How to Create a Loyalty Program to Retain Customers

How to Create a Loyalty Program That Works: Designing a System to Retain Customers

Posted 7 months ago by Anastasia Prokofieva

Whether you�셱e launching a桂brand new business or桂you�셶e been running a桂successful online shop for桂years, retaining customers is桂part of桂the桂gig.

Without loyal customers, brands will fail to桂thrive and桂survive online. Fortunately, there are quite a桂few ways to桂entice customers into becoming loyal brand ambassadors, one of桂them is桂fairly straightforward桂�� loyalty programs.

Learn how to桂design a桂loyalty program that works for桂your business and桂keeps customers coming back for桂more.

Importance of桂Loyalty Programs

Curious about the桂benefits of桂loyalty and桂rewards programs? You�셱e in桂the桂right place! But first, let�셲 break down exactly what a桂loyalty program is.

At桂its core, a桂loyalty program is桂implemented by桂a桂business to桂entice customers to桂continue shopping with them. Simply put, it�셲 a桂program that rewards customers for桂their loyalty.

Loyalty programs offer customers special discounts, coupon codes, freebies, and桂other perks that encourage them to桂keep purchasing.

Increase Customer Lifetime Value

Customer lifetime value (CLV) is桂defined as桂the桂amount of桂revenue a桂customer brings to桂a桂brand over time. When brands set up桂a桂solid loyalty program, they boost CLV by桂getting customers to桂keep coming back and桂forming lasting relationships with them.

When customers feel appreciated and桂valued through exclusive discounts and桂rewards, they are more likely to桂continue purchasing from that brand instead of桂seeking out competitors.

Stand Out from the桂Competition

So, how does a桂loyalty program make a桂brand stand out against the桂competition? We�셱e glad you asked.

When a桂shopper makes a桂purchase and桂has a桂positive experience, they�셱e more likely to桂return to桂buy again. However, if桂they purchase and桂receive a桂discount code or桂a桂special offer, they�셱e even more likely to桂make another purchase!

That�셲 how loyalty programs improve a桂brand�셲 retention rate and桂set them apart from the桂competition.

Meet Customer Expectations

Another critical factor is桂that consumers expect brands to桂offer a桂loyalty program. Loyalty cards, point systems, and桂other rewards have become the桂norm in桂many industries.

According to桂this , loyalty programs influenced purchasing decisions for桂an桂average of桂almost 8桂out of桂10桂US桂consumers.

Shoppers have certain expectations from loyalty programs, too. Six in桂10桂US桂consumers . This feature ranked as桂the桂top feature, with earning points and桂rewards following closely at桂58%. About a桂third of桂US桂consumers valued exclusive product access.

Leading features seen as桂desirable in桂loyalty programs according to桂consumers

Understanding the桂Fundamentals of桂Designing an桂Effective Loyalty Program

Before you begin creating a桂customer loyalty program, there are a桂few things you must prioritize as桂you strategize what�셲 important.

Take a桂Customer-Centric Approach

Without understanding the桂true wants and桂needs of桂your customer base, you can�셳 create an桂effective loyalty program. You may think offering standard discounts or桂coupon codes will be桂enough, but there�셲 much more opportunity for桂personalization.

By桂offering unique discounts and桂freebies based on桂their shopping behaviors, you can hone in桂on桂the桂specifics of桂what your customers want to桂prove your value as桂a桂business and桂show how well you understand their needs.

For example, if桂a桂customer frequently purchases skincare products, you can offer them a桂free sample of桂a桂new product or桂exclusive access to桂a桂limited edition line.

Farfetch�셲 Private Client loyalty tier provides exclusive benefits like a桂fashion concierge and桂personal stylist to桂high-value customers

Set Clear Objectives

To桂launch and桂maintain an桂effective loyalty program, having clear objectives is桂critical. Some common objectives or桂goals of桂a桂loyalty program may include increased revenue, increased repeat purchases, higher average order value, customer satisfaction, and桂customer lifetime value.

By桂setting clear goals early on, you can properly measure the桂effectiveness of桂your program and桂make any桂necessary adjustments.

For example, if桂your goal is桂to桂increase repeat purchases, you can track the桂number of桂times a桂customer returns to桂make a桂purchase and桂see if桂it桂has increased since implementing the桂loyalty program.

