# Bussines Development
Improve customer retention: loyalty systems and their benefits
What is more crucial for a business – keeping existing clients or attracting new ones? Well, according to the latest studies, it costs 5 times more to gain a new customer than to retain one.
Building long-term, mutually beneficial relationships with clients is key for any business. That’s where loyalty systems come in.
Let’s break down what they are, how they work, and the different types available.
What is a loyalty system?
A loyalty system is a program that rewards customers for repeated purchases with perks and bonuses. By offering discounts, rewards, or early access to products, such programs make customers feel valued and appreciated, which directly influences their shopping decisions.
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The benefits of having a customer loyalty system
More sales
Adding an extra item to the cart to get a bonus increases average order value. A 2022 survey showed that 80% of customers tend to buy more frequently from a brand after joining its loyalty program.
Reach new customers
A well-designed program encourages clients to advocate for your brand within their social circles. They become brand ambassadors, driving organic growth without a formal referral system. This is especially beneficial for IT services.
Valuable data collection
By signing up, customers provide personal information that helps you analyze buying behavior, preferences, and engagement patterns. This data is essential for tailoring offerings to customer needs.
Improved communication
Loyalty programs act as direct communication channels with customers, offering an easy way to share updates on products, services, and promotions.
Types of loyalty systems
Points-based programs
Customers earn points with every purchase and redeem them for discounts, products, or special offers.
Advantage: freedom to choose rewards makes the program more attractive.
Tiered programs
Customers unlock higher tiers with better rewards the more they engage.
Advantage: keeps customers engaged and motivated long-term.
Referral programs
Customers earn rewards for bringing in friends, family, or colleagues. Referred individuals also get incentives.
Advantage: builds community.
Subscription programs
Customers pay a recurring fee for exclusive benefits like free shipping, early access, or members-only discounts.
Advantage: steady income stream stabilizes cash flow.
Value-based programs
Rewards align with company values or causes, encouraging customers to support based on shared beliefs or interests.
Advantage: improves brand reputation
A survey in the United States found that most consumers prefer discounts in exchange for joining loyalty programs. The next most popular incentives were points and rewards, followed by exclusive or early product access.
Loyalty programs also strengthen emotional connections with brands. In a 2022 survey, about 50% of participants said they joined a loyalty program simply to show devotion to a company.
