Customer loyalty programs are the most trustworthy tool for inspiring customer loyalty. A 2013 Nielson report revealed that 84% of consumers say they’re more likely to stick with a brand that rewards them with a customer loyalty program.

We could site endless studies on the amazing value of customer loyalty programs. The science behind them is clear. But if there’s anything you need to know about them, it’s that they work well at creating customer retention.

So, let’s delve into exactly how these programs work. Then let’s look at how to get started creating an ideal program that keeps your customers coming back.

But first, let’s go over the basics.

Customer Loyalty At A Glance

The main benefits of customer loyalty programs are:

  1. They are set up quickly
  2. They leave room for near-limitless customization
  3. They are low-cost and high-reward
  4. They allow you to collect useful data for your business strategy
  5. Once optimized, loyalty members can land you 18% more revenue than normal customers

What Exactly Are Customer Loyalty Programs?

Customer loyalty programs are a great way to engage your customers

The term ‘customer loyalty program’ might sound intimidating. Doesn’t it take a lot of time and effort to create and manage a ‘program’?

Setting a loyalty program up takes some time and effort on your part. But when it comes to a value analysis, customer loyalty programs are very efficient tools.

A loyalty program isn’t usually difficult to manage. All a customer loyalty program does is provide an incentive for customers to return and support your business. When a customer who’s enrolled in your loyalty program makes a purchase, they receive a reward. Their reward is normally points they can redeem later through discounts or free stuff.

It’s relatively cheap to start your own customer loyalty program. You can launch one on one of many platforms. Then, you need to manage a database of enrolled customers. This is why customer loyalty programs are often a part of a broader marketing strategy. They come included with many POS systems and online merchant sites.

Why Are Customer Loyalty Programs Important?

Use data to provide the offers your customers care about

If you’ve ever done any marketing for your business, you know that attracting new customers is hard. Oftentimes, it’s also very expensive.

It’s much more cost-effective to bring back old customers than it is to attract new ones. But there’s also the fact that if you don’t employ a loyalty program, you’re choosing to leave money on the table. They’re almost ubiquitous these days. If you don’t have one, you’re lacking a serious competitive tool that your competitors are certainly using.

Giving away free products might not sound appealing to you right now. But with the right use of data, you will find that a free product or service for loyal customers will carry your business a long way.

A Guide To Creating A Loyalty Program Based For Your Customer

Customer satisfaction is at the core of a successful loyalty program

The concept of customer loyalty is easy to understand. But modern programs offer you more resources you can use to collect data and bolster your entire brand. You can create a simple program, or you could go crazy and make a very elaborate rewards program.

A typical customer loyalty program allows customers to collect points upon purchasing an item.

You’re likely already familiar with the process. Air miles, restaurant and hotel cards, and stamp cards all work this way. You probably have one of these cards sitting around in your wallet or purse.

The type of rewards you provide to customers will depend on your business. For example, restaurants and coffee shops often have a business card-sized stamp card where whenever you purchase a drink or meal, you get a stamp. Once you reach 10 (or however many) stamps, you get a free meal or drink.

Measuring Customer Loyalty

These programs are difficult to optimize if you can’t measure customer loyalty accurately. There are a few common metrics you can use to measure loyalty.

1. Net-Promoter Scores

An NPS is provided by tools such as online/email surveys. They ask customers for feedback and use the feedback to predict customer loyalty. This data can form the basis of your action plan for creating your company loyalty program.

2. Customer-Loyalty Index

A CLI is a metric that measures customer loyalty over time. Much of the index will be calculated using the same tools as NPS. But your CLI will also consider additional data. For example, upselling and repurchasing actions will also sway each customer’s index.

3. Repurchase Ratio

This ratio is easy to calculate. The ratio is simply the ratio of your one-time customers against your repeat purchasers. With a strong loyalty program, you should be able to improve your ratio as more customers start coming back for more rewards.

Using Your Customer Loyalty Data

Now that you know who your most loyal customer are, and you have a good system of measuring loyalty, it’s time to choose a loyalty program that suits your business model and customers behavior.

There are various types of customer loyalty programs, and each can have its own unique take on a program. You can tweak and change your loyalty program as many times as necessary in order to get a loyalty program that works for you.

8 Customer Loyalty Program Ideas

We’ve compiled a list of 8 different customer loyalty programs that could work for your business. Choosing the right customer loyalty program is crucial. Not all programs fit all businesses. Take time to consider which one will work best for you.

 

If you find that there a number of different programs you think might work, it’s worthwhile testing them against each other over long periods of time. Find out which makes you more money.

1. Customer Referral Loyalty Programs

We’ve gone over how finding new customers is harder than retaining old ones. But with customer referrals, your program can do both.

A good loyalty program includes a generous reward for old customers who refer new, paying customers to your business. Customer referral programs kill two birds with one stone. They provide loyal customers with even more incentives to come back to you while also pulling in new customers.

Customer referrals usually look like this:

  1. Customer #1 refers Customer #2
  2. Customer #1 gets a 30% discount on their next purchase
  3. Customer #2 gets a $20 credit towards your business
  4. Customers #1 and Customer #2 are both happy and more likely to spend more

2. Reward a Customer with Points

Point reward loyalty programs are among the most common. They are a simple and effective way of promoting customer loyalty. That’s why all the biggest hotel chains and airlines have been using them for years.

