Customer Loyalty Programs: The Complete Guide
Customer Loyalty Program Overview
Customer Loyalty Program Definition:
Customer loyalty programs are long-term marketing strategies structured to motivate the repeat business of customers or clients via reward incentives from a particular business.
Usually a business may offer customers one of the following to encorage repeate purchases:
- Free merchandise
- Advanced release products
- Reward points or cash back
- Free upgrades
Businesses that depend on growth coming from repeat sales through customers would benefit vastly from offering a loyalty program.
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Participants in a loyalty program (a card holder) are identified by plastic, paper, or digital cards that mirrors the look and size of a credit card. There are different names for these cards such as:
- advantage card
- club card
- loyalty card
- membership card
- points card
- rewards card
The cards itself usually contain an mag strip, or bar code. Proximity cards and chip cards do exist for some programs.
The program works when a consumer presents the card at checkout, more than likely to receive a discount on their current purchase, or points that accumulate until they are redeemed on future purchases.
The cards (except paper cards) allows businesses to collect valuable data that can help a business improve the customer experience by offering rewards that stimulate greater interest or other things that their market research brings out.
Loyalty Programs are designed of course to create customer loyalty. Businesses convent this because repeat customers create higher lifetime values, which allows for higher return of investment predictions.
Loyal customers who repeatedly buy products or services from the same business are more profitable than consumers who buy once.
Are Loyalty Programs Right For Every Business?
Business from various industries can benefit from running a customer rewards or loyalty program. Industries in widespread sectors like retail stores, restaurants, beauty service care, airlines, and hotels view loyalty programs as an necessity to remain competitive.
Repair service providers, tax attorneys, insurance salespeople or landscapers, for example are in industries where customer sales are more infrequent and must look at the level of competition around them to decide weather a return on investment is worthy of investing in a loyalty rewards program.
They may even benefit from using the loyalty program to offer referral rewards.
Successful Loyalty Program Examples
Loyalty programs can be a huge boost to businesses overall marketing efforts. But like any marketing, they can loose money on time and effort. The reason? Consumers may belong to multiple loyalty programs but only remain active in a few.
It is imperative that the business adds enough value to the program if they are to retain customers the way the program was designed to do. Having a look at other successful customer loyalty programs may help one with ideals they could use to be successful.
- Starbucks Rewards
- Target REDcard
- Olive Garden Rewards
- CVS ExtraCare
- The Home Depot Pro Xtra
- Giant Eagle Advantage Card
- Sunoco Gas Rewards Card
Types of Loyalty Programs
Just as businesses from many industries can join in on offering loyalty programs to their customers, businesses can offer different types of loyalty programs as well. Some businesses have even combined different types of programs to meet the needs of their loyal members.
- Point System
- Tier System
- Annual Fee VIP Benefits
- Non-monetary programs
- Punch card/ stamp card program
- Partnership programs
Mobile Loyalty Program
There has been a shift toward online and mobile online loyalty programs in favor over the traditional magnetic card, stamp, or punch based schemes.These newer programs usually features an QR code that gets scanned at the time of purchase. Mobile loyalty is the perfect choice of loyalty programs for small businesses.
Measuring the Success of A Loyalty Program
Is the customer loyalty program increasing customer happiness?
Are you retaining customers at a higher rate?
A business would no doubt need a way to measure the success of the program. And businesses would themselves decide on what metric numbers constitute as a marketing success.
Here are a few of the most sought after analytics to watch.
- Customer Retention Rate
- Negative Churn
- Net Promoter Score
- Customer Effort Score
Successful Loyalty Program Questions and Tips
Its all about the details. Making a customer loyalty program successful could fall on the business owner as well as the software they choose. Loyalty programs that are too hard to maintain does little good to the merchant or the consumer.
Here are questions to ask, and starting tips to use for running a successful loyalty program
- What actions will a customer take to be rewarded?
- How will the customer access, redeem, and use their rewards?
- What type of rewards to offer the customer?
- What are the rules of the loyalty program be?
- How will communication with members be handled? (example: e-mail, text messaging)
- Reduce the difficulty to understand the program as much as possible to ensure an pleasant customer experience.
- Eliminate any barriers of entry and make the loyalty program easy to join.
- Simplify the redemption process.
- Realistically reward your customers through cash, rebates, coupons, and free items.
- Hold mystery rewards for elite level card members.
- Require continual participation of the program by creating penalties for inactivity, and set up reminders for users to use their rewards.
- Give better rewards for longer active users.
- Use tiered levels to encourage customers to make progress.
- Make customer progress to higher levels a big deal. Offer certificates, shout outs on social media, wall of fame, gold stars,freebies or more.
- Have all the answers to their questions in an accessible place, with simple language.
- Share and grow the customer loyalty program. Rewarding customers who share on social media helps increase brand awareness and creates social media advocates simultaneously.
Benefits From a Successful Loyalty Program
- Aligning the business to cater towards their most profitable customers
- Fuels word-of-mouth marketing
- Creates higher customer retention rates
- Attracts new customers cheaper than other marketing efforts
- Ability to draw back lost customers
- Increases the lifetime value of customers
- Creates separation from the competition
- Data obtained through customers helps reduce advertising cost through better targeting of loyal customer lookalikes.
Loyalty Program Software
Choosing the right loyalty program software can play a role into weather the customer loyalty initiative is successful or not. Many brands today offer management of the loyalty program through an loyalty app.
Loyalty apps are affordable in price and easy to create.
Retail Loyalty Programs
Retailers know that loyalty programs are highly popular and effective in their industry. And although loyalty programs generally offer the same benefits for every industry, goals, strategies, and measuring ROI may sightly differ for a retail loyalty program.
Goals When Running A Retail Loyalty Program
Retail store owners should try to tie marketing initiatives to goals. Three goals to shoot for include:
- Improved retention rates from customers
- Valuable collection of data
- Customers who spend more on average, increasing profits as a result.
Retail Loyalty Program Benefits
A retail business will see a lot of benefits when running a loyalty program. The 3 biggest are:
- Referrals from customers
- Satisfaction scores higher from customers
- Customers returning more frequently
Retail Loyalty Programs ROI Measuring
ROI measurement for retailers running loyalty programs would look at key performance indicators such as:
- memberships that are new
- active vs inactive subscribers
- accounts reactivated
Retail Loyalty Program Tips
Here are some tips to building a great loyalty program that promotes customer engagement.
- Find the right loyalty program for your business by do research find a program that fits your customers.
- Offer sneak peeks, and first to buy offers on new products
- Offer a free add on item to purchases
Retail Loyalty Program Examples
- Big Lots
- Giant Eagle
Loyalty Program Statistics
- 87% of shoppers reported that they want brands to have loyalty programs.
- 54% of consumers say they would consider doing more business with a company for loyalty rewards
- 46% said that they have already increased the amount of business with a company because it offered loyalty rewards.
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