In the small business space, a customer loyalty program is a great way to differentiate yourself from your competitors and encourage customers to return to your business. A customer loyalty program rewards customers for frequently purchasing its products or services. These rewards may range from discounts to free items.
No matter what industry you are in, customer loyalty programs can help you grow and sustain your market share.
Benefits of a Customer Loyalty Program
Most customer loyalty programs focus on the primary goal of increasing customer retention. According to Harvard Business Review, increasing customer retention by 5 percent increases profits by 25 to 95 percent. This is because repeat customers are more likely to buy more from a business overtime. And as these repeat customers spend more, your operating costs to serve them decrease.
Customers who are members of loyalty programs are also more likely to tell others about your business. Referrals are one of the most effective and inexpensive forms of advertising and can help generate even more revenue for your business.
Further, because today’s loyalty programs are mostly digital, they can provide businesses with a massive amount of customer data. As loyalty members make more purchases, businesses will gain more insights needed to make more informed business decisions.
Tips to Create a Customer Loyalty Program that Works
We’ve outlined a few best practices that businesses should consider when creating and maintaining an effective customer loyalty program.
Educate your Customers on the Program
After you launch your customer loyalty program, make sure that your new and existing customers understand the program’s benefits. You can do this through sending informational emails, posting flyer in your store front, adding content to your social media channels, or implementing pop-up banners to your website. If you have an e-commerce business on the Internet, you can list how many points a customer could earn for each purchase, if they were to join the loyalty program. In each touchpoint, make sure you clearly outline the steps your customers need to take to enroll in the program.
Most Purchases Should Qualify for a Reward
Some businesses set stricter standards on which types of purchases qualify for a reward. However, setting strict standards may discourage your customers from participating in your program altogether. If most transactions qualify a reward, a customer will be more incentivized to participate in your program.
For example, when a Starbucks loyalty member purchases anything from the store on their app, they will receive points towards a free item, no matter what type of item they are purchasing. Because all purchases lead to credits, Starbucks customers are more incentivized to choose Starbucks over a competitor who may only offer rewards for a select number of items.
Make Sure It Provides a Multi-channel Experience
Your program should work across all channels. A customer should earn the same rewards whether they are shopping in your brick-and-mortal location or on the Internet. For a business, this can be a great advantage to attracting and maintaining customers.
Offer Rewards Beyond Monetary Perks
One great way of developing a meaningful relationship with your customers is to provide them with rewards that go beyond a discount on their next purchase. Whether it’s allowing customers to donate points to a cause or giving them extra rewards on their birthday or a holiday, unique and meaningful benefits that go beyond monetary perks can help you establish a deeper level of loyalty with your customers.
Customer loyalty programs can help improve customer retention and increase your profits. If you follow these best practices, you’ll be on the right track for developing a loyalty program that is worth the investment.