How To Create a Loyalty Program in 5 Steps

Loyalty programs have proven themselves as one of the most effective tactics for increasing revenue and inspiring customer loyalty. As many as 84% of consumers say they’re more apt to stick with a brand that offers a loyalty program. And 66% of consumers say the ability to earn rewards actually changes their spending behavior.

How to Create a Customer Loyalty Program
  1. Choose a great name.
  2. Create deeper meaning.
  3. Reward a variety of customer actions.
  4. Offer a variety of rewards.
  5. Make your ‘points’ valuable.
  6. Structure non-monetary rewards around your customers’ values.
  7. Provide multiple opportunities for customers to enroll.

10 Innovative Customer Loyalty Programs (And How to Start Yours)

Why consider a loyalty program?

The primary benefit of creating a loyalty program is the increased likelihood that customers will return to your store. Many businesses operate on a customer-focused model, and a loyalty program provides tangible rewards for your shoppers.

Here are a few reasons you might benefit from starting a loyalty program:

What is a loyalty program?

A customer loyalty program provides ongoing incentives to your customers for their continued business. This can be direct rewards, like cash back or free merchandise, or bonus points towards future purchases. By enrolling, customers receive exclusive benefits intended to increase their desire to shop with you again. Loyalty programs can lead to steady cash flow and new customers if existing participants encourage their friends and family to enroll.

How to create a loyalty program

There are a few steps to follow to create a loyalty program, no matter what business you have or what type of rewards you offer:

1. Get to know your customer

The customers desire should be at the forefront of your loyalty program. Listen to them through conversation, surveys and trends to determine what would motivate them to return. If its possible, design your loyalty program around desirable items or services such as discounts on your most popular brands. Sometimes, its your brands customer service or your values that people prefer, so you might offer rewards for shopping in store or donate proceeds to valued organizations.

Decide what type of customer behavior you are rewarding. This could be store visits, dollars spent or referrals made. This should align with your customers existing behavior.

2. Decide what type of loyalty program is best

Once you know what will keep your customers coming back, align this with your long-term business strategy. Make sure you have the tools and technology to launch and maintain a successful program. For example, points programs are common, but it might be easier to launch a punch card system to track purchases made. Partnerships or value-based programs could help if youre looking to grow your reach immediately, but tiered programs might benefit you if youre looking to promote exclusivity, higher spending or frequent visits.

3. Create excitement

When launching a new business campaign, you want to create excitement around it. You might incorporate:

Discuss the new program with customers that may have provided feedback that helped drive the program. If offering a paid or subscription-based loyalty program, perhaps you can make it free or discounted for the first month.

4. Prepare for the launch of your program

Be sure you have systems to manage customer data securely and ways to capture and track this additional information. Whether you need sign-up sheets or forms, mechanisms to calculate discounts or individual punch cards, be sure everything is ready and tested before your launch. Some companies might offer membership cards or other indicators that require barcode scanning for more sophisticated loyalty programs.

5. Grow your loyalty program

Once you have existing customers signed up, consider how you can use the loyalty program to bring in new customers. Partnership loyalty programs can attract new business, or you might add a referral-based incentive that offers customers free or discounted products or services for every person they refer. Incentives per referral could both strengthen your relationships and expand your business.

Examples of loyalty programs

Loyalty programs can vary depending on how a business sells its products or services and its marketing and advertising strategies. Here are some examples of loyalty programs:

Point-based loyalty program

One of the most common types of loyalty programs, the point-based system, offers customers a certain number of points based on dollars spent or purchases made. Once you earn a certain number of points, you receive a reward.

For example, a clothing company may offer five points for every dollar spent. Once you earn 100 points, you receive 25% off your next purchase. This works well because customers can feel like they are playing a game. You will want to make sure the points system is simple and clear and that customers always have access to their points balance to ensure clarity and keep the customer engaged.

Punch cards

For smaller businesses, like coffee shops, you might offer a punch card system. Customers receive a punch or stamp to their punch card with each purchase. Once a customer reaches a certain number of punches or stamps, they earn a reward.

Considering the coffee shop, customers may need to buy 10 large coffees before earning a free beverage. This guarantees that a customer must make a certain number of purchases before you provide a free item and, like the points system, turns the shopping experience into a game for customers.

Tiered programs

Tiered loyalty programs reward customers who spend more money with more exclusive benefits. You can create a chart that states the benefits of each tier, allowing the customer to know what benefits they can receive within each tier.

Businesses can pair this with other loyalty programs such as a points system. For example, a clothing store might offer one point per dollar spent at a lower tier but three points per dollar at a higher tier. This rewards the customers loyalty and guarantees a higher spending rate before offering free or discounted merchandise or services.

Paid programs

Customers may pay a one-time or annual fee to take part in a paid loyalty program. Companies may want to offer ongoing benefits, a special sign-up benefit and exclusive coupons or deals throughout the year. For example, a book store might offer the following benefits as part of a paid loyalty program:

Value-based or charity programs

Rather than monetary or physical rewards, you might align your rewards program with the values of the customer. For example, a cafe may want to promote its commitment to sustainability, a cause that its customers support. The cafe sells reusable cups and pledges to donate one dollar to a local recycling program for each cup purchase. Matching up with customers values is a great way to build relationships, enhance your business reputation and increase loyalty.

Game-based programs

Though points and punch cards might feel like games, a company may offer actual games to bring customers back. For a food company, for example, you could provide alphabet letters with each purchase. If a customer collects the letters to spell out words or phrases, they might receive free items or a free meal. This is a way to engage repeat customers in a fun way.

Partner-based programs

A partner-based loyalty program engages two or more businesses that team up to provide their customers with purchase incentives. This can be mutually beneficial to the businesses by broadening their audience to people that might not have shopped with them previously. For example, a cable company might choose to partner with a television company and offer free premium channels if they purchase that brand of television.

Subscription programs

Subscriptions are like paid loyalty programs, but payments are recurring. Companies may use this strategy for products that need regular replacement, such as toiletries, beauty products and dog food. Members may receive exclusive benefits, like free shipping, and discounts.

FAQ

How do you create a loyalty program in Excel?

5 Criteria to Make a Program Great
  • High perceived value of your program currency. …
  • High perceived value of your reward options. …
  • A compelling “earn velocity.” According to Maritz’s 2016 Customer Loyalty Study, 40% of consumers cite “benefits took too long to earn” as the primary reason for quitting a loyalty program.

What are the five criteria for a successful loyalty program?

In short, for every dollar a customer spends, they receive a certain amount of points in return. These points accumulate until the customer is able to redeem them for a reward. For the most part, the number of points received per dollar is fixed and does not change between customers or purchases.

How does a loyalty program make money?

Different Types of Customer Loyalty programs
  • Point Programs. The point programs are the most common programs around the commerce world, as they the simplest ones. …
  • Spend-Based Loyalty Programs. …
  • Tiered Programs. …
  • Paid Programs – VIP member club. …
  • Value – based Programs. …
  • Partnered Program. …
  • Game Program. …
  • Hybrid Loyalty Programs.

What are 3 loyalty programs?

Different Types of Customer Loyalty programs
  • Point Programs. The point programs are the most common programs around the commerce world, as they the simplest ones. …
  • Spend-Based Loyalty Programs. …
  • Tiered Programs. …
  • Paid Programs – VIP member club. …
  • Value – based Programs. …
  • Partnered Program. …
  • Game Program. …
  • Hybrid Loyalty Programs.

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