Loyalty marketing is an approach to marketing, based on strategic management, in which a company focuses on growing and retaining existing customers through incentives. It is a customer’s willingness to repeatedly return to a company to conduct some type of business due to the delightful and remarkable experiences they have with that brand. Branding, product marketing, and loyalty marketing all form part of the customer proposition – the subjective assessment by the customer of whether to purchase a brand or not based on the integrated combination of the value they receive from each of these marketing disciplines. One of the main reasons you want to promote customer loyalty is because those customers can help you grow your business faster than your sales and marketing teams.
Loyalty marketing strategies involve rewarding recurring customers for continually using a specific company’s product or service. Successfully pulling off a top-notch loyalty program is more difficult than ever. A structured approach to rewarding customer actions that includes giving customers incentives for specific actions that benefit the company like discounts, rewards, free merchandise, or exclusive access. Therefore, customers who make regular purchases—for example, who shop at the same supermarket every week, or eat at the same restaurant at least once a month—are most impacted by a rewards program, as their repeated business earns them more rewards.
Loyalty marketing refers to building trust among recurrent customers, rewarding them for continually conducting business with a company. For many companies, 80 percent of all their business comes from 20 percent of their customer base. The discipline of customer loyalty marketing has been around for many years, but expansions from it merely being a model for conducting business to becoming a vehicle for marketing and advertising have made it omnipresent in consumer marketing organizations since the mid- to late-1990s. Some of the newer loyalty marketing industry insiders, such as Fred Reichheld, have claimed a strong link between customer loyalty marketing and customer referral. Brands today hope that their increased focus on loyalty marketing will drive greater customer retention, engagement, and lifetime value.
In recent years, a new marketing discipline called “customer advocacy marketing” has been combined with or replaced by “customer loyalty marketing.” In previous generations, loyalty programs often came in the form of redeeming proofs-of-purchase for special products. To the general public, many airline miles programs, hotel frequent guest programs, and credit card incentive programs are the most visible customer loyalty marketing programs. Today, they are more commonly operated through card purchases using digital information. In turn, this digital information can be used to discover more methods of installing and reinforcing customer loyalty.