Tips for effective customer loyalty programs

Loyalty programs can be expensive and tricky to set up. Here’s how to maximize your loyalty program’s success rate so your hard work pays off.
Written by Ruth Chen

Note: This is article #5 in the The Ultimate Guide to Creating Repeat Customers

Adopting a customer loyalty program for your company is both an exciting and important decision. It’s exciting because loyalty programs can be effective and profitable. It’s important because while loyalty programs don’t always cost a fortune to set up, creating a successful one on the first try will save you time and money and distinguish your company from the rest.

Here are several tips to keep in mind when creating (or improving) a loyalty program:

Use tiers.

According to a literature review by Hanover Research, the optimal loyalty program structure has three tiers (top elite, bottom elite, and no status) with a controlled proportion of consumer population in high tier. Despite what you might think about tiers, 75% of consumers said they approve of businesses giving preferential treatment to customers who spend more money.

Use an online platform so customers can track their progress.

72% of consumers would like better access to rewards online and the ability to redeem their rewards more easily. If you have the programming skills and manpower, consider making a mobile application--59% of people would be more likely to join a loyalty program that offered a smartphone app.

Provide a personalized incentive for what customers want.

Personalize your customers’ rewards based on location, birthday, season/holiday, and shopping habits. For example, if your customer’s birthday is coming up, send them a birthday gift offer. If you’re a clothing company and your customer lives in an area where it’s always hot and sunny, tailor your emails to only send information about warm weather clothing. Currently, only 11% of loyalty programs offer personalized rewards based on a customer’s purchase history or location data--doing this will help you stand out from your competitors!

Target long-term goals and awards rather than just immediate gratification.

Immediate gratification is great, but it doesn’t give customers a reason to continue coming back. If you have your customers work for a long-term goal, they’ll not only come back more frequently, but they’ll also appreciate the reward much more in the end. An example of immediate gratification is a 15% discount offer on their current purchase. To turn this into a long-term goal, offer your customer a smaller discount (such as 10%) on their current purchase and a bigger discount (such as 20%) on their next purchase. You could even turn this into a punchcard, where customers get bigger and bigger discounts as they come back, or get a free product after x number of purchases.

Reward customers for more than just making purchases.

Did you know that 77% of transaction-based programs actually fail in the first two years? This is because customers want choices. Simply encouraging transactions over and over again doesn’t give your customers much freedom or excitement. Instead, try something new. For example, reward customers for taking online surveys, providing feedback, and referring friends to your brand. These behaviors will not only give your customers something fun to focus on, but they’ll also help you improve your products/services through feedback and expand your customer outreach.

Posted on Aug 17, 2015
Filed under Repeat Customers
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