Maintaining good customer relationships and loyalty is critical to running a business. Every enterprise with consistent profits and growth in its respective industries has strong customer relationships.
Many businesses and their marketing teams agree with this observation. While attracting new customers is always desirable, keeping existing ones is also a priority. In 2021, 73 percent of chief marketing officers focused more on retaining existing customers than getting new ones.
Retailers and other businesses could explore several strategies to build customer loyalty. One of the most popular ways is by establishing your brand's own loyalty or rewards program. While it can take some time and resources to set up, a good loyalty program can boost your revenue and improve customer loyalty, among other benefits.
Key Takeaways
- Businesses implement loyalty programs to reward customers for certain brand interactions.
- Brands could explore several customer loyalty programs, depending on their goals and resources.
- Many successful businesses have established rewards programs that increase customer loyalty and offer valuable rewards.
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Understanding Customer Loyalty Programs
Loyalty programs refer to offerings and systems created by brands that reward or offer incentives to customers for performing desired behaviors. As the name suggests, loyalty programs reward customers and clients for continued patronage.
Rewards programs, or loyalty programs, come in different forms. However, all of them work to increase customer engagement. Customers are more inclined to buy from companies offering valuable rewards through these programs than their competitors.
Businesses can offer a variety of rewards. These could include exclusive or early access to new products and services, exclusive events, discounts, awards, or merchandise. These rewards help businesses show their appreciation to loyal customers or clients.
While some argue that offering incentives or rewards is antithetical to maximizing revenue, loyalty programs offer unique benefits. It helps improve your business's customer relationships and encourages further patronage and engagement.
Customers have become increasingly interested in joining loyalty programs as well. A 2020 survey by Yotpo showed that 68 percent of loyal customers would be willing to participate in a brand's loyalty program. This figure significantly increased compared to the previous year's 59.8 percent.
Benefits of Loyalty Programs
While it can be confirmed that loyalty programs aren't the most efficient way to maximize profits, they do offer other benefits that can help one's business in the long run.
These benefits often go beyond the value of individual sales and offer a more holistic approach to growing one's business and customer base. Here are some primary benefits loyalty programs can provide your company or organization.
Better customer retention
With an economic recession on the horizon, it can be challenging for businesses to retain customers as more consumers plan to cut costs. Layoffs in the tech and finance sectors have already occurred, and experts predict that this trend will continue across other sectors.
For this reason, companies must be strategic and focus more on customer retention. Loyalty programs can be an excellent way to do this. Offering a loyalty program that provides value for your customers can encourage them to stick with your brand.
Loyalty programs help you engage your customers beyond their purchases. It encourages further interactions with your brand through shared values or social experiences.
They make customers feel appreciated and valued, encouraging them to spend more and stay loyal to your brand.
More customer referrals
The likelihood that your customers will recommend you to their networks increases if they enjoy and find value in the benefits of your loyalty program.
Word-of-mouth can be a potent tool to promote your brand's loyalty program. Your acquisition costs through this marketing method can be virtually nothing and can significantly increase your customer base.
You can also implement mechanics to gain more customer recommendations, such as rewarding existing loyalty program members for every successful referral. A referral system can also introduce a social aspect to your loyalty program. More referrals mean more customers, which can help your overall revenue.
Reviews and user-generated content
Following recommendations from friends and family, customer reviews and user-generated content are a close second. Many consumers usually read reviews and look up a brand to see what previous customers and clients have to say about your company.
For this reason, ensuring your loyalty program offers an excellent customer experience is a must. Customers that enjoy your loyalty program could leave positive reviews and create original content featuring your business.
Like user-generated content, earned media can be an incredibly effective marketing tool. While traditional advertising is still effective, earned media is beneficial in building customer trust and loyalty, especially for younger customers.
Potential customers could see this content and become more encouraged to engage with your brand and purchase your products. They could even join your loyalty program once they see its benefits.
