9 Reasons Why You Need a Loyalty Program

It’s Not Just About Giving Points

Today, for brands to remain sustainable over time, they must go beyond offering good service and products that add value to their consumers. They need to deeply understand their customers, engage with them meaningfully, and build long-term retention.

According to a loyalty study by KPMG, 85% of a company’s growth comes from loyal customers. Research by Bain & Company further highlights that a 5% increase in customer retention can boost profitability by up to 25%.

Below are 9 key reasons why a strong loyalty program is essential:

1. Customer Knowledge

By turning each transaction into valuable customer data, a loyalty program becomes a powerful tool for managing and understanding your audience. It helps you grasp their preferences, desires, and needs.

The primary goal in terms of knowledge is to understand:

1. Who your customer is.
2. How they shop.
3. What they say about the brand.

2. Timely Segmentation

Comprehensive customer knowledge empowers brands to group (segment) consumers meaningfully based on demographic, psychographic, behavioral, purchase behavior, or brand preference variables.

3. Targeted Marketing

A great loyalty program should go beyond understanding customers. It should enable brands to leverage that knowledge to create valuable communications for each customer.

4. Automated Marketing

A loyalty platform should also allow for automated messages based on customer interaction cycles or "customer journeys."

This automation ensures regular, effortless contact with customers—whether it’s for birthdays, special occasions, feedback requests, re-engagement efforts, or to reward and thank loyal clients.

5. Return on Investment: Measure, Control, and Impact

“What cannot be measured cannot be improved,” said Lord Kelvin over 100 years ago.

A loyalty program should measure every interaction with customers, enabling brands to evaluate the ROI of their actions and focus on those that work best.

6. Create Brand Advocates

A well-designed loyalty program that rewards purchases effectively doesn’t just make customers happy with their points and prizes. It also sparks word-of-mouth promotion, where satisfied customers share their positive experiences with friends and family.

According to Nielsen, 84% of people trust recommendations from family or friends. A successful loyalty program can build a network of brand advocates.

7. Design Products Tailored to Customers

Understanding who buys which products and maintaining two-way conversations enables brands to create products or services that genuinely address identified customer needs or opportunities.

8. Build Competitive Advantage

KPMG reports that 2 out of 3 consumers are willing to go the extra mile to buy from brands that reward their spending. A robust loyalty program helps convert new customers into repeat buyers, thereby growing the brand’s customer base.

9. Act on Customer Feedback

Knowing what customers say about their brand experience allows companies to address issues that might otherwise go unnoticed with an operational-only perspective. This insight enables corrective actions to enhance customer satisfaction.

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