The fact that Loyalty Rewards Programs are effective in retaining customers is no longer up for debate. Centuries of experience has proven that ‘rewarding’ customers not only keeps them coming back for more but also modifies their spending behaviour. Across various industries and business sizes, loyalty programs continue to woo customers and shoppers through new digital channels and in different forms.
Let’s take a look at the underlying psychology of how customer loyalty programs work.
Rewarding points to customers when they undertake an action like shopping, referring or answering a feedback questionnaire is akin to a positive reinforcement that motivates customers to stay engaged and repeat the said action. The experience of ‘success’ when reward points are redeemed for a discount or a free product is critical to the process. It produces delight and encourages your customer to achieve the next milestone – a number of points or the next tier of the customer loyalty program. It’s the age-old wisdom at play: carrots work better than sticks.
A direct result of positive reinforcements is the increased frequency of availing your product or service and fostering a habit to do so regularly. Customers start choosing your business not out of compulsion, but by choice. This establishes a commitment and increases the affinity of your customers to your brand. As a result, they not only visit your business but also refer it to their circles. Furthermore, Loyalty Rewards Programsengrain your business into the routine of your customers and they instantly recall your brand when they think of making a related purchase.
Change Behavioural Patterns
Enhanced affinity, coupled with regular positive reinforcements in the form of savings or free products, help businesses undertake another critical process: change the behavioural pattern of the customer. By making a reward desirable, Loyalty Rewards Programs encourage customers to make decisions they wouldn’t normally make. When there is a promise of a freebie or a discount in the future, a customer might hesitate lesser to spend more. This helps businesses change the way their customers behave and engage with their brand, and alter consumer habits.
By offering diversified rewards, clearly communicating the value of rewards and the savings made by the customer, Loyalty Rewards Programs can easily become popular. Loyalty management software like Loyera can help businesses establish the same. Once the process of earning and redeeming rewards points has been initiated, you need to sustain it with regular and relevant rewards as well.
The bottom-line is that Loyalty Rewards Programs must be desirable and must seem achievable to customers. Remember, it is the reward that drives the customer behaviour. Since you control the reward you offer, you have the control over how customers interact with your business. Make no mistake, a customer loyalty program is not just about coming up with ways to manipulate your customers using psychological tricks. But, it requires understanding human nature, and more importantly, what drives happiness and satisfaction. What purpose does your customer loyalty rewards program serve? Let us know!
You can read more about the psychology of customer loyalty here and here.