Starting a customer loyalty program for your business can be hugely beneficial – not only for you, but your customers as well. Customer loyalty programs help build and retain customer relations and keep them coming back for more.
Getting a customer loyalty program set up doesn’t have to be complicated, but there are a few things to consider before diving straight in. You’ll need to understand the different types of customer loyalty programs and you’ll need to balance rewards with the expense of running the program.
Don’t worry though! We’ve broken down all the information you need to know about customer loyalty programs to get yours off the ground.
The Benefits of Having a Customer Loyalty Program
A customer loyalty program offers a wide range of benefits for your business, if done correctly. A few of the biggest benefits include:
- Customer Retention: customers that opt into loyalty programs will often continue to shop at your store in order to earn more rewards. An existing customer is always cheaper than acquiring new ones, so this is a big benefit.
- Customer Referrals: loyal customers don’t just shop with you more, they are also more likely to spread the news to their friends and families. Loyal customers are primed to become brand advocates, which can help boost sales, without costly advertising.
- More Sales: loyalty programs promote buying more to earn more, so when implemented correctly, you should start to see sales increase as more customers opt in.
- Better Customer Experience: loyalty programs help customers feel valued, which leads to higher levels of customer satisfaction. As a business owner, you should always be striving to make the customers’ experience better.
Different Types of Customer Loyalty Programs
Punch Card Programs
The most basic of the customer loyalty program is the punch card program. This generally works by having a physical (or app-based) punch card that a customer can present every time they shop. When they make a specific purchase, they get a stamp. Then, usually after 10 stamps (though the amount may vary) they receive a free or discounted item.
This sort of customer loyalty is popular with coffee shops or food places. One example is a “Buy ten coffees, get one free” card to encourage customers to come back again and again to your shop. These have a high opt-in from customers as usually they don’t need to sign up, they can simply take a card.
Points programs are one of the most widespread customer loyalty programs that exist. With a low barrier for signing up, these programs also have a high opt-in. Generally for every specified dollar amount, the customer earns a corresponding amount of points. The easiest one to implement is 1 point for every dollar spent.
Then, after the accumulation of a set number of points, the customer may receive a coupon, discount, or other reward. It’s similar to the punch card idea, but usually a customer has to sign up to the program to be able to participate.
Additionally, while punch cards are generally limited to one product or product type (like a cup of coffee or a sandwich), points-based systems can be used for every purchase. Many companies have switched from punch cards to point-based systems because the value to the customer is higher and it’s harder to present fake cards.
Tiered Loyalty Programs
Tiered loyalty programs are a type of membership program that offer different perks for customers depending on their level. These usually also work either on points, or total spend over time. The more money you spend with the company, the higher tier you can reach, which earns you better rewards, special deals, and exclusive offers.
Usually, there are three or four tiers within these programs, with the most basic tier available to all customers. Then, as customers spend more, they can move up the levels. It’s a great incentive for loyal customers as many want to reach the higher tiers, thereby spending more.
Airlines and hotels generally use tiered loyalty programs, with those that have reached the highest tiers able to get the best perks like free upgrades and no baggage fees. Uber also used a tiered-based system, but now shifted into the next type of loyalty program below – the paid loyalty program.
Paid Loyalty Programs
Paid loyalty programs, also called fee-based loyalty programs, are a special type of loyalty program where a customer pays a fee (either recurring or one-time) to join the loyalty club. These sort of loyalty programs usually have the lowest buy-in, as a customer really needs to feel the perks they get outweigh the cost.
The biggest example of a paid loyalty program is Amazon Prime, which members can buy yearly and get access to free one-day shipping, early access to deals, and special events like Prime Day. REI Co-Op is another brand that offers this sort of loyalty program, but instead of a yearly fee, it’s a one-off fee for lifetime membership.
Value-based programs are a unique type of loyalty program, where the customer doesn’t actually receive any special perks themselves. Instead, their purchases go towards charity or another value-driven cause.
TOMS shoes offers a value-based program that donates shoes to kids in need. These programs can be very successful for the right market, especially if their target customers feel their purchases are making the world better. They aren’t as appealing to people that are looking for more personalized perks, but they can bring about good PR.
5 Steps to Start a Customer Loyalty Program
1. Determine Your Objectives
The overall goal of a loyalty program will depend on what your business goals are. You should determine whether increasing customer retention, higher sale value, or something else is your main objective with your loyalty program. This will help you figure out what the best structure and rewards are, in order to reach your goals.
To figure out how well your system is once it’s implemented, find a way to measure and report on your goal, as that will help you understand what’s working, what’s not, and how you can make it better.
2. Choose a Loyalty Program Structure
As we discussed above, there are several types of loyalty programs for your business to choose from. Points-based is the most widespread and recognizable, but it may not be the right one for you. For products that are more luxurious, exclusive, or bought frequently, tiered programs or fee-based might be the best fit.
Once you decide what you want, figure out how you’ll implement it. If you operate a brick-and-mortar store, you could have physical loyalty cards, but there are also many different apps and softwares that can help you set up a fully digital loyalty program.
3. Set the Rewards
Setting the rewards is often the hardest part of creating a new customer loyalty program. Choose low-valued rewards and you only see marginal opt-ins, but choose too high-valued rewards and you might lose money.
I always recommend starting with discounts and coupons, as these are easy to implement, reasonably cheap for businesses, and still a tangible reward for customers. Start with smaller rewards and you can also increase the value or change them later on.
4. Brand Your Loyalty Program
This is an optional step, but coming up with a clever name and some branding can get customers engaged and interested in the product. Sephora could just call their loyalty program the Sephora Loyalty Program, but instead they call it the Sephora Beauty Insider, which makes it feel more exclusive and exciting for customers.
Branding your loyalty program also increases brand recognition and helps enhance customer experience. It’s an easy way to make your program well-known, which can help increase opt-ins.
5. Launch the Program
After you’ve set the rewards, launch the program. Make sure you get the word out to existing customers that they can sign up and save. These are usually the easiest people to get to opt in, as they are already frequent shoppers, or at least have purchased from you in the past. A marketing email will be a great way to share the good news with engaged customers.
With several of the brands mentioned above – like Uber – their programs have shifted and changed throughout the years. Don’t worry if your program changes over time, as long as it still offers value to your most loyal customers.
How to Provide Your Loyal Customers with the Best Checkout Experience
Making your checkout experience smooth and secure is a simple way to keep customers coming back for more. It’s a really easy way to build customer satisfaction and increase their loyalty. That’s where Pay.com can help.
It’s easy to get started with Pay.com right away. With a simple onboarding process, you can get your account set up in no time. Then, you can create a customized checkout page, unique to your business. You can add your logo and embed the page directly on your website, either through our developer-friendly API or with our no-code solutions.
Plus, Pay.com lets you choose from a variety of payment methods – including credit cards, PayPal, and digital wallets like Apple Pay and Google Pay – for extra convenience for your customers.
The Bottom Line: Is a Customer Loyalty Program Right for Your Business?
A customer loyalty program is a fantastic way to better engage with and retain your most frequent shoppers. By offering perks, discounts, and benefits, they’ll be more inclined to come back again and again.
These programs can work for a variety of businesses, whether you sell goods online or services in person. They are pretty simple to set up and can increase the customer experience while also increasing your sales.
Pay.com can help increase customer experience to build loyalty through a smooth and seamless checkout process. Using either no-code solutions or developing a checkout page with our APIs, you can customize the checkout experience with your own branding and logo, building trust and brand recognition with your customers.