The Anchor: 5 benefits of loyalty marketing

05 Sep,2012

By Siddharth Reddy


A loyalty programme is a long-term strategy to identify, retain and grow profitable customers. Every enterprise should understand this and must put in place a strategy to achieve these objectives. The benefits of a loyalty programme are many but these are five key benefits:


#1 Know your customers better – The starting point of implementing a loyalty strategy starts with gathering knowledge about your customers; their purchase preferences, value potential, personal traits etc. Knowing your customers better allows you to communicate 1-to-1, set up a listening post, personalise your products and services and continue to be relevant to them.


#2 Retain your best customers – Not all customers are made equal. Identifying your most valuable customers (MVCs) and retaining them drives long-term sustainable revenues.


#3 Increase Lifetime Value (LTV) – The total potential spends from a customer over his lifetime is defined as LTV and maximising this potential through a loyalty programme drives increased revenues and higher ROI on customer acquisition costs.


#4 Lower your costs – Loyal customers understand your processes and products better, are less costly to serve and less prone to competition lures, and try new products faster, thus ensuring lower costs in maintaining sustainable revenues.


#5 Increase profits – According to Fred Reichheld of Bain & Company, it costs 6 to 7 times less to retain a customer than to acquire a new one. Reducing customer churn reduces overall costs and increases profits.


Siddharth Reddy is the MD of BI Worldwide, India, a loyalty marketing, recognition and incentives service provider. He can be reached at


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