Establish a桂Strong Value Proposition

Why should customers choose your loyalty program and桂your business over a桂competitor�셲?

The value proposition sets the桂stage for桂attracting customers and桂keeping them for桂the桂long haul. This message should clearly explain why shoppers should stick with your brand, what the桂program offers, and桂how you�셱e different from the桂other fish in桂the桂sea.

For example, you could set up桂a桂tiered loyalty program that offers more benefits as桂customers move up桂the桂ranks. Say, for桂every $1桂spent, they earn one point and桂can redeem those points for桂rewards or桂discounts. As桂they reach higher tiers, they may gain access to桂exclusive perks such as桂free shipping, early access to桂sales, or桂personalized offers.

The Lululemon membership�셲 value proposition lies in桂its emphasis on桂experiential advantages, such as桂events and桂receipt-free returns, rather than monetary savings

Common Types of桂Customer Loyalty Programs

Customer loyalty programs aren�셳 a桂one-size-fits-all solution. An桂enterprise loyalty program, for桂instance, may not be桂suitable for桂a桂small local business.

That�셲 why it桂makes sense to桂examine some common loyalty program examples and桂types before deciding which one best suits your business.

Businesses use a桂few different types of桂customer loyalty plans to桂attract, engage, and桂retain shoppers. Let�셲 discuss some of桂the桂best rewards programs here.

Points-Based Programs

One of桂the桂famous loyalty program examples is桂Starbucks Rewards, a桂points-based program. The more money Starbucks customers spend, the桂more Stars (or points) they collect, which can be桂applied towards future orders, discounts, and桂free products and桂merchandise.

Starbucks Rewards is桂easy to桂understand and桂versatile in桂its offerings, making it桂a桂popular choice for桂coffee lovers around the桂world. The program is桂straightforward to桂use via the桂Starbucks mobile app for桂additional consumer buy-in 껸꾈삣桂깎꾈껨껸껨깎낼깎꾈넨.

Starbucks customers can unlock additional rewards by桂using specific payment methods

Tiered Programs

Tiered programs are another way that brands can give rewards to桂loyal shoppers and桂keep them engaged for桂longer.

An桂example of桂a桂tiered program is桂Sephora Beauty Insider, where customers continue to桂move up桂the桂tiers based on桂how much money they spend. The more they spend, the桂closer they get to桂unlocking exclusive benefits and桂freebies based on桂their shopping behavior.

Sephora Beauty Insider is桂a桂genius customer retention strategy because it桂encourages more spending and桂long-term engagement so桂shoppers can continue to桂earn loyalty points and桂access more products and桂incentives.

Sephora�셲 Beauty Insider loyalty program consists of桂three tiers

Paid Loyalty Programs

When a桂brand has enough customer loyalty in桂its customer base, paid loyalty programs are an桂effective way to桂keep their shoppers interested and桂loyal.

Amazon Prime is桂the桂perfect example of桂paid loyalty, where customers pay a桂membership fee for桂exclusive perks like free 2-day shipping, unlimited media streaming, free games and桂photo storage, and桂much more.

From a桂business perspective, paid loyalty programs offer instant revenue for桂a桂business and桂keep highly engaged customers interested in桂what you have to桂offer.

Fast, free, and桂convenient shipping options are one of桂the桂main perks of桂Amazon Prime

Of桂course, this loyalty program list is桂not exhaustive. You can use other loyalty programs depending on桂your business type and桂goal. Check out the桂detailed list of桂effective loyalty programs in桂this article:

Creating a桂Loyalty Program That Suits Your Business Needs

Now that you understand the桂various customer loyalty programs you can use, you may have an桂idea of桂what type you�셝 like to桂leverage with your brand. When deciding on桂a桂customer loyalty program, be桂sure to桂consider the桂following.

Program Goals

What do桂you want to桂achieve with a桂loyalty program? Are you hoping to桂increase repeat purchases or桂improve engagement? While a桂tiered program may improve repeat purchases, a桂points-based program will be桂more compelling to桂improve engagement and桂attract new customers.

Budget &桂Resources

Consider the桂cost of桂the桂program and桂how much time and桂energy it桂will take to桂get off the桂ground. For example, offering customers loyalty points for桂each purchase may be桂easier if桂you�셱e just getting started as桂a桂brand and桂have minimal resources to桂launch a桂fully fleshed-out loyalty program.

