5 Valuable Benefits of Loyalty & Reward Programs for Startups

18 Sep, 2020
Lotte, Digital Content Specialist

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Probably one of the most valuable assets of a business is a loyal and steady customer base. According to a study done by James Altfield, the chances of selling your product or service to an existing customer are estimated to be between 60 and 70 percent, while that number drops to about 2 to 5 percent for new prospects. That fact alone should be enough to convince businesses to invest in the right strategy for the retention of their customers.

One way to establish this, is by providing personal attention to your customers with help of loyalty and reward programs. A loyalty and rewards program aims to achieve a sustainable customer base by providing them with rewards for their loyalty to your product or service. This can be done in the form of, for example, gamification, which rewards the customer with badges, experience points (XP), trophies, or access to personalized content and discounts. Keep on reading to find out more about the benefits of loyalty and reward programs for startups.

1. Let your brand become more important than your prices

When customers are thinking of purchasing a certain product or service, they will initially look for the option with the best price-quality rate, especially if they don’t already have a distinct preference for a certain brand. With the tools available online nowadays, it’s easy to instantly compare hundreds of products and their prices at once. However, as soon as a customer creates a personal bond and preference for your brand, it’s way more likely for them to return, even if that means they’ll have to spend more money than unfamiliar alternatives.

Loyalty and reward programs are made with the goal to enhance this personal bond between a business and its customers by providing them with personalized content or rewards for something they normally wouldn’t be rewarded for. One of the most significant benefits of loyalty and reward programs is that they lower the focus on competing on price alone. It gives your business the opportunity to make a distinction between your brand and your prices, offering a much more personalized experience.

2. Create deeper emotional bonds with your customers

By building genuine relationships with your customers through brand loyalty rewards, you show how much you value them and their business. Every customer is unique, and everyone wants to be treated like an individual. Nowadays, feeling special and unique in the online spheres has become close to impossible, and it’s a great power if a brand manages to achieve this personal bond. But in order to know exactly what your customers need in order to build that loyalty, you’ll need to have insights into their preferences.

Following the principles of design thinking, businesses can use different strategies to empathize with their customers, and create human-centered strategies for retaining their customers. A way to get insights into the needs of your customers, you can analyze statistical user data, or allow your customers to fill in surveys or interact with polls to express their likes and dislikes. A handy tool for getting a better insight into the needs of your customers is an empathy map, in which you describe the internal and external experiences of your end-user.

3. Let your customers advocate for your brand

In our blog about finding the right product-market fit we explained that word of mouth advertising among customers is one of the most efficient ways to acquire new users and retain the existing customer base. A well-working loyalty and reward program usually triggers an emotional reaction in customers, which makes them likely to share their experience with friends or family. Next to that, you can also use reward systems to reward your customers for recommending your product or service to a friend or family member.

According to recent studies, 92% of people trust recommendations from friends and family over any other type of advertising. Loyalty and reward programs can help you build up a network of advocates for your startup. These people are more than willing to share their positive experiences with others for a small reward, and thereby save you a lot of effort and investment over doing this yourself. Besides, new users are more likely to follow up on a positive experience from another user, than an advertisement from the brand itself.

4. Increase Customer Lifetime Values

The Customer Lifetime Value, or CLV, is the overall profit made by the relationship you’ve established and maintained with a customer. You can calculate the CLV of a customer by calculating the following formula:

([ "Average purchase value" ] _ [ "average purchase frequency rate" ]) _ [ "average customer lifespan" ] = Customer Lifetime Value
The higher the number of the outcome of your CLV calculation, the greater the long-term profits. By knowing your Customer Lifetime Values, you can create a loyalty and reward program that can improve the overall CLV of your users.

5. Retain your already existing customers

As mentioned before, loyal customers are about 67% percent more likely to spend money on your product or service than new customers. Besides that, acquiring new customers often requires at least five times more investment than the retention of already existing users. This has a huge impact on your profit margins, and shows that customer retention is one of the most cost-effective ways of growing your startup.

You might notice that it’s not as easy to retain a loyal customer base as it is to attract new users. We are curious creatures and won’t shy away from trying things out, but in a time where everything is always accessible, we rarely stick to the same thing for a long period of time. On the other hand, because there is so much to choose from, we long for a safe haven we can always rely on. Loyalty and reward programs make use of this longing by convincing customers your app can be that familiar safe haven.

Frequently asked questions

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Did you like the blog above, but do you still have some questions about the subject or related topics? No issue! You can easily contact one of our Lizard specialists on these specific topics, and they gladly tell you more about it. This way, you’ll never leave with uncertainties.


Global Commercial Director | markus@lizard.global | +60 18 35 65 702

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