What Makes an Awesome Loyalty Program?

Creating loyal customers is like making friends. You can’t expect your clients to give you their trust right away. You need to understand and treat them well. You have to communicate with them and give them what they need and like, too. Giving away a thoughtful treat or two can do wonders, which is why you need a well-designed loyalty program.

But why do you want loyal customers in the first place? It’s because loyal clients can give you perks you can’t get from casual customers. Check out these stats:

• The White House Office of Consumer Affairs reports that it’s six to seven times more expensive to acquire new customers than to retain ones you already have.
• The same office also found that on average, your loyal customers are around 10 times more valuable than their first purchase.
• Much of your revenue (around 80%) can come from just 20% of your existing customers, says the Gartner Group.
• The book “Marketing Metrics” found that your probability of selling to an existing customer is 60% to 70%, compared to just 5% to 20% for new prospects.
• Word of mouth can account for 20% to 50% of all buying decisions.

Basically, loyal customers (not just any kind of customer either) give you revenue for far less effort and resources. They can also act as free publicity through their testimonials and are essentially among your most important assets as a business owner.

A loyalty program is a great way to capture your customers’ loyalty in exchange for select perks. It creates a relationship where you offer advantages like exclusive discounts and promotions if your customer keeps doing business with you. Executed well, a loyalty program can help stabilise your revenue sources while also contributing to increased customer traffic.

Crafting your loyalty program

To create a loyalty program that works, you need to:

Set a goal. What do you want to achieve out of your loyalty program? Do you want to get more customers? Or do you want to improve your relationship with your current customers? In the case of the former, referral-based rewards will most likely give you the best results. In the latter, something that encourages them to come back would be your best option.

Identify the best reward. Will you be giving away redeemable points for every purchase, exclusive discounts, free products or a promotion? Your reward should be tailored to your customers’ behaviour and interests. For example, if you notice that most of your restaurant’s customers come in the morning to have breakfast, a free cup of coffee would be a good idea. To create the perfect reward, you can:

• Get to know customers. Identify who they are, what their motivations are and what they like about your products, among other things.
• Study data. You can work to determine your customers’ habits: what and how much they buy, when they visit and how long they stay.

Communicate with your customers. Identify the best method to spread the word about your loyalty program. It is ideal that you use all channels available to you, even your social media accounts. You should also encourage your staff to participate in information dissemination.

Enable the easy redeeming of rewards. Just because your customers know you have implemented the loyalty program doesn’t mean they will stay. A common reason why customers leave the loyalty program—and the business—is because of they cannot obtain the rewards they deserve. Encourage them by making it easy for them to redeem their rewards.

Gather data. The loyalty program will give you information you can use to provide better service and more effective loyalty programs in the future. It allows you to personalise your next campaigns, as well as your marketing efforts so you target specific customers and their particular preferences.

Loyalty programs are a great way to create and improve your relationship with your customers. It comes with a few expenses but it’s a compromise you should not be afraid to consider. Your customers’ loyalty comes at a price after all, but it’s worth it.

What is your favourite among all the loyalty programs you’ve been part of and why? Tell us in the comments.