Look through your customer reviews and user-generated content. Find positive ones you can use to promote your loyalty program and your company as a whole.
Increased revenue
Depending on the mechanics of your loyalty program, it could help you increase your revenue and customer lifetime value. If we consider the other benefits of a loyalty program, all of them will improve your overall profits.
A loyalty or rewards program seeks to improve customer loyalty by boosting their engagement with the brand and encouraging more purchases.
The longer customers stick with your brand, the more they spend, boosting your company's revenue. Each loyal customer you earn will have a lasting and consistent impact on your earnings.
Better customer relationships
A business's relationship with its customers can significantly influence their buying habits. Customer relationships are a significant determinant of a customer's purchasing decisions.
A study by SalesForce found that 94 percent of customers say that a positive experience would encourage them to continue buying from a brand.
Loyalty programs are one way to increase positive customer interactions and improve relationships. Maintaining these positive relationships also offers other benefits that impact various aspects of your business.
Increased competitiveness
A well-organized and executed customer loyalty program can help set your company apart from your competitors. It gives your brand an edge that attracts new and potential customers.
Your customer loyalty program could offer unique rewards or experiences that your competitors don't. You could also use your rewards program to sell products or services at a lower price point than your competitors.
Ensuring that your loyalty program offers genuine value to your customers and clients can significantly help sway customers into patronizing your brand over others.
Types of Loyalty Programs
Customer loyalty and rewards programs can come in various shapes and sizes. Businesses can explore and use different program mechanics to align with their resources and goals.
Here are some basic loyalty program types your company could use. However, you can always mix and match these types to create something uniquely your own.
Points programs
A points-based program is one of the most popular types of loyalty programs. This system can be very versatile, and businesses often use it differently.
Here's how a points program works. Your system awards loyalty points to customers every time they perform a specific action. These actions could be purchasing, signing up for an event or newsletter, or achieving other goals you have in the pipeline.
Customers could then use the points they accumulate to gain rewards. These could include giveaways, discounts, or credit toward their next purchase.
You can also explore ways for you and your customers to track points. Some standard methods include loyalty cards, mobile apps, or online accounts.
Cashback programs
Cashback loyalty programs have become especially popular in e-commerce, online shopping, and financial services. This type of program gives back a percentage of a customer's spending for them to use on future purchases.
This program works because it makes customers and clients feel like they're getting some of their money back with every purchase. Earning a cashback reward can encourage customers to continue buying from your business to save on their next purchase.
Tier-based programs
You can look at tiered loyalty programs like video games. Customers can clear or achieve different levels depending on their amount of spending. For example, once people spend a certain amount of money, they get on a higher tier offering unique rewards.
You can increase the value of your loyalty rewards depending on the tier, encouraging program members to spend more to get them. These rewards range from exclusive, high-percentage discounts to exclusive access to new products or experiences.
Gaming programs
Gaming loyalty programs often incorporate a simple game into the rewards process. The player's performance in the game will correspond to certain prizes.
Some examples of games businesses use for these programs include spin-to-win wheels or simple matching games.
This loyalty program may take time and software development resources to set up. However, it can be an excellent way to engage with your customers and excite them enough to participate in your rewards program.
Spend-based programs
In a spend-based program, customers or clients get credits for the amount they spend, no matter their number of purchases. This loyalty program rewards high-spending customers, even if they only make a few purchases.
Some airlines have adopted spend-based programs over points-based ones to reward customers who spend a lot of money on fewer flights. This rewards program can help you retain these high-spending customers and reduce your churn rate.
Mission-based programs
A mission-based program may be for you if your company has strong values and mission statements you want to share and incorporate into your branding.
A mission can help you connect and increase engagement with customers and clients with the same values. You can also partner with a related nonprofit, local entrepreneur, or community organization so customers can see concrete results of their support.
Free perks programs
Nearly everyone loves free stuff. A free perks loyalty program gives customers just that. Each purchase can help them collect points or credits they could redeem for free products and services.
