Published
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Jun 27, 2023

Why Are Loyalty Programs Important During Periods of Economic Downturn?

During economic uncertainties, loyalty programs are crucial for businesses to retain customers and navigate challenges for stability and growth.

ecommerce

Amidst the current challenging economic climate, loyalty programs have become crucial for businesses striving to navigate through uncertainties and secure their stability. How can they maintain customer loyalty in times of financial uncertainty? 

To answer this, we turn to the proven strategies of loyalty programs and focus on how to deliver a personalized customer experience through your loyalty program. These approaches have demonstrated their effectiveness and cost-efficiency, particularly when compared to the alternative of identifying and targeting new audiences, which can erode brand image and profit margins through steep discounting.

When economic downturns strike, characterized by reduced consumer spending and financial uncertainty, businesses face the daunting task of maintaining customer loyalty. With loyalty programs increasingly becoming the solution to this, 50% of consumers turn to loyalty programs as a means to make their cash go further.

Two-Fold Benefit to Loyalty Programs: Supporting Merchants & Customers

Loyalty programs during these challenging times are not just beneficial for the merchant, they are also incredibly helpful in incentivizing customer loyalty and encouraging spending by offering worthwhile rewards.

Influence.io's loyalty program offers incentives and rewards to existing customers, encouraging them to remain loyal to the brand, even in financially challenging times. It is helpful for merchants to understand and calculate what their loyalty points are worth when offering points-per-purchases and subsequent money off. 

During a recession, loyalty programs play a vital role in helping businesses navigate economic challenges and maintain a competitive edge.

Top-performing loyalty programs can boost revenue (through an increase in spending & visit frequency) by 18%-30%.”

Source: Passkit.com

3 Key Benefits of Loyalty for Customers During Periods of Economic Downturn

  1. To Cultivate Loyalty For Long-Term Retention 

Providing incentives to encourage customer loyalty is a smart strategy for keeping them on board, especially when they're feeling the pinch financially. Think back to the 'Eat Out To Help Out' campaign that made waves on UK high streets during the pandemic. 

While it wasn't exactly a loyalty program, it was a clear example of how offering customers monetary rewards or discounts can boost their engagement and, in turn, their loyalty to your business. It goes to show that a little extra incentive can go a long way in retaining customers.

During these financially challenging times, it's crucial to show your customers some extra care and attention. Ensuring the nurturing and retention of your loyal customer base is of utmost importance amidst the financial instability.

  1. Attracting new customers:

Loyalty programs differentiate businesses from competitors by offering unique rewards and benefits. This distinctiveness can attract new customers seeking value during challenging economic periods. Providing enticing value propositions and rewards helps businesses expand their customer base even in a recessionary market.

3 Key Benefits of Loyalty For Merchants During Periods of Economic Downturn

Here are the three reasons why loyalty programs are crucial for merchants during periods of economic downturn:

  1. Ensure A Stable Stream of Revenue:
  • Loyalty programs generate predictable income by encouraging repeat purchases from loyal customers and reducing reliance on new customers during a recession.
  1. Cost-effective marketing:
  • Targeting existing customers through loyalty programs is a cost-effective strategy, as it requires fewer resources compared to acquiring new customers.
  • Customer referrals and word-of-mouth generated through loyalty programs amplify the marketing reach without large advertising expenses.

    How BareBack Footwear's Referral Strategy Achieved an 861% ROI in Just 10 Days:

    A success story in regards to leveraging Referrals to acquire new customers and in turn generate revenue can be seen with BareBack Footwear.

    Bareback has harnessed the power of email reminders through Influence.io to keep their customers informed about specific events. Remarkably, within a mere 10 days, they managed to generate a remarkable £470.99 in revenue from just three referrals, boasting an impressive Average Order Value (AOV) of £157.

    Currently, they are subscribed to the Influence.io starter plan, which comes to a monthly cost of $49. Incredibly, within their very first billing cycle at $49 per month, they've already achieved a Return on Investment (ROI = 861%) through the addition of the loyalty program to their account.

    Since incorporating Referrals into their platform, they've witnessed a total revenue of $421.99. This underscores the substantial value and success that their integration of Referrals into their growth strategy has delivered in just a short span of 10 days.

  1. Customer data and insights:
  • Loyalty programs allow businesses to gather valuable customer data, including preferences, purchase history, and demographics, enabling targeted marketing campaigns such as targeting specific customer segments (maybe high-value shoppers) in the hopes of gaining more purchases.
  • Analyzing trends and patterns from loyalty program data provides valuable insights for making informed business decisions and adapting strategies during economic downturns.

Struggling with how to implement an effective loyalty program? Here are 3 key strategies that make a significant impact:

  • Value-based rewards: Offering discounts, exclusive promotions, and bonus points provides customers with tangible benefits, helping them save money and feel appreciated.

To fortify your loyalty program, studies indicate that it's essential to offer a variety of rewards. Currently, 79% of respondents deem discounts as the most sought-after benefit, while 65% value free products. However, true loyalty is garnered by brands that make customers feel like individuals, offering rewards that align with their preferences.

  • Communication and engagement: Actively engaging with customers through personalized messaging, regular updates, and seeking feedback fosters a sense of connection and builds loyalty even during challenging times. 
“75% of American consumers say they’re more likely to be loyal to brands that understand them on a personal level”

Source: Acquia.com

  • Flexibility and adaptability: Adapting loyalty program benefits to meet changing circumstances and customer needs demonstrates a business's commitment to customer satisfaction, fostering loyalty and retention.

Cultivating Resilience: The Impact of Loyalty Programs and Influence.io in Economic Turbulence

In conclusion, loyalty programs have proven to be extremely important during periods of economic downturns. They play a vital role in retaining existing customers, attracting new ones, and enhancing customer lifetime value. Loyalty programs offer numerous benefits such as revenue stability, cost-effective marketing, and valuable customer data and insights which help to reduce risks. 

Influence.io helps businesses establish trust and credibility by enabling collaborations with influencers who possess a robust online presence and a highly engaged following. This collaboration not only enhances brand visibility but also ensures that businesses remain at the forefront of consumers' minds

Sign up to Influence.io today to tap into cost-effective marketing channels, build trust and credibility, and effectively navigate the challenges of a recession. In the ever-evolving landscape, loyalty programs and platforms like Influence.io offer businesses the opportunity to thrive and succeed, even during the most challenging economic times.