Discover how to build lasting customer relationships with a successful loyalty program. Our complete guide covers strategies to increase retention and boost loyalty.
Many business owners struggle to boost customer retention rates. Keeping customers coming back in today’s fiercely competitive market is hard. Even after curating a fantastic selection of products, designing a welcoming in-store experience or compelling website, and offering exceptional customer service, customers will still come and go.
So, what else can you do to increase that all-important business metric, customer retention?
Loyalty programs are often touted as the best solution for retaining customers. However, building a loyalty program that fosters unbreakable customer loyalty requires careful planning and execution. It’s not enough to simply launch a loyalty program and hope for the best.
In this comprehensive loyalty program guide, we'll delve into the why and how of loyalty programs.
Here's what you can expect to find in this guide.
These tips can help you build a loyalty program that goes well beyond points and punch cards. Learn how to create a win-win experience that fosters a genuine brand-customer connection, boosts loyalty, and ultimately, fuels sustainable business growth.
Loyalty programs are a proven way to foster customer loyalty and drive repeat business. However, the wrong format, incentives, and structure can impede your program’s success.
Consider these common pitfalls to avoid spending time and money on a loyalty program that doesn’t net results.
In general, loyalty programs can help achieve three main goals: more frequent purchases, increased spend per transaction, or deeper customer insights. The goal you choose should inform the way your loyalty program is set up.
What customer behavior do you wish to incentivize? Design your loyalty program o reward your customers for taking that specific action. For instance, customers who order above a certain dollar value on your website get free shipping. This deal encourages increased spend, boosting your bottom line.
Customers are bombarded with loyalty programs, so generic rewards won't cut it. Offering the same tired discounts or free samples fails to excite or incentivize repeat business.
Instead, look for incentives aligned with your brand and relevant to the customer. “If you’d really like to treat your best customers, offer a bonus after they hit multiple multiples of however many you’re requiring for redemption – if it’s the 10th free, at 30th offer 2 free, at the 50th, pay their whole ticket (within reason),” wrote one expert.
A loyalty program isn’t a silver bullet for the rest of your marketing efforts. And, it shouldn't be run in a silo. For optimal impact, seamless integration with your existing marketing tools is crucial.
Customer data is the lifeblood of any loyalty program, but wielding it comes with a responsibility to protect customer privacy.
In today's data-driven world, consumers are increasingly wary of how their information is collected, used, and shared. A loyalty program that feels intrusive or that violates customer trust can backfire spectacularly.
With these challenges in mind, let’s dive into ways to offer a loyalty program that excites and delights customers, ultimately strengthening brand affinity and customer retention.
Repeat customers are the lifeblood of a healthy, growing business. It’s one of the most cited statistics in the business playbook: 80% of your venture’s profit will come from 20% of your existing customers. Loyalty programs are designed to increase your existing customer base, boosting profits in the process.
Let's explore how these programs can be your secret weapon for success.
Loyalty programs incentivize repeat business, keeping your customer base (and revenue) steady and consistent.
Businesses can achieve a 20% increase in sales from loyalty program members.
Sephora's Beauty Insider program is a great example. This beloved program offers tiered rewards, early access to new products, and personalized recommendations. The result? Loyalty program members spend on average three times more than non-members.
The stats are clear: loyalty programs are powerful revenue generators.
Studies show that acquiring a new customer can cost five times more than keeping an existing one. Loyalty programs play a role in both reducing costs and increasing sales — translating into healthier profit margins for you.
Loyalty programs are chock full of valuable customer insights. When customers sign up to track their purchases, reward redemptions, and preferences, they’re giving you a deeper understanding of your customer base. This data can be used for:
Loyalty programs offer more than just incentives. They foster a sense of community and belonging. When customers feel valued and appreciated, they become brand advocates. They'll not only keep coming back themselves, but they'll also recommend your business to their friends and family, generating valuable word-of-mouth marketing.
The referrals tool from Influence.io enhances this process by providing easy ways for customers to refer your business, track their referrals, and earn rewards for bringing in new customers. This not only strengthens customer loyalty but also helps expand your customer base organically through trusted personal recommendations.
It can be difficult to make your loyalty program stand out among all the brands’ points, punch cards, and prizes. Set your business apart by offering unique rewards, personalized experiences, and a smooth program experience.
This edge can attract new customers and solidify your position in the minds of your existing customer base.
Ready to Build a Thriving Loyalty Program?
Successful loyalty programs aren't about fancy features, it's about understanding your customers and building genuine connections.
Influence.io empowers small businesses to create data-driven loyalty programs that drive customer engagement, boost sales, and cultivate brand loyalty.
Loyalty programs come in all shapes and sizes, each with its own set of advantages and limitations.
