center might have multiple coffee shops. All other factors being equal, a customer who’s part of a loyalty program at a particular coffee shop has a reason to go there over the others.
Con: Requires Setup and Upkeep
A drawback to customer loyalty programs is that they take time and money to set up. You’ll either need to set up the reward-tracking infrastructure (like software) yourself or pay an employee to do it for you. Keep in mind that tracking rewards after setup will also take some labor.
Pro: Brand Promotion
Loyalty programs can be a way to get your business’s name out there and help it stick in people’s heads. You can try tactics like incorporating your business’s logo and color schemes onto loyalty cards, or even naming the program in a way that brings your business into a customer’s mind.
Con: Giveaways Add Up
Customer loyalty programs that give away free items or provide deep discounts can backfire if they end up giving away more money than they bring in. This ties into the ongoing upkeep mentioned earlier: You’ll have to keep careful track of your customer loyalty program to make sure it’s creating value.
Is a Customer Loyalty Program Right for Your Business?
If well managed and well branded, customer loyalty programs can be a boon to your company. Set up properly, a loyalty program can reward both your customers and your company, keeping both sides connected.
