Providing good service to your customers is always an effective way to get them coming back. But if you want to build a strong customer base, you need to take it a step further. This is where having a good customer loyalty program will help. Discover how you can build one for your business and get customers participating.
What is a customer loyalty program?
A customer loyalty program is a set of strategies that let companies provide incentives for their customers\’ patronage. Companies give these rewards based on customer buying habits. The hope is that these rewards would encourage new purchases.
This idea comes from the notion that rewards will help bolster the investment of customers towards a brand. As business strategists Frederick F. Reichheld and W. Earl Sasser, Jr. noted in their studies, a company\’s most loyal customers also become its most profitable. These loyal customers can even become business builders who can bring in more customers.
The benefits of a customer loyalty program
To better appreciate the value of a customer loyalty program, you need to understand more the benefits that it can provide. Some of these benefits that you will encounter include:
- Increased revenues: Loyal customers are more likely to spend on your brand. This will boost your revenues significantly.
- Save money: A good customer loyalty program can save you a lot of money, as it brings in a steady income stream. The program can also become self-sufficient and draw more customers.
- It provides valuable data: Using your loyalty program, you get to understand more what makes your customer tick. That information will help you in developing better-targeted marketing campaigns for future customers.
- Make customers feel more appreciated: Customer emotions play a large role in the success of a business transaction. By making them feel more welcomed by your business, you encourage customers to be more involved with it and make purchases.
- Create brand advocates: Having an enthusiastic community of customers gives you a lot more room to promote your brand. And they will be doing that for you free of charge.
All of these benefits will have a significant impact on the way your business performs. However, to get the most out of these, your customer loyalty program should be well planned and implemented. Customers should be excited about what you have in store for them and be ready to jump in.
Building your customer loyalty program
When developing your customer loyalty program, you need to tailor it to their behavior. It also needs to have the following traits.
- Provide a frictionless transactional experience for your customers
- Help provide additional value through third party affiliates
- Bring you and your customer closer together
To accomplish these goals, you need to know your customers well. Use the initial customer data that you have gathered to understand what they prefer. But don’t just stop at this information. Keep in mind that customer preferences change, so your loyalty program should be ready to adapt.
Here, you need to take a multi-faceted approach for your program. Instead of focusing on just one customer preference, look into how you can meet a wider set of wants. This strategy will give your loyalty program more reach. However, be careful not to overstretch your program as it can end up not successfully drawing customer interest.
The types of customer loyalty programs
Once you have your customer information, you can decide what type of rewards to give your loyal customers. There are a lot of ways that you can go with this, depending on the wants of customers. Here are some of the popular types of programs that you can consider.
Points program
In this program, your customers earn points every time they make a transaction with you. The points vary depending on the size of the transaction or the kind of products they purchase. They can then redeem these points for different rewards.
Paid program
This type of loyalty program is also known as the VIP member club. Here, customers pay a one-time or regular fee to become part of your VIP list. Upon membership, customers get access to exclusive benefits.
Tier program
In this type of loyalty program, there are several levels available depending on how loyal the customer is. Each tier consists of rewards that are of higher value compared to those in the lower tier. You can determine the tier level of a customer either through a points system or direct purchase amount.
Partner program
With this type of loyalty program, you partner with another business to provide perks for your loyal customers. Both companies gain more engagements from their collective customer bases. Make sure that the benefits both you and your partner offers are complementary to each other.
Charity program
This program is different from others in that you don’t target your customer’s desire for perks directly. Instead, you tug at their desire to help others. For every purchase that they make, you donate a portion of the purchase value to a charity that the customer supports.
Game program
In this type, you add game elements into the program. For instance, you can create a mobile app where customers can purchase and enter raffles and contests. The idea here is to encourage more repeat purchases from them.
Choosing the right customer behavior to reward
The type of customer loyalty program that you go with should match the customer behavior that you want to amplify. Some of the specific behaviors that you can target are:
- Making direct purchases
- Bringing new customer referrals
- Engaging with your brand on social media
- Purchasing certain products
As is with the type of program, these behaviors should match your campaign’s goals. For example, if you are looking to increase sales, then you would want to incentivize more direct purchases. You also need to make sure that everything aligns with the budget that you have provided. That will ensure that the program would end up profitable.
Implementing your customer loyalty program
Once you launch your customer loyalty program, you need to make sure that customers can easily participate. As such, keep the sign-up process as simple as possible. For instance, you can tie it to making purchases through a mobile app so that they won’t have to do separate steps.
You can also provide multiple points of engagement. Aside from your mobile app, use email marketing, websites, and social media to inform them of your customer loyalty offer. Provide a simple registration process for each of these entry points.
Keeping track of your program
Your customers would also want to track their progress in your loyalty program. Provide them with an easy way to do that, such as a small counter or panel on your mobile app. Your customer service team should also be able to give that information upon request.
Here, customer loyalty software would be handy. One such software is CandyBar, which lets you track the customer purchases made through a mobile app. The customer can then check their rewards status through text messages for faster access.
Measuring your loyalty program’s success
One of the fastest ways to see whether your customer loyalty program is doing as intended is by looking at your retention rate. Here, you need to compare the retention rate of customers enrolled in your loyalty program versus those who are not. A higher retention rate for the former means that your program is working.
You would also want to look into your customer churn rate. This is the rate at which customers stop shopping at your business. In the case of your loyalty program, you would want to see this as going negative. That would mean that your customers are actually spending more on your brand. This development will help offset the natural churn rate of your wider customer base.
Lastly, do a satisfaction survey. The survey will give you a more in-depth look at what your customers think about the program. They will also be able to tell you the pain points they encounter when participating. All of these will help you in refining the program and drawing in more customers.
Keep your customers coming with a good loyalty program
Launching a customer loyalty program is going to be a significant investment on your part. And it will be a long-term effort, as you have to hone that loyalty. But by following the various strategies here, you can create a more effective program. Get started and be on your way to creating a community of loyal patrons.