Loyalty marketing can be defined as the management process of identifying ‘best customers’ and utilizing customer data and insight to create, retain and grow profitable relationships. Best customers are those who are the most profitable.
Also important are those future clients whose characteristics suggest that they have the potential to become your best customers.
We instinctively know that when customer loyalty increases, so do profits.
Loyalty marketing aims to increase those profitable relationships by first figuring out what profitable behavior actually is, then designing a range of marketing programs to maintain and influence profitable behavior, ultimately delivering higher profits and maximizing a customers lifetime value.
Loyalty marketing is based on the principle that keeping existing clients is far less expensive than getting new ones.
It’s been said that having Loyalty marketing in your marketing plans generating an improvement in customer retention of just 5% can increase profitability between 25% and 85% (in terms of net present value) depending upon the industry. Therefore increased ‘customer loyalty’ has a direct relationship with increased customer profitability.
Let’s face it, most marketing costs only occur at the beginning of a relationship, so the longer the relationship, the lower the amortized cost. Plus, account maintenance costs decline as a percentage of total costs.