Pros & Cons of Starting Customer Loyalty Programs | Fora Financial Blog
Pros and Cons of Starting Customer Loyalty Programs
May 26, 2017

Pros and Cons of Starting Customer Loyalty Programs

Starting customer loyalty programs can be a time-consuming, yet rewarding, project. It is vital to make your customers feel valued. If you do not make this a priority, they make take their business elsewhere!

Still, we understand that setting up and maintaining a loyalty reward program can require a lot of effort, and potentially money. In this post, we’ll provide a pros and cons list so that you can decide if business loyalty programs are worth pursuing.

The Benefits and Downsides of Customer Loyalty Programs

Pro: Gives customers an incentive to return

Customer loyalty programs often inspire customers to become loyal buyers. They feel like their patronage is appreciated, so they continue to do business with an establishment that offers them long-term rewards. Even if a customer appreciates your products or services, you may not always be top of mind. This is why implementing a rewards program could keep customers engaged with your business. A proactive way to use your loyalty rewards program to engage customers is to send them monthly emails informing them of how much they’ve earned in rewards. This reminder could encourage them to make more purchases!

Con: Have to keep track of loyalty program offers

By offering a loyalty reward program you’ll be able to gain customer loyalty, but you’ll also have to put in extra effort to set it up and maintain it. You may need a technological system to track award amounts your customers are earning. If you don’t maintain your customer loyalty programs, you could lose patrons, so keep this in mind when deciding if this is right for your business.

Pro: Could increase transaction amounts

If customers are trying to get a discount, free item or other incentive, they may be more likely to make larger or more frequent purchases at your business. According to the 2016 Bond Loyalty Report, 66 percent of shoppers adjust their spending amount in order to take advantage of their loyalty program benefits. By offering customers the option of enrolling in a rewards program, you may see a boost in sales!

Con: Could be time-consuming to set up

Not only does setting up an account for customers take away from other initiatives, but if you have a digital loyalty program, it may require frequent monitoring. This will all depend on the type of loyalty program you use. To avoid this, consider an automated service that will save time for both you and your customer base.

Pro: Can help promote your business’s brand

Business loyalty programs often provide a strong branding opportunity. Whether it is incorporating your business slogan into the program name, or decorating the rewards card in your colors and logo, you can make your rewards program tailored to your branding. The more that you publicize your brand, the more that you’ll connect with your customer base.

Con: Could decrease value

Make sure that you aren’t losing money through your business’s rewards program. If you are giving away too many products or too many discounts, you might end up hurting your business’s finances. You should be rewarding your customers, while still creating sales for your business.

Hopefully after reading this post you can determine if business loyalty programs are the right venture for your business. Having a loyalty program option for customers could set your business apart from competitors, and may help you increase sales in the long run. It is important to consider how a rewards program could benefit both you and your customers; as it should be advantageous for both parties!

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].
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