Referral programs
Referral or refer-a-friend programs reward customers who get their friends and family to perform desired actions. They could get their networks to buy your products, attend events, or sign up for the loyalty program.
This program can effectively increase your customer base and market to a broader audience. Ensure your loyalty program provides value so customers will be more motivated to get their friends and family on board.
Community programs
As the name suggests, community loyalty and rewards programs focus on fostering social connections and engagement among customers along with their relationship with your brand. They can also develop organically from an existing loyalty program.
Creating and nurturing these communities offers excellent value for your brand. It can help increase brand loyalty, especially considering its social aspect.
Paid programs
A paid loyalty or rewards program requires customers or clients to pay a recurring or one-time fee to access exclusive perks. Many brands call them VIP or membership programs.
For example, an e-commerce brand could offer a members-only program that asks for a monthly fee in exchange for free shipping or exclusive discounts. Loyal customers that make multiple purchases could see this program as an excellent deal that can help them save on shipping fees.
Hybrid programs
Each business has unique needs, goals, and resources. One type of loyalty program might not work for everyone. Hybrid loyalty programs could be the best option in these instances.
A hybrid program combines one or more types of loyalty programs. You can merge two or more systems to achieve your goals more effectively.
How To Create a Loyalty Program
Loyalty programs can become highly unique and tailored experiences that benefit the company and its customers.
Your brand could follow some basic steps to create a loyalty program. Of course, you may make some tweaks to suit your needs, preferences, and available resources.
1. Identify your goals
As with any new strategy or campaign, identifying your goals is the first step to creating a loyalty or rewards program. Know what you want out of your loyalty program. Is it sales? Newsletter subscriptions? Customer reviews?
Understanding your program's goals can help you make better decisions further down the process. Your goals will significantly impact the type of program you want to use alongside other choices.
2. Choose your rewards
After knowing your goals, choose the rewards you want to offer. Ensure these rewards are valuable enough that your audience will see significant benefits in joining your program.
Examples of rewards you can offer include the following:
- Discount codes or vouchers
- Early access to products or services
- Exclusive events and experiences
- Gifts and freebies
3. Select a type of loyalty program
Choose a type of loyalty program that aligns with your goals and rewards. You can also look at your current systems and resources to decide.
The type of loyalty program you choose will determine the goals you'll reach and the time and effort required to run it.
4. Decide how you will run your program
Loyalty programs can take a lot of time and energy to run. Some brands prefer to run them manually, but others use dedicated software to accomplish the same goals.
Managing your loyalty program requires tracking and rewarding customer behaviors according to your chosen system.
Small businesses could get by with manual handling. However, larger enterprises with a broader customer base might benefit more from automated software that integrates with their point of sale (POS) system.
5. Incorporate your branding
When creating and launching a loyalty program, infuse your brand into it. This practice ensures that each aspect of your loyalty program calls back to your business, your unique selling points, and the values you espouse.
You can incorporate your brand and create a personalized experience through the following:
- Messaging and marketing materials
- Loyalty program name
- Program currency or points
- Merchandise
- User interfaces
6. Market your program
You must market and promote your new rewards program To gain loyalty program members. Tell your audience about your loyalty program and its mechanics to attract more participants.
Here are some ways you can market your program to new and existing customers and clients:
- SMS and email marketing campaigns
- In-store signs
- Website popups and banners
- App notifications
- Social media
- Word of mouth from staff or brand advocates
7. Observe and adjust
When everything is in place, launch your loyalty program. Make sure to monitor its implementation closely. After a set time, observe the program's initial results.
The data you get can help you understand your program comprehensively, which can help you make necessary adjustments.
Tips for Establishing a Successful Loyalty Program
Creating and launching a loyalty program is one hurdle. Running it and ensuring its success and longevity is another. Some loyalty programs might have a successful initial run, but keeping them running in the months and years to come requires commitment and effective systems.