Customer Base

By桂understanding what your customers want, you can determine the桂type of桂loyalty program that will best resonate with them. If桂they�셱e looking for桂instant gratification, a桂points-based system is桂ideal. If桂they�셱e after the桂quality of桂products, tiered programs are likely to桂be桂stickier and桂promote long-term engagement.

Walmart�셲 loyalty program resonates with its customers�� core value of桂saving money and桂aligns with its brand positioning as桂a桂low-price retailer

Considering all those aspects, you can create the桂best loyalty programs tailored to桂fit your business needs.

Strategies for桂Sustaining Customer Engagement

Once you know what program you�셪l be桂pursuing, it�셲 time to桂start hammering out the桂details! Keep the桂following in桂mind as桂you strategize an桂effective customer loyalty program for桂your business.

Engagement Tactics

Keep customers excited about your loyalty program by桂engaging with them in桂simple ways. Post on桂social media, send monthly newsletters and桂promote the桂program in桂your ecommerce shop. Entice customers to桂sign up桂and桂gain access to桂the桂rewards you�셱e offering.

Personalization

There isn�셳 a桂more important strategy in桂marketing than personalization in桂this digital world. Consumers expect shopping experiences that leverage their behaviors to桂offer products and桂services that will benefit them in桂meaningful ways.

That applies to桂loyalty programs, too. 43% of桂consumers for桂a桂personalized experience from a桂company or桂brand.

Adidas offers free shoe personalization options to桂its Level 3桂loyalty program members

Ensure your customers feel like part of桂your brand by桂providing tailored rewards, regardless of桂where they are in桂the桂buyer�셲 journey.

For example, you can provide specific product recommendations to桂particular customers based on桂their buying habits.

Say a桂customer bought a桂specific blend of桂coffee beans from you four times. You might consider providing them with a桂discount on桂their next purchase of桂that specific blend or桂recommending a桂discount on桂new blends that align with their preferences.

Tailoring your loyalty program to桂each customer may seem impossible, but with AI-driven algorithms, it桂becomes achievable. One such program is桂Marsello, and桂if桂you run an桂붚죕쳔 store, you can easily set it桂up桂with the桂Marsello app.

Listen to桂our podcast to桂delve deeper into using AI-powered personalized loyalty programs:

Regular Communication

Keep your loyalty program top of桂mind with customers by桂providing consistent communication. Send emails reminding them of桂their point status, new rewards opportunities, or桂special promotions that are launching.

Gamification

Encourage customers to桂participate in桂your loyalty program through gamification strategies to桂make it桂a桂fun, game-like experience.

For example, you can create social media contests within the桂program where customers can collect additional loyalty points by桂completing certain tasks, like posting on桂social media or桂engaging with your brand.

If桂you sell online with 붚죕쳔 and桂are looking for桂customer loyalty software, the桂Gratisfaction app can help you gamify your loyalty program.

The Gratisfaction app helps gamify your loyalty program

Another option for桂붚죕쳔 stores is桂the桂Kangaroo Loyalty Rewards. Beyond offering gamification features, this app enables you to桂set up桂ambassador and桂tier programs.

Exclusive Access

Offer exclusive deals and桂access to桂VIP customers and桂program members to桂build brand loyalty and桂entice others to桂join.

With early access to桂new products or桂attending members-only shopping events, your brand can foster demand fueled by桂FOMO (fear of桂missing out) from customers who have not yet joined the桂program.

IKEA Family loyalty program doesn�셳 reward customers based on桂spending; instead, it桂offers exclusive experiences like free furnishing workshops along with other perks

Wrap Up

When done right, a桂loyalty program can foster brand loyalty, improve engagement, increase revenue, and桂build a桂loyal, long-term customer base. With increased engagement, you�셪l collect valuable customer data, improve referrals, and桂successfully stand out against the桂competition.

Ready to桂launch a桂loyalty program on桂your website? 붚죕쳔�셲 ecommerce platform integrates with various online loyalty programs to桂empower your business to桂attract new customers and桂provide valuable experiences to桂your existing ones. Learn more about retaining customers with 붚죕쳔 here.

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About The Author

Anastasia Prokofieva is a content writer at 붚죕쳔. She writes about online marketing and promotion to make entrepreneurs�� daily routine easier and more rewarding. She also has a soft spot for cats, chocolate, and making kombucha at home.

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