The Ultimate Checklist on Creating a Successful Customer Loyalty Program
in Business by Severine Hierso
For a business to succeed, you need loyal customers who spend money again and again. But with so much competition, it can be hard to keep customers coming back. A top-notch customer loyalty program can help with this. Successful loyalty programs increase customer satisfaction and engagement. This, in turn, leads to more conversions and a healthy ROI.
Loyalty programs have massively advanced, in part by undergoing a digital transformation. Businesses are more integrated, so customers can get rewards both online and in-store. There are also more opportunities for businesses to build lasting relationships with customers. So, loyalty programs benefit both customers and businesses.
In this article, we’ll cover:
- What a customer loyalty program is and why you need one
- How to build a customer loyalty program
- How to foster customer loyalty
What is a Customer Loyalty Program?
A customer loyalty program rewards customers for staying loyal to a business. They're a great way for businesses to get to know their customers. And this means they can give customers personalized offers and make it even more attractive to stay.
Customers are usually rewarded every time they make a purchase. But many businesses are also expanding their programs to build an emotional connection. For instance, they may reward customers for leaving a positive review online. This is particularly important given how negative reviews affect SEO for businesses. They may also send customers a free gift to say “Thank you!” or give them access to exclusive events or products.
Why do you Need a Customer Loyalty Program?
It costs five times more to get a new customer than to keep an existing one. So a successful customer loyalty program is great for your bottom line. And that's not the only way they increase your revenue:
- Repeat purchases: for the first six months, a customer’s repeat purchase rate increases by 30%. Why? Loyalty programs encourage customers to spend more often to earn rewards. It’s also easier to sell to existing customers than new ones.
- Referrals and reviews: loyal customers can recommend you to friends and family or leave positive reviews online.
- Greater personalization: 64% of customers want to receive personalized offers based on their past purchases. You can use this information to personalize your loyalty program and give them the personal experience they expect.
Types of Customer Loyalty Programs
There are five main types of programs to choose from:
- Reward redemption: this is the top loyalty program structure customers prefer. Customers spend money and receive points they can use to claim a reward, like a free gift or discount. The desire to earn a reward is what motivates them to keep spending.
- Tiered program: customers spend money or engage with the brand to advance to a higher tier with more valuable rewards. They’re a popular option: one quarter of consumers want to see VIP tiers in a loyalty program.
- Perks program: customers get rewards regardless of how long they’ve been with the brand. The aim is to create a relationship with customers that will encourage them to keep coming back.
- Gamified program: customers play games or complete challenges to unlock rewards and win prizes. 28% of consumers like these sort of chance-to-win benefits. So, turning your customer interactions into a game is a great way to keep them motivated and engaged.
- Loyalty community: customers are divided into communities based on their interests and values. The idea is to personalize how customers interact with your brand. They aren't standalone programs but fit into an existing program.
You can also create your own hybrid loyalty program by using the best features from several programs.
How to Build a Customer Loyalty Program
There are four main phases in building a successful customer loyalty program:
1. Concept Phase
This is the time to research your customers and look at your business goals and KPIs. How will your loyalty program help you please customers and fulfill your goals? How will you measure its success? If you’re not sure what your customers want, send out a short survey on social media or email it to your subscribers.
You should also look at any data you have about your audience and their interests. Remember, your aim is to create lasting customer relationships that will benefit them as well as you. So you need to know how to appeal to them.
The final part of this phase is to decide what type of customer loyalty program will suit your brand. You can then move on to the next phase: designing your loyalty program.
2. Design Phase
There are several things you should bear in mind when designing a customer loyalty program, such as:
1. What Rewards and Benefits to Offer
The top rewards customers prefer are discounts (70%) and free products (65%). So it’s definitely worth offering these sorts of benefits. But don’t just give customers discounts - there are many ways you can reward them. For instance, you could:
- Make a donation to their favorite charity
- Enter them in a prize draw
- Give them free tickets to an event
2. How Customers Earn Rewards and How Long it Takes
45% of consumers say that it takes too long to earn a reward, while 31% say it's too difficult. So you need to think about how to make the reward redemption process as easy as possible. You should also give customers rewards consistently, not just at the beginning. Remember, you want to motivate them to stay with your brand long-term.
3. Give Customers Value
You need to make your rewards valuable if you want to keep customers. But 27% of consumers say their loyalty program rewards aren't valuable. How can you make them worthwhile? Help customers visualize what their points are worth. For instance, you can give points as gift cards or store credit.
4. Personalize the Customer Experience
80% of customers say they’re more likely to buy from a brand that gives them a personal experience. How can you personalize their experience? You can use your customer data like purchase history and preferences. In fact, 60% of customers want brands to personalize their experience based on their preferences. And emerging technology like AI can help too.
3. Launch Phase
Next, you need to launch your customer loyalty program. Think about how to communicate its benefits to gain consumer trust. To do this, consider your target audience and goals. You might not want to roll out your program to all your customers immediately. Instead, you could select a percentage of them to try out the program so you can make any necessary tweaks. And when you do launch, you should tell people about it with a unified, multi-channel campaign.
You also need to get your employees on board and provide training for your sales and customer service teams. For instance, one in three business leaders prioritize investments in digital platforms. You can use these platforms for training, communication, and optimizing performance.
4. Review Phase
The final phase is to review your loyalty program’s performance and how it affects your ROI. For instance, you could track customer queries and complaints with call tracking software. If lots of customers mention the same issue, you can take steps to fix it.
You can use analytics tools like Google Analytics to track metrics like engagement rate, sales, and conversion rate. These help you assess how your loyalty program is performing. You can also keep track of things like point redemption and rewards. Tracking metrics means you can optimize your loyalty program, which should boost your retention rate even more.
How to Foster Customer Loyalty
There are several ways you can foster loyalty that complement your customer loyalty program, including:
- Give great customer service: 45% of consumers say solving a problem or answering a question is the most important way a brand can interact with them. So it’s important brands give customers great service across all their channels. Set up a help desk, give customers the opportunity to chat live with employees or chatbots, and make sure customers get help whenever they need it.
- Be consistent: consistency builds trust. So it’s important to give customers a consistent, positive experience every time they interact with you and across all your channels. After all, 63% of consumers want a seamless experience across online and offline touchpoints.
- Ask for feedback (and use it): 45% of customers say they want to feel appreciated. Asking for feedback is a great way to show how much you value their opinion. And it can help you improve your customer experience.
- Engage with your customers: 81% of customers want a relationship with a brand. This means regularly interacting with customers on all your touchpoints. And don’t only engage them when you want to sell something. Give them useful tips, tell them how you’re addressing important issues, and make them feel appreciated. This will help you build a meaningful relationship, which, in turn, builds loyalty.
Loyalty Brings Success
A customer loyalty program is a great way to build a long-lasting relationship with customers. There are four main phases in developing a winning customer loyalty program: concept, design, launch, and review. By following these steps, you’ll be well on your way to developing a successful customer loyalty program your customers will love.