Here are some tips to ensure your loyalty program enjoys long-term success and helps you achieve your company's goals.
Know your audience
Knowing and understanding your audience is critical when creating a loyalty program. Collecting and analyzing customer data and feedback should be something your business prioritizes.
This knowledge will help you craft and implement an enticing and rewarding loyalty program. It will also help you in your other campaigns and ensure your other initiatives serve your customers.
Reward different customer actions
Loyalty programs are an excellent way to increase revenue by encouraging and incentivizing customer purchases. However, rewarding non-purchasing customer actions, such as signups, logins, or donations, can also be helpful.
Rewarding various customer actions can help you achieve other company goals and encourage customers to interact with your brand in different ways.
Offer valuable rewards
Offering valuable rewards might seem like a no-brainer, but some loyalty programs might still neglect this aspect. The rewards you offer loyal customers will impact their engagement. Why would they bother signing up if they don't see value in your program's rewards?
Knowing your customer base is critical. Understanding their motivations and interests can help you curate a rewards system that is attractive to them.
Personalize your implementation
Personalization is a critical component of marketing and running a business today. A SalesForce study found that 66 percent of customers expect brands to understand their expectations and needs.
Personalizing your loyalty program also helps you stand out from your competitors, who may also have their own programs. You can explore ways to achieve better personalization, such as relevant product recommendations, individual messages, and discounts on select products.
Have a data-centric approach
Data and statistics are critical to running a business. Your loyalty program will also benefit from comprehensive data and analytics.
Collect relevant customer behavior, interests, and demographic data throughout your program's implementation. These data points, alongside other metrics, can help you improve your loyalty program and other business practices.
Explore partnerships
Partnerships with other companies or organizations can add another dimension to your loyalty program. These collaborations help you provide unique joint rewards and attract a broader customer base.
Listen to your customers
Collecting customer feedback should be standard practice for your brand. The information you glean can help you identify your loyalty program's strengths and weaknesses so that you can adjust your implementation as necessary.
This feedback can also extend to other business practices. They can help you identify potential problem areas to ensure customer satisfaction.
Best Examples of Customer Rewards Programs
Customer rewards and loyalty programs are not a new phenomenon. Many businesses and organizations have launched and run successful programs that benefit the company and its customers significantly.
Here are a few of the best customer loyalty programs with practices you can learn from and emulate.
Starbucks Rewards
The multinational coffee giant Starbucks has a successful rewards program that encourages repeat purchases and continued patronage. They also launched a corresponding mobile app for easier use and monitoring.
Customers collect points or stars with every purchase, which they can use to redeem drinks and pastries. Program members can also get a free drink, cake slice, or pastry on their birthday.
Sephora Beauty Insider
Sephora is a multinational personal care and beauty product brand that has amassed millions of loyalty program members. The Sephora Beauty Insider program offers free-to-join, points-based free shipping and discounts.
Aside from being a points-based program, Sephora Beauty Insider has also evolved into its own community. Members regularly communicate with each other, sharing makeup looks and personal care tips.
DSW VIP Rewards Program
Designer Shoe Warehouse's (DSW) long-running VIP Rewards Program is a free hybrid loyalty program. It utilizes a hybrid tier and points system that awards customers points for every eligible purchase.
Each DSW VIP Rewards Program tier enjoys perks and discounts of increasing value. This simple system and its valuable rewards greatly encourage customers to make repeat purchases.
The North Face XPLR Pass
The North Face is a well-known sports and outdoor apparel brand. Their loyalty program, the XPLR Pass, is an excellent match for their offerings and customer base.
Customers gain points according to the amount they spend, which they can use to redeem The North Face products and unique travel experiences. Members can also get birthday shoutouts and gifts with their purchases.
