In today's world, customer loyalty is more important than ever for businesses. With fierce competition in almost every industry, companies must find ways to not only attract new customers but also retain their existing ones. In fact, depending on what industry you’re in, acquiring a new customer can be anywhere from five to 25 times more expensive than retaining an existing one. One way to tap into existing customers’ mindshare to foster customer loyalty is through value-based loyalty programs that are fueled by cause marketing campaigns.
What is a loyalty program?
A loyalty program is a marketing strategy used by businesses to encourage customers to make repeat purchases and continue to engage with their brand. It's essentially a rewards program that offers customers incentives for their loyalty, such as points for every purchase or a discount for signing up. The goal of a loyalty program is to create a positive customer experience and foster a long-term relationship between the customer and the brand. Loyalty programs can:
- Increase customer retention and foster customer loyalty, which can lead to increased revenue and repeat business. By rewarding customers for their loyalty, businesses can create a sense of appreciation and incentivize customers to continue shopping with them instead of their competitors.
- Gain valuable insights into customer behavior and preferences, allowing them to personalize their marketing efforts and improve their overall customer experience.
Overall, a well-designed loyalty program can be a powerful tool for building customer relationships and driving business growth. Value-based loyalty programs in particular have proven to be effective in both boosting brand reputation and retaining customers.
Why value-based loyalty programs work
Loyalty programs that are value-based are effective because they give customers a sense of purpose and personal fulfillment beyond just earning points or rewards. When a company associates itself with a social cause that aligns with the values of its customers, it can create an emotional connection that goes beyond the transactional relationship. 40% of loyalty program members (for Gen Z it’s 65%) find it appealing to have the option of earning rewards through a loyalty program to donate to a charity or cause.
The partnership between Sephora and the National Black Justice Coalition (NBJC) is a prime example of a value-based loyalty program that works. By offering customers the option to donate their reward points to the NBJC, Sephora is not only incentivizing customers to make purchases but also encouraging them to support a cause they care about. The NBJC is a civil rights organization dedicated to empowering and advocating for Black LGBTQ+ individuals and their families. By partnering with the NBJC, Sephora is demonstrating its commitment to diversity, equity, and inclusion, which is an important issue for many of its customers.
Moreover, value-based loyalty programs can also help companies differentiate themselves from their competitors. In today's competitive marketplace, offering value beyond just the product or service is essential. Customers are increasingly looking for companies that align with their values and support social causes that matter to them. In fact, 83% of millennials favor brands that align with their values, prioritizing ethical consumption over price. By offering customers the opportunity to support a cause they care about, companies can build a deeper and more meaningful relationship with their customers, which can result in increased loyalty and advocacy.
Overall, value-based loyalty programs like the one offered by Sephora and the NBJC work because they tap into customers' emotions and values. By aligning with a social cause that matters to their customers, companies can create a deeper connection and foster loyalty. Additionally, value-based loyalty programs can help companies differentiate themselves from their competitors and attract customers who value purpose-driven brands.