A Guide on How to Build an Effective Customer Loyalty Program

good customer loyalty program

January 18, 2021

Reading time about 8 minutes

Customer satisfaction is every company’s goal irrespective of the type of business you deal with. As a business owner, your main focus should be to make your customers happy and satisfied in a way that helps you to boost business growth. As the competition is very stiff, every business is struggling to stay ahead of the race and gain a competitive advantage. There may be many competitors in the market that may be offering a similar type of services, which is why you need to offer something unique and different.

As the customers’ expectations grow, they are always picky when it comes to the brand they want to associate with or choose services. Gaining customers’ trust is one of the main things your business must focus on to increase your business ROI. Making them feel valued helps in retaining them for a long time and choosing your brand over and over leaving behind your competitors. The most effective way to do so is through the help of successful customer loyalty solutions. In this blog, we will learn how an effective loyalty program is built & how it helps a business retain customers in the age of distraction.

How does a Loyalty Solution Benefit Your Business?

A good loyalty program must track and reward customers based on their spending behavior through which special benefits & privileges will be provided to the ones who are loyal towards the brand. More the customers spend, the more will be the benefits they receive. Having a customized reward program for your business not only helps in keeping existing customers but also helps in bringing more customers. Keeping the focus on customer loyalty is extremely important to grow business & increase sales faster. A study says a repeat customer spends three times more than a first-time buyer and the loyal customers are the ones who spend 5 times more.

A customer loyalty program acts as an effective marketing strategy to reward customers in the form of benefits such as discounts, points, free products & access to new products. By rewarding them for being loyal towards your brand, you are building a relationship with customers making them less likely to switch to a competitor with similar offerings. Apart from building trust, there are several benefits that a loyalty program offers to a business.

Here are some of the top benefits that a customer rewards program can offer-

  • Increase Retention Rate

One of the main reasons for using a loyalty program is customer retention, which defines the rate at which customers return to your brand. The increase in retention rate helps to reduce your spending while increasing the number of the overall customer base. Only a 5% increase in retention rate can lead to an increase in profits by 25% and more by 95%.

  • Marketing at Lower Costs

With the help of a reliable and well-planned loyalty program, your business can gain a competitive advantage in the market that is hugely dominated by big brands. It is always better to focus on retention more than acquisition as bringing new customers takes more effort and money. Convincing new users to trust your brand and try your products can be a hard task, which is why you must try to keep your existing customers happy and satisfied. Your loyal customers will help to bring more customers, without the need of putting extra marketing costs & advertisement expenses.

  • Better Personalization

Every customer expects some kind of personalized experience while they interact with the brands. Similarly, having a loyalty program can help customers get customized recommendations based on their interests and preferences. Whether it’s a discount on customer’s shortlisted products, occasional birthday or anniversary offers, or gifts on the purchase, rewarding customers is the best way to provide personalized experiences and win their hearts.

  • Focus on Customer Lifetime Value

The customized loyalty program can help in speeding up the purchase frequency rate made by customers as the program plays a main role in keeping customers engaged to make them choose your brand over and over. One of the best benefits of using a reward program is to help in increasing the customer lifetime value and acquiring new/lost customers with the help of targeting offerings like special privileges, free stuff, etc.

  • Build a Brand Presence

Another best offering from a customer loyalty program is to help in building brand presence and gain the attention of the new customers & retain existing ones. It is always advisable to build your new business website or mobile app aligned with the best loyalty program that matches your website’s color theme, voice, and tone. This will not help in gaining the attention of customers and reflect your business brand’s values.

Things to Consider Before Building a Customer Loyalty Program

Customers are still the king for any business and knowing their needs is what you must focus on in a loyalty program. Giving your customers what they want is what will motivate them to return to your brand again and again. Before you take the help of one of the renowned loyalty solution providers, here are some of the things that need to keep in mind while creating a customer loyalty program-

  • Know Customers

Customers have a variety of options while they look for services in a brand, which is why your loyalty program should be good that they cannot pass it up. No customers would be interested to buy products they don’t need and a good customer loyalty program is what you need to understand customers’ needs and reward them. The best way to know customers effectively is through the following strategies-

  • Collect Customer Contact Details

Building customer information helps your program to know more about them, which facilitates easy planning & launch of marketing campaigns using insights extracted from the customer data.

  • Analyze Customer Behavior

Keeping track of customer behavior helps in knowing what they want & need at a particular time. Every customer activity needs to be recorded & stored through a loyalty program as it will help to deliver a personalized experience.

  • Categorize Based on Preferences

Your customer needs may be different from one another, which is why a tailored approach while building a loyalty program is needed to suit the requirements of most of the customers.

Type of Loyalty Program

Another thing that you must focus on is the type of program that will work best for your customers. Encouraging your customers to remain loyal to your brand is what every organization needs but it is not possible until you have a program that offers what customers are looking for. Here are some of the loyalty program types that you can choose from-

  • Point-based Program

This is the type of loyalty program where customers get rewarded with points while they make a purchase. These reward points can be used later for the purchase of items or some kind of reward from the catalog. The more points they earn, the more will be the reward value.

  • Paid-Program

This is an exclusive loyalty program where customers can enjoy extra privileges or benefits after paying a one-time annual subscription fee to join the program. The customers having paid programs get access to special offerings or member-exclusive perks.

  • Tier-based Program

As the name suggests, these programs work based on the levels of brand loyalty. The more loyal customers are towards a brand, the higher tier they will climb to, which means better will be the rewards they receive.

  • Partner-based Program

Another interesting type of loyalty program is the one where more than one brand is involved to provide collective audiences with member discounts that customers redeem while doing business with any of the partnered brands.

Choose Customer Behavior to Reward

The next thing after understanding the type of loyalty program for your customers is to choose the customer interactions your business would like to reward. Based on the type of interaction, you must reward customers that can bring benefits to your business in the best possible way.

Below are some of the action-based rewards that you can offer to your customers-

  • Reward customers for referring new customers
  • Reward customers for using their social media platforms to engage with your brand
  • Offer free or additional products on completing a particular amount of spend
  • Offer rewards for being the highest spender of the week or month.

Use the Program Effectively

The last step is to build a customer loyalty program that is easy to use and understand for your customers.  Ensure that the program you build is-

  • Friendly to use
  • Easy to track
  • Cost-effective to use
  • Easily understandable
  • Packed with robust features

To take the best advantage of the loyalty program you built, you must make sure to work on the quality of loyalty services you offer to your customers.

Closing Statement

Hopefully, you must be aware of all the benefits a good loyalty program can offer to your business. Make sure that you go through the above-stated loyalty program strategies while building the loyalty program and start promoting them like any of your other products. Even if you are already using a reward program for your business, it’s always a great idea to analyze and understand where your program lacks and to implement the most effective one, which costs you lesser money and time. Get in touch with the expert developers of the most leading Web Development Company California to build your loyalty solution tailored to suit your business needs & grab the immense benefits today.