Amazon Prime
Amazon Prime is probably one of the most well-known loyalty programs today. It is a paid program where customers pay $14.99 each month to access the following benefits:
- Same-day, one-day, and two-day delivery
- Discounts and free shipping
- Streaming services
As a retailer, Amazon is in a very competitive market. With its beneficial rewards and perks, this loyalty program is an excellent way for them to stand out from their competitors.
How To Build Customer Loyalty
Loyalty programs are one way of improving customer loyalty. However, building customer loyalty takes time. It can be challenging for your brand to earn customers' trust and loyalty.
For this reason, you need comprehensive strategies and consistent practices that positively impact your customers' experiences with your brand. Read below for ways to boost customer loyalty beyond launching a loyalty program.
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Implement multi-channel customer service
To build customer loyalty, you must be consistently aware of your customers' needs and requests. One way to achieve this awareness is by implementing a multi-channel service system.
Modern businesses often have multiple channels of communication with their customers. These could include physical stores, e-commerce websites, social media, and other platforms. These various platforms give your brand more opportunities to interact with customers and address their needs, offering an omnichannel experience.
Be consistent
Many brands enjoy success because of consistency. Ensuring customers' interaction with your brand turns out positively is key to this step.
Consistently providing good experiences can improve brand recognition and loyalty, as customers know what to expect. With time, consistency will strengthen customer loyalty.
Provide good customer service
While you may strive for perfection in your business operations, you or your employees might make mistakes that affect your customers. An excellent customer service system can help you turn things around.
Help customers solve problems through genuine and meaningful interactions. While some interactions could provide an opportunity for promotion or upselling, prioritize your customers' needs first. Solving their problems and listening to feedback is more effective at building trust and loyalty.
Share positive experiences
Many customers are willing to provide feedback and reviews, especially after a remarkable experience with your company.
You can gather positive feedback and share it with your audience. Some customers could create user-generated content about your brand and post it on social media.
Sharing these positive customer experiences can attract new customers and encourage existing ones to stick with your brand.
Focus on your customers
If you're in a highly-competitive market, it can be tempting to constantly look at your competitors to see what they're doing. While competitor research can help you improve in certain areas, your customers must be a top priority.
Look at your customer base and focus on giving them the best experience possible. Satisfied customers will become loyal if they see your brand knows what they need and is willing to provide.
Continue to improve
Customer feedback can be positive or negative. While it can be easier to dwell on the positives, any negative reviews you get can also be helpful.
Take note of what customers complain about and use the negative feedback to improve. Customers will notice you are genuinely enhancing your services, which will develop trust and loyalty.
Pro Tip: Using software and apps to automate your rewards programs can make them more efficient and provide you with data for reports and analysis.
Start a Customer Loyalty Program Today
Rewards systems or loyalty programs can be an excellent way to improve customer relationships and earn customer loyalty. They also offer several other benefits, like broadening your reach and increasing your revenue.
When launching your loyalty program, have a corresponding marketing campaign. User-generated content can be helpful in this step.
Apps like Archive can make collecting and utilizing UGC more efficient. It automatically detects and compiles any brand-related posts from your audience, which gives you a wealth of available content. Contact our team today for a quick demonstration.
Improve customer loyalty and build better relationships through loyalty programs and UGC. Contact Archive today.
FAQs on the Benefits of Loyalty Programs
Are there disadvantages to loyalty programs?
Loyalty programs offer many advantages, but they can be challenging to implement. Some challenges and disadvantages of loyalty programs include the following:
- The difficulty of measuring loyalty in customers
- Inconsistent profitability
- Competition with other similar loyalty programs
Can small businesses implement loyalty programs?
Yes. Small businesses can implement loyalty programs at a smaller scale and lower costs. Examples of loyalty or rewards programs for small businesses include punch cards, loyalty discounts, and community programs.
When can you add a loyalty program to your business?
There is no rigid time frame as to when you can launch a loyalty program. If you have the resources and staffing to run one, then it's time to launch a loyalty program. Even if you start small, you can change and adapt as your business grows.
