Loyalty programs drive financial success, report suggests

Retail companies are more likely to financially succeed when they execute well-planned loyalty programs, according to new research.

The research was conducted by Aberdeen Group in a report entitled, “Cutting Edge Customer Loyalty: Retail Best Practices for Acquiring, Retaining, and Re-engaging Customers”.

165 retailers were surveyed in the first quarter of 2009 and companies in the top 20 percent with the best financial performance were referred to in the report as the ‘best companies’.

On average, best companies increase sales by 19 percent year-on-year, increase customer retention by 16 percent and decrease customers attrition by 5 percent.

It found 90% of the best companies had successful results from loyalty programs compared to less than a third of other companies

The correlation between successful finances and loyalty programs is suggested in the report, with best companies recording a 96 percent greater compound annual growth rate than other companies.

Best companies are also 1.8 times more likely than the bottom 30 percent of companies to develop customer behaviour-based promotions which drive improved loyalty

They are also five times more likely to track, store and analyse customer data, which will then be used to create more tailored promotions and 70% more likely to develop multi-tiered rewards plans for their most profitable customers.

Companies that want to achieve “Best in Class” status are advised to create a customer loyalty roadmap for its most profitable customers and upgrade loyalty infrastructure on an annual basis.

“We believe that having the capability to build relationships with customers is a critical driver of success in today’s tough business environment,” said Luc Bondar, vice president, Loyalty, Carlson Marketing.

“Everyone knows that it is easier to retain customers than it is to acquire new ones.

“And in these tough economic times, it’s more important than ever to build relationships with your valuable customers.”