How to Create a Customer Loyalty Program

By: Irangi Gamage
How important are your customers? Well, without any, you wouldn’t be in business. But specifically, if your business involves repeat customers then we ask a different question:“how important are loyal customers to a business?” Bob Konsewisz, a strategist consultant for Maritz Loyalty, states that loyal customers are worth five or six times more than regular customers. Therefore retaining customers is crucial for a business. A customer loyalty program can be designed to say thank you, and to encourage future business from your customers as well as referrals.
A customer loyalty program is an incentive program that lets your frequent customers get discounts, VIP sales coupons, advanced purchase access to upcoming products, or gain points which can later be redeemed for prizes. If you don’t have one in place, here is how you can get started on a customer loyalty program.

Creating a Customer Loyalty Program

When designing a customer loyalty program, start by asking these two questions:
  1. What are the incentives that customers will receive?
  2. What type of a loyalty program do you want to create? You will need to decide if you want to provide your customers a discount with purchases, a points program that can later be redeemed for free products and prizes, free shipping, or products and services that are exclusive for them. Loyalty programs are not limited to these, once you know what type of a program you want, you can get creative. It is typically a good idea to look at your competitors for loyalty program ideas. You can make one that is similar to theirs, or make one that is unique to further differentiate yourself from competitors.
  3. What is the process for customers to achieve their incentives?
  4. How will customers progress to the goal of getting rewarded? Will they have to make more purchases, visit the store more often, refer friends, and/or partake in social media contests? You don’t have to pick only one of these actions. Your loyalty program can consist of multiple actions that may allow them to receive awards.

Tips for Creating a Customer Loyalty Program

  1. For a successful customer loyalty program, it is important to have a moderate level of difficulty, that also provides value for your business.

  2. Research done by professors Nunes and Dreze on loyalty programs showed that providing customers with early advancements as a bonus increases the effectiveness of a customer loyalty program.

    An example: A coffee shop provides customers with two different point cards. The first one has 8 slots to fill before getting a free drink (buy 8 drinks to get one free). The second card has 10 slots to fill with two already stamped (buy 8 more drinks to get one free). At the end of the day, both these cards are the same. Customers with either card will have to buy 8 drinks to receive a free one. However, customers with the second card tend to finish their card and get their free drink more often than the customers with the first card. This is because they feel as though they got a head start to the game. The two filled slots help the customers visualize the end of the game, which will encourage them to visit the store more often to get their card stamped.

  3. The loyalty program should be sufficiently promoted by your employees to the customers. This is an efficient way for your customers to get to know about the programs your business has to offer. Therefore, it is important to train your employees, teach them about your loyalty programs, and encourage them to communicate this to your customers. Social media, newsletters, and flyers can also be used to convey these information to customers, which will further promote and maintain your loyalty program.

  4. Be creative and keep the program fresh by changing it up every once in awhile. For example, you can give extra points for referrals in one month and extra points for social media tags in the next month, or give a free product on birthdays.
Some examples of customer loyalty incentive techniques:
  • Loyalty Cards & Coupon discounts like those from grocery & retail stores
  • Additional or one-time credits by signing up to receive eblasts, or social media actions
  • Additional points earned for each month of a paid monthly subscription
  • Additional points earned for each referring someone who becomes a customer
  • Tiered savings and rewards redemption rates (incentive to build up points as they are worth more at different levels)
Having a customer loyalty program can be beneficial for your business because it adds value to it by increasing the retention rate of your loyal customers, and encouraging new customers to do business with you. Applying the tips mentioned above could help you when creating your own customer loyalty program. Contact us if you get stuck and visit our blog for similar articles.