Points-based programs are the most popular loyalty program structure. Customers earn points for their purchases, which they can redeem for rewards such as discounts, free products, or exclusive experiences.
Many online stores offer points-based loyalty programs to show appreciation for customer purchases. These traditional programs work just like the ones you might see in physical stores but with the added convenience of being entirely digital.
Let's say your eCommerce store sells jewelry. You could implement a points-based program where customers earn 1 point for every dollar spent. Once they accumulate a certain number of points, they can redeem them for various rewards:
Perks: Simple to understand and manage. Customers earn points for purchases, which can be redeemed for rewards like discounts or free products.
Limitations: Can feel generic and impersonal. Customers might not be motivated by points alone.
Tiered loyalty programs present a powerful alternative for businesses seeking to cultivate a loyal customer base that actively interacts with your brand.
Tiered programs place customers in different categories based on their spending or engagement. Each tier comes with its own benefits; higher tiers within your program can offer exclusive perks that go beyond traditional discounts or free shipping. Imagine offering personalized birthday gifts, priority customer service support, or invitations to members-only events for your top-tier customers.
The tiered structure inherently fosters a sense of progression and accomplishment. Customers are driven to make repeat purchases, participate in promotions, or leave reviews to elevate their tier status and unlock the associated benefits.
Plus, tiered programs allow you to segment customers based on loyalty. This enables you to deliver targeted communications and promotions that resonate with each customer's unique preferences and purchase behavior.
Perks: Offer different reward levels based on customer engagement. Higher tiers can unlock exclusive benefits like early access to sales or personalized offers.
Limitations: Can be complex to manage and might discourage new customers from joining.
VIP programs require customers to invest upfront in a monthly or annual membership fee. In exchange, members gain access to a curated selection of premium benefits and exclusive experiences that elevate their brand relationship.
By requiring a membership fee, you attract customers who are demonstrably interested in your brand and willing to invest in a deeper connection. This fosters a core group of highly engaged brand advocates.
Perks: Offer premium rewards and exclusive benefits for a monthly or annual fee. This can create a sense of community and exclusivity.
Limitations: Requires upfront investment from customers, which might deter some.
A punch card on an eCommerce website is a virtual card with designated spaces for "punches." Your customers earn a punch with each purchase or action you define (for example, leaving a review). Once the card is filled, customers redeem it for a predetermined reward.
Punch cards are incredibly easy to understand and manage for you and your customers. This makes them ideal for businesses of all sizes, especially those new to loyalty programs.
Perks: Simple and easy to implement. Ideal for driving repeat purchases within a short timeframe.
Limitations: Rewards are often limited and might not incentivize long-term loyalty.
Want the power of punch cards but with better performance?
Try Influence.io's StampCard: A modern take on the punch card!
While traditional punch cards offer a basic loyalty solution, Influence.io's StampCard takes the concept to the next level. Our digital StampCard program retains the simplicity and ease of use of punch cards but incorporates valuable features that enhance customer engagement and program effectiveness:
For many customers, the reward process can start to feel repetitive. Click, browse, add to cart, checkout, new points earned—rinse and repeat.
Gamification is a way to make rewarding purchases or other online engagements more fun and even more rewarding. Gamified loyalty programs incorporate game-like elements into the traditional loyalty program structure. The aim is to make earning rewards and interacting with the program fun and engaging for customers.
Perks: Incorporate game mechanics like points and VIP tiers to boost engagement and make earning rewards more exciting.
Limitations: Requires careful planning and execution to ensure the game aspect complements your brand and resonates with your audience.
Read more: 9 Innovative Ecommerce Loyalty Program Ideas
So, how do you decide which program is best for your business?
The program structure is simply one element to consider. Any structure you choose must be tailored to your customer base and business goals. Consider factors like your industry, average purchase value, and desired customer behavior.
You may also consider exploring hybrid models that combine elements from different loyalty programs. Experiment with gamification to make earning rewards more fun and engaging.
'Creating a Loyalty Programme should be as unique as your business. Using a solution like Influence.io allows for your brand voice to shine through, and offers the flexibility needed to increase engagement with your customers.' - Kai Jensen, Product Manager at Influence.io
Start by clarifying your business goals. A loyalty program can serve many purposes, including
Analyze your customers in the process of determining your goals. Consider their demographics, purchasing habits, and motivations. What type of rewards would resonate with them most?
Now that you know your goals and customer profile, let's explore the different program types.
Here's a quick breakdown of the most common loyalty program types to help you navigate the options and choose the one that best aligns with your business goals and customer base.
Armed with your goals and program knowledge, it's time to find the perfect match! Choose a program that aligns with your budget and the resources you can dedicate to management.
Pro tips:
As you implement your program, follow a few best practices to optimize your program for success.
