How to Start a Customer Loyalty Program

how to start a customer loyalty program

Estimated reading time: 6 minutes

According to Customer Thermometer, 80% of most businesses’ future profits will come from approximately 20% of their existing customer base¹. That means you have a tremendous opportunity to generate more sales from your current customers, so long as you give them a good reason to return. A customer loyalty program is an effective way to get your customers back in-store or to your website.

Most customers will not carry punch cards or loyalty cards and are not interested in downloading another smartphone app. So, you need a loyalty program that is convenient and easy to use for your customers. There is no one-size-fits-all model for loyalty programs, as every small business has different products, services, goals, and sales strategies. Keep reading this Balboa Capital blog post to eliminate the guesswork and point you in the right direction. You will learn how to start a customer loyalty program that can keep your customers coming back again and again.

Choose the rewards you want to offer.

The first step is to decide which types of rewards you want to include in your customer loyalty program. The goal is to have unique and compelling rewards that generate excitement among your customers, leading to repeat business. Research studies reveal that saving money is very important to B2C and B2B customers. It is up there with quality products and services, personalized service, positive online reviews, and convenience.

Therefore, consider rewards that have an economic motivation. Some ideas include special discounts, gifts with purchases (in-store and online), points programs, complimentary shipping, birthday perks, and anniversary perks.

Coupons with special discounts and incentives.

Offering customers percentage-based discounts and incentives is a proven way to generate sales and upsell customers in almost every industry. You can send them coupons in the mail or via email. Most shoppers use physical coupons, digital coupons, and coupon codes. Coupons with special discounts or incentives might not be as profitable for your small business, but your customers will appreciate them.

For example, a pet store might email its existing customers a 20% off coupon code to use on certain pet foods, products, and toys. A coupon gives the pet store’s customers an incentive to make additional purchases sooner rather than later. Next, offering an incentive is another way to drive sales. Some examples of this include a buy one, get one free (BOGO) offer, a gift with purchase, and a giveaway where each purchase gives a customer a chance to win something.

Finally, if your loyalty program includes a coupon with a percentage-based discount or special incentive, define your offer dates and make them reasonable. For example, limited-time offers that are too short (ex: 24 hours) or too long (ex: several months) might result in your customers ignoring them.

Loyalty programs with points programs.

A points program is one of the trickiest offers in a loyalty program. First, you need to look at your customers’ buying habits (how much money they spend, how frequently they shop, etc.) and your pricing structure to determine how many points are needed to get a discount or a special offer. If your customers have to reach an improbable points level, your loyalty program will have little or no value.

For example, let us say an ice cream shop has a points program where customers get 10 points for every purchase and will receive a free ice cream cone once they reach 250 points. However, for customers to claim this reward, they need to make 25 ice cream purchases, which is far too many and might result in an unsuccessful loyalty program.

When creating a program, make it appealing and easy to understand for your customers. One of the most straightforward approaches is to have customers earn one point for every dollar spent, and when a certain number of points are accrued, a discount coupon or percentage off is given. Here is an example of this points program scenario for an independent wine shop. For every $1 spent, wine shop members earn one point. When a customer has 100 points, they receive a $10 coupon. Wine shop members who spend $100 get $10 for their next purchase.

Free shipping and fun perks.

Everyone enjoys complimentary shipping when they buy something online or place an order over the phone. Offering this as part of your loyalty program builds the promise of repeat business and leads to happier customers. You will only want to offer free shipping on purchases of a specific dollar amount to avoid losing money. You can email your customers a free shipping code that they can use for their next purchase.

In terms of fun perks, there are countless options available. For example, if your small business has a CRM system, you can add your customers’ birthdays and anniversaries to their profiles with their permission. You can then send out mailers or custom emails to your customers with special discounts or offers that make them feel special. It is an excellent way to build rapport with your customers and differentiate your small business from the rest.

Deploy your loyalty program.

Now that you know many things you can incorporate into your customer loyalty program, it is time to get it up and running. If you decide to do it yourself, you will need to make sure that it works with the tools and technologies that your business is currently using, such as your email marketing software, CRM software, and point-of-sale (POS) system. Hiring a marketing specialist or a team with experience developing and deploying loyalty programs is a good option if you are unsure where to begin.

Lastly, many customer loyalty software systems are available online. Loyalty software is easy to use; it can also be customized with your business logo. Before purchasing, contact your CRM software provider or POS system provider to see if they offer customer loyalty programs. Doing so will simplify the entire process and eliminate the need for extra software or hardware.

Get your customers on board.

Once your customer loyalty program is ready to launch, it is time to let your customers know about it. Getting them to sign up might be difficult, so you can always opt for a hybrid approach that puts customers into the program immediately after purchase, whether in person or online. When you have customers shopping at your small business in person, have your employees briefly mention the benefits and rewards of the program, and keep it short and benefit-driven.

For example, asking a customer, “can I add you to our free loyalty program that gives you $10 off your next purchase?” sounds enticing and will likely generate a positive response. However, if the customer is not interested, accept it politely and avoid pressing the issue.

Finally, have your webmaster add a banner or a link on your website’s homepage that invites users to sign up for your customer loyalty program. Send them an email with a special offer or discount immediately after providing their information. For a good user experience and more loyalty program signups, ask for your form’s first name, last name, and email address. Asking for too much personal information might prevent people from signing up.


Balboa Capital, a Division of Ameris Bank, is not affiliated with nor endorses Customer Thermometer. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.