Loyalty points are easy to earn and easy to redeem, making them stimulating for the customer. The points they earn simply credit towards a future free transaction.

Points are a great way to start if you’re setting up a loyalty program from scratch. Your average customer will quickly come to understand and appreciate a points system. Many of them will already be building up points with their favorite hotel.

The seamless experience of building and spending points is the safest bet for a lukewarm customer. But points systems also allow for additional data-gathering.

Point-based reward programs allow you to analyze your loyal customers’ behaviors. You can then work to provide a more unique experience to your best customers. The more information you gather, the more information you can use to personalize your rewards.

3. Customers & Non-Profit Partnerships

Do you have a passion for a cause that aims to make the world a better place? Many of your customers may share that same passion.

Redeemable points aren’t the only option for a loyalty program. When you partner with the non-profit of your choice, your customers who share your enthusiasm for it will feel good knowing that part of their purchase is going to a cause they care about.

4. Customer Spending-Based Loyalty Programs

These loyalty programs, being customer rewards, are similar to point-based rewards. But instead of just giving customers points for every purchase (or every dollar), they only reward the high-spenders.

Spending-based rewards allow you to single out and reward your best customers. Low-volume, high-ticket businesses can gain huge benefits with them. You simply provide a reward that follows every purchase that meets a minimum amount. Then those who pay more money on fewer purchases can feel like they’re gaining a lot of value,

5. Customer Subscription Loyalty Programs

Subscription-based loyalty programs and rewards for your customers can only be included along with loyalty programs for certain business types. But if your product or service must be delivered repeatedly over a long period, subscriptions can provide more value to customers.

Subscription programs can benefit you even when they end up costing you some money. The thing is that well-made subscription rewards tie your customers much more closely to your business. Look no further than Amazon, which has perfected subscription rewards and used them to build a global business empire.

You can use subscription programs under several business models. Service providers tend to have an easier time implementing successful ones, but even restaurants like Katz Deli are making a killing with them.

6. Reward Your Customer with Free Perks

Free perks programs simply gift each loyal customer a free product or service. All you need to do is run an occasional redeemable offer. This allows you to promote your company and gain new customers while engaging older customers.

7. Community-Based Engagement For Brand Loyalty

 

If you provide hobby/interest-based products or services, community-based rewards can increase your customers’ connections with your brand.

An online forum where your customers can discuss your business and their hobbies can foster a tighter connection with your business. Experienced enthusiasts can help newbies make decisions. They can even direct customers to whichever of your products they think the newbie would most appreciate.

Like most of the examples we’ve discussed, these rewards won’t work with all businesses. But you can always build an online forum and see how it affects your brand.

8. Cashback Loyalty Programs to Reward Your Customers

Cashback rewards and loyalty programs for customers are similar to points programs. Your customers are also likely already familiar and comfortable with the concept.

Many credit cards offer cash-back on every dollar as long as customers pay back their balance in full and on time. But businesses can use the same kind of system.

The idea of cashback rewards is as simple and seamless as points. For example, for every $0.50 your members spend, they get a $0.01 credit towards a future purchase.

This kind of program is more common for financial companies than it is for others. But plenty of restaurants and apparel businesses have cashback rewards for customers too.

According to the experience of Bank of America, cashback programs are extremely successful. 8 out of 10 loyalty program members are more likely to recommend the business to their family and friends.

Providing Value For Loyalty

A typical customer loyalty program allows customers to collect points upon purchasing an item.

You’re likely already familiar with the process. Air miles, restaurant and hotel cards, and stamp cards all work this way. You probably have one of these cards sitting around in your wallet or purse.

The type of rewards you provide to customers will depend on your business. For example, restaurants and coffee shops often have a business card-sized stamp card where whenever you purchase a drink or meal, you get a stamp. Once you reach 10 (or however many) stamps, you get a free meal or drink. This is a great and simple way to get customers coming back to your business.

Research Your Customers

You can gather valuable data in several ways:

  1. Surveys
  2. In-person conversations
  3. Online chatbots

Your approach needs to start, and remain, centered around data. Find out what makes your customers respond emotionally and give them what they want in a loyalty program.

All marketing attempts start with research. For a loyalty program to be worth your time, it needs to consider what your customers value. So, your starting point is finding out what your most enthusiastic customers would want to come back for.

The Value in Give-Aways & Discounts

Regardless of your specific points system, the importance behind them is in their psychology. People are addicted to discounts. Customers are also more likely to return to a business where they can get free stuff. This aspect of customer loyalty programs is fairly basic.

Modern tools also make customer loyalty much more useful for a business. They allow you to collect basic data on your loyal customers. This data lets you see what your best customers are coming back for. Customer loyalty programs provide a wealth of knowledge that you can use to improve your actual wealth.

How Do I Get Started With My Loyalty Program?

Now that we know the kinds of rewards you can include, it’s time to get started with your own program!

Loyalty programs are cheap to implement, relative to more aggressive marketing strategies. But that doesn’t mean they deserve any less forethought and attention.

If you are ready to get started with your program, you can create your loyalty program cards, gift certificates, and much more with Design Wizard.

Best of luck with your program.

Share your thoughts