First, offer a variety of rewards to cater to different preferences. Align these rewards with your business goals (e.g., free shipping for repeat purchases).
Additionally, keep your structure simple. Don't initially overwhelm customers with too many options. Monitor program performance and adjust your reward structure based on customer behavior.
Once your program is polished, it's time to shout it from the rooftops (or at least your website and social media channels).
Promote your program through blog posts, email marketing campaigns, and social media announcements.
Here are some additional ideas to keep your loyalty program thriving:
Loyalty programs can be your secret weapon for customer retention. Whether you're creating one from scratch or looking to revamp your existing program, these do’s and don’ts can help you ensure it succeeds.
Loyalty programs are all about building relationships with your customers. Launching your program early in your business lifecycle establishes a system for rewarding customers from the first purchase, fostering a sense of value and laying the foundation for long-term loyalty.
So, don’t wait.
Research your target audience and understand their needs and desires. Build a customer persona to guide you in crafting a program that speaks directly to their interests.
Here are some ways to gain valuable customer insights even with a limited audience:
What types of rewards do they offer? What are their program structures?
This analysis can give you a sense of what works in your industry and what you can improve upon.
Read more: The 8Cs to follow when building a loyalty program
Many eCommerce platforms like Shopify or BigCommerce offer built-in loyalty program functionality or integrate with third-party loyalty management tools.
These tools can streamline program management, automate reward distribution, and track customer behavior, giving you valuable insights to optimize your program over time.
Did you know?
Influence.io offers effortless integration with popular e-commerce platforms like Shopify and BigCommerce. This means no complex setup or coding is required. Simply connect your store, and you'll be ready to launch your loyalty program.
Building a thriving loyalty program takes time.
Track your program's performance, analyze customer behavior, and be prepared to adapt your program based on the data you collect.
Remember, a successful loyalty program is a dynamic entity that evolves alongside your business.
Over time, loyalty incentives can start to feel stale. Even the most seasoned merchants can let their loyalty program fall by the wayside.
If you’re seeking to refresh your loyalty program, here are some specific do’s and don’ts to consider.
As your business evolves, so should your loyalty program.
Revisit your initial program objectives. Are they still relevant? Has your focus shifted from customer acquisition to retention or driving deeper engagement?
Re-aligning your program goals with your current business needs is the first step to continuing the long-term success of your loyalty program.
There’s a good chance that your customers are drowning in points from a dozen different programs. Make yours stand out by offering valuable rewards instead of generic discounts.
Conduct customer surveys or social media polls to understand what rewards will mean the most to your customers. In addition to traditional discounts, offer exclusive products, early access to sales, or personalized recommendations.
Unfortunately, the truth is that not all customers are created equal. Some customers will become brand advocates and stay loyal to your business for a lifetime. A one-size-fits-all program doesn’t recognize their contribution to your brand.
Consider implementing a tiered program or offering different reward options based on customer engagement levels. This structure personalizes the experience and incentivizes customers to climb the loyalty ladder.
The worst-case scenario is when a loyalty program becomes a tool for bribing customers to take a certain action. Studies show that, as a rule, one-time promotions can be expensive and don’t generate loyalty. For instance, a free coffee once a quarter may encourage someone to come a few extra times, but won’t encourage an emotional connection.
Building an emotional connection with your customers goes beyond transactions. Loyalty programs that tap into emotions create a sense of value and belonging, fostering deeper customer engagement.
Here are some ways to add emotional connection to your program:
Loyalty programs are a double-edged sword. While they can foster customer engagement, they can also become a financial drain if not designed strategically. Many merchants fall into the trap of blindly launching programs without considering the "value-sharing" equation.
What does value sharing mean?
Essentially, value created must exceed the cost of value delivered.
Many businesses launch programs without understanding the economics of reward-giving. They focus solely on rewarding "talk" (simple actions) instead of the "walk" (valuable customer behaviors).
The bad result? Your customers accumulate points but don't necessarily translate their loyalty into actions that benefit the company.
Therefore, your program must reward behaviors that drive your business value
Your rewards must be tied to specific, desired customer behaviors. Consider rewarding actions that drive value-sharing, such as:
The full potential of loyalty programs is unlocked when customers change their habits in support of your brand. This happens when the program offers a clear proposition: rewarding actions that benefit both the customer and the company.
Loyalty programs are a powerful tool in any eCommerce entrepreneur's arsenal. But simply throwing points and discounts at your customers isn't enough. Your program must be strategic, personalized, and emotionally engaging to succeed.
Influence.io offers a seamless solution for eCommerce businesses on platforms like Shopify and BigCommerce. Move beyond points with our comprehensive suite of tools to manage your program effectively, automate tasks, and gain valuable customer insights.
Try Influence.io today.