Loyalty Program vs CRM Strategy: What’s the Difference?

This is a question that brands present to loyalty consultants time and time again. Loyalty programs and CRM (customer relationship management) strategies are two common approaches that businesses use to build and maintain customer relationships. While both aim to increase customer engagement and loyalty, they differ in their focus and execution. Ultimately, businesses can use both to drive growth and success. Even better yet, businesses can embed a sophisticated CRM strategy within their loyalty program for optimal chances of success.

Loyalty programs

Loyalty programs are designed to incentivise customers to make repeat purchases and engage more deeply with a brand. These programs typically offer rewards such as discounts, points or credit accumulation, free products, or exclusive access to events or promotions in exchange for customer loyalty. The better-designed programs not only reward transactional or spend-related activities, they also reward non-transactional activities (typical examples include sharing preferences, completing profile and referring a friend). The goal of a loyalty program is to create a sense of value and exclusivity for customers, while also increasing their lifetime value to the business.

One of the key benefits of a loyalty program is that it creates a tangible incentive for customers to engage with a brand. By offering rewards that are relevant and meaningful to customers, businesses can increase customer retention and build long-term loyalty. Additionally, loyalty programs can help businesses gather valuable data on customer behaviour and preferences, which can inform future marketing and product development efforts.

CRM Strategies

CRM strategies, on the other hand, are focused on building and maintaining strong relationships with customers through personalised communication and engagement. These strategies typically involve gathering data on customer behaviour and preferences, and using that data to tailor marketing messages and offers to individual customers. The goal of a CRM strategy is to create a more personalised and relevant experience for customers, while also increasing their lifetime value to the business.

One of the key benefits of a CRM strategy is that it allows businesses to create more targeted and effective marketing campaigns. By understanding each customer’s unique needs and preferences, businesses can deliver messages and offers that are more likely to resonate with them. Additionally, CRM strategies can help businesses identify opportunities for cross-selling or upselling to existing customers, which can increase their lifetime value.

Differences and similarities

While loyalty programs and CRM strategies have different focuses, they share some similarities as well. Both aim to increase customer engagement and loyalty, and both rely on data to inform their approach. Additionally, both loyalty programs and CRM strategies require ongoing effort and investment in order to be effective.

However, there are some key differences that loyalty experts will identify between the two approaches. Loyalty programs are more focused on incentivising customers to make repeat purchases, while CRM strategies are more focused on building personalised relationships with customers. Loyalty programs tend to be more transactional in nature, while CRM strategies are more relational. Additionally, loyalty programs typically offer rewards that are visible and tangible, while CRM strategies may offer more intangible benefits such as personalised recommendations or exclusive access to content.

Which approach is right for your business?

Ultimately, the decision of whether to focus on a loyalty program or a CRM strategy will depend on your business goals and customer base. A loyalty program may be a good way to incentivise repeat business and increase customer lifetime value if you have a large customer base that makes frequent purchases. If you have a smaller customer base or sell higher-end products or services, a CRM strategy may be more effective in building personalised relationships with your customers.

In many cases, businesses may find that a combination of both approaches is most effective. By offering a loyalty program that rewards repeat purchases while also using data to personalise marketing messages and offers, businesses can create a more well-rounded approach to customer engagement and loyalty. Ultimately, the key is to understand your customers’ needs and preferences, and use that knowledge to create a strategy that resonates with them.

A well-designed loyalty program will have a CRM Strategy built within it

A well-designed loyalty program can be a powerful tool for building customer relationships and increasing customer engagement. However, many businesses overlook the fact that a loyalty program can also serve as an effective CRM (customer relationship management) strategy. By designing a loyalty program with CRM principles in mind, businesses can create a more personalised and relevant experience for customers, while also increasing their lifetime value to the business.

Collecting Data:

One of the key ways that a loyalty program can serve as a CRM strategy is by collecting data on customer behaviour and preferences. By tracking purchases, engagement with the loyalty program, and other relevant data points, businesses can gain valuable insights into what motivates their customers and how they can better serve them. This data can then be used to tailor marketing messages, offers, and promotions to individual customers, creating a more personalised experience that is more likely to resonate with them.

Segmentation:

Once businesses have collected data on their customers, they can use that data to segment their customer base into different groups based on their behaviour and preferences. For example, customers who purchase frequently may be placed in a high-value segment, while customers who have not made a purchase in a while may be placed in a re-engagement segment. By segmenting customers in this way, businesses can create more targeted marketing campaigns and offers that are more likely to resonate with each group.

Personalisation:

Personalisation is another key aspect of both loyalty programs and CRM strategies. By using the data collected through the loyalty program to personalise marketing messages and offers, businesses can create a more relevant and engaging experience for customers. For example, customers who frequently purchase a certain product may be offered a discount on that product, while customers who have not made a purchase in a while may be offered a promotion to encourage them to come back.

Ongoing Engagement:

Finally, a well-designed loyalty program can serve as an effective tool for ongoing customer engagement. By offering rewards and incentives for continued engagement with the brand, businesses can keep customers coming back and increase their lifetime value. Additionally, by using the data collected through the loyalty program to personalise the customer experience, businesses can create a deeper sense of connection and loyalty with their customers.

A loyalty program is far superior to a CRM strategy in so many ways

In conclusion, a well-designed loyalty program can serve as an effective CRM strategy when it is built with customer data collection, segmentation, personalisation, and ongoing engagement principles in mind. By using the data collected through the loyalty program to create more targeted marketing campaigns and offers, businesses can create a more personalized and relevant experience for their customers, leading to increased engagement and loyalty.

While a good CRM strategy is certainly important for building and maintaining customer relationships, in many cases a loyalty program can be even more effective. A well-designed loyalty program can create a sense of value and exclusivity for customers, while also incentivising them to make repeat purchases and engage more deeply with the brand. Additionally, a loyalty program can provide businesses with valuable data on customer behaviour and preferences, which can inform future marketing and product development efforts. By combining the benefits of a loyalty program with the principles of a CRM strategy, businesses can create a more personalised and relevant experience for their customers, while also increasing their lifetime value to the business.

A loyalty program is far superior to a CRM strategy from both the business and customer perspective, if done right. The program will offer:

• Accumulation of value
• Sense of exclusivity and belonging
• Depth of relationship
• Ongoing engagement
• Rewards for performing desirable behaviours
• A clear and overt member value proposition
• Progressive member profiling
• Direct and clear value exchange
• Greater non-transactional earn opportunities
• Preference capture
• Strong emotional connection
• Richer analytics
• Greater opportunity to reward advocacy

Ultimately, while a good CRM strategy is certainly important, a loyalty program can take customer engagement and loyalty to the next level.

Are you ready to evolve your CRM strategy into a loyalty program? Talk to us today at Loyalty & Reward Co.