Loyalty Programs Vs Discounts?
What does your Business need and Why..
This is a question that has perplexed millions of Businesses across the world. Which one - Loyalty Program or Discounts - is a better strategy to boost sales and drive growth.​
To understand this, lets first explore what each type actually is.
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A loyalty program is a marketing tool designed to create a retention program for customers, fostering a lasting relationship between a brand and its customers. It aims to reward customers for their repeated interactions, which can include cashbacks, discounts, or exclusive benefits.
Discounts, on the other hand, are regular discounts or promotions that a brand runs to attract customers.
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While the two seem to be similar, there is a huge difference the way each operates and performs.
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To begin with, Loyalty programs and Discounts differ in their approach to customer engagement and long-term business goals. Loyalty programs focus on building long-term relationships with customers by rewarding them for repeat purchases and engagement, whereas discounts are typically short-term incentives aimed at driving immediate sales.
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They also differ in way they resonate with end customer. While discounts may provide immediate sales boosts, they can also devalue a brand's perceived value and may lead to customers almost always expecting regular price reductions whenever they shop. It may hamper a Brands positioning in a customers mind. Loyalty or Membership programs, on the other hand, create an emotional connection with customers and foster trust, as they are designed to reward customers for their continued support and specific choices. Its no secret that perception is a critical factor in customers' minds that drives their behaviour.
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Another important distinction is that Loyalty programs provide businesses with valuable data on customer behavior, which can be used to tailor marketing efforts and improve customer experiences. Discounts, however, do not typically offer the same level of insight into customer preferences and purchasing habits.
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The below table summarizes the differences between Loyalty programs and Discounts.​​​
Parameters | Discounts | Loyalty Programs |
|---|---|---|
Impact | Immediate Sales driving immediate revenue | Repeated engagement and sales driving higher revenue per customer |
Insights | No Insights on Customer behaviour | Critical insights on customer behaviour helpful in driving repeated engagement |
Perception | Customers expect regular discounts | Customers feel connected to the Brand |
Strategy | Short-term | Long-term |
Its important for Busineses to realise the overall objectives and outcomes of these two strategies. A short term strategy should always roll up to a long term strategy. So, while you may be tempted to go for a short term solutions for driving immediate sales, but a rewarding loyalty program will ensure you make your customers come back to you much more often.
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If you feel need help with deciding what does your business need, book a free consultancy now with EarnNBurn.