How to Start a Customer Loyalty Program

how to start a customer loyalty program

Major research firms indicate that 75% of most companies’ future profits will come from approximately 25% of their existing customer base. That means you have a tremendous opportunity to generate more sales from your existing customers, so long as you give them a good reason to return. An effective way to get your customers back in store, or back to your website, is with a customer loyalty program.

Most customers will not carry punch cards or loyalty cards, and they have no interest in downloading another app to their smartphones. 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. To eliminate the guesswork and point you in the right direction, keep reading this Balboa Capital blog post. 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 rewards that are unique and compelling enough to generate excitement among your customers, as this can lead to repeat business. Research studies reveal that saving money is very important to both 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 to consider include special discounts, free gifts with purchase (in-store and/or 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 repeat business in just about every industry. You can do this by sending them coupons in the mail or via email. Over 80% of shoppers use physical coupons and coupon codes, and digital coupons are expected to top $100 billion next year. Coupons with special discounts or incentives might not be as profitable for your business, but your customers will appreciate them.

For example, a pet store might email its existing customers a 20% off coupon code that can be used on certain pet foods, products, and toys. This gives the pet store’s customers an incentive to make additional purchases sooner rather than later, and perhaps buy something they might otherwise not be interested in. Next, offering an incentive is another way to drive sales. Some examples of this include a buy one, get one free (BOGO) offer, a free gift with purchase, and a giveaway where each purchase gives a customer a chance to win something. If your loyalty program includes a coupon with a percentage-based discount or special incentive, make sure you define your offer dates and make them reasonable. Limited-time offers that are too short (ex: 24 hours) or too long (ex: several months) might result in your customers ignoring them.

Points programs.

This is one of the trickiest offers to include in a loyalty program. Reason being, 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 in order to get a discount or a special offer. If your customers have to reach a points level that is improbable, 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 they will receive a free ice cream cone once they reach 250 points. Before customers can claim this reward, they need to make 25 purchases, which is far too many and might result in an unsuccessful loyalty program.

When creating a points program, come up with something that is appealing to your customers, and that is realistic in terms of how many points need to be accumulated in a certain time period. In addition, make your points program easy to understand for you and your customers. One of the simplest approaches is to have customers earn 1 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 1 point. When a customer has 100 points, a $10 coupon is given. In summary, wine shop members who spend $100 get $10 to use towards 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. Obviously, you will only want to offer free shipping on purchases that are a certain 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 to choose from. If your small business has a CRM system, you can add your customers’ birthdays and anniversaries to their profiles, with their permission of course. You can then send out mailers or custom emails to your customers with special discounts or offers that will make them feel special. This is a nice way to build a rapport with your customers and differentiate your small business from the rest.

Deploying your loyalty program.

Now that you know some of the many things that 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 in developing and deploying loyalty programs is a good option if you are not sure where to begin.

Lastly, there are a number of customer loyalty software systems that are available online. They are relatively easy to use and can be customized to your liking with your company logo, colors and fonts. Before you make a purchase, contact your CRM software provider or POS system provider to see if they offer customer loyalty programs. If so, this will simplify the entire process and potentially eliminate the need for extra software or hardware.

Getting your customers on board.

Once your customer loyalty program is finished, 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 their purchase, whether in person or online. When you have customers shopping at your 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 something like “can I add you to our free loyalty program that gives you $10 off your next purchase?” sounds enticing and will most likely generate a positive response. 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, and send them an email with a special offer or discount immediately after they provide their information. For a good user experience and more loyalty program signups, just ask for a first name, last name and email address on your form. Asking for too much personal information might prevent people from signing up.