How to Create a Customer Loyalty Program in 9 Steps
Customer retention can increase revenue, improve sales and enable business growth. Organizations have therefore started to focus more on retention strategies, such as customer loyalty programs.
Loyalty of the clientele is an organization’s ability to retain customers over time, determined by the number of new customers it acquires, as well as the rate of customer churn. Organizations often spend more time developing marketing strategies focused on new customers, but a customer loyalty program can reach their already engaged audience and facilitate sales. If organizations nurture relationships with loyal customers, they can increase revenue and customer lifetime value.
Why create a loyalty program?
Modern businesses use subscription-based models and measure monthly recurring revenue as a measure of success, so a balance between retention and customer acquisition can lead to sustainable growth. For example, if fewer customers cancel their subscriptions, organizations can more easily meet revenue goals for acquisition.
Any organization that wants to sell more products or services to existing customers should create a loyalty program. Regardless of industry or industry, organizations can reward customers for their loyalty with exclusive perks, which can help them differentiate themselves from the competition.
Explore the following nine steps to creating a customer loyalty program.
1. Choose a program type that matches the brand
With myriad ways to incentivize existing customers — like discounts, refunds, freebies, and more — organizations should choose a loyalty program that aligns with their business offerings. Rewards should motivate and attract customers.
Here are some common examples of loyalty programs:
- Point-based loyalty programs, which reward customers based on actions such as referrals, repeat purchases and subscriptions.
- Tiered loyalty programs, which offer customers different benefits based on their spending.
- Paid loyalty programs, which require customers to pay a fee to receive specific benefits.
- Value-based loyalty programs that highlight a brand’s values and donate a portion of sales to charity or specific causes.
- Coalition Loyalty Programs, which is a loyalty card program that incentivizes customers of multiple companies to share their data.
- Playful loyalty programs, which offer games or challenges to retain customers.
2. Define the objectives of the loyalty program
Organizations need to know what results they want from a loyalty program, such as increased revenue or increased engagement. For example, a business may want to create more awareness around its brand or cause. If it engages with existing customers and donors who share their experiences on social media, the organization can generate more business.
Organizations may also want to find ways to increase order volume or size, which they can set targets for through customer loyalty programs. Then they can measure against those goals.
3. Know the audience
If an organization understands its target audience and what motivates that audience to make purchases, it can understand how to engage customers in the future. Analyzing customer behavior and interactions can help organizations understand customers’ worldview or what they want from a brand. Proper data collection and storage can create closer relationships with customers and reveal what drives loyalty.
When CX teams research their target audience or existing customers, they need to discuss what data to capture at different touchpoints. This information can help teams understand which products or services to communicate to the public and create better customer experiences.
4. Personalize the customer loyalty program
Organizations can use collected data to personalize future offers for existing customers. For example, if a SaaS company offers a service used by different types of services, the company needs to know which services customers come from and how they use the tool. This knowledge enables organizations to tailor future offers and incentives to these use cases.
If a retail company stores data from past purchases, it can learn from a customer’s previous interactions — specifically the volume of those interactions — making future reach more targeted and effective. Birthdays, anniversaries, and other unique data points are also great details to use for timely outreach.
5. Create incentives with referrals
Organizations that use their customer base as a referral source can encourage new sales, growth and engagement. If customers have good experiences, organizations can more easily ask them for referrals, such as sharing content on social media, offering unique links or discount codes, and asking for positive reviews.
In exchange for something easy for customers to do – which they may have done anyway – the organization can reward them with freebies or offers, and it becomes a win-win for both parties. .
6. Promote Customer Loyalty Program
If an organization’s loyalty program is new, marketing teams should first promote the program to existing customers for rapid adoption. The incentives and type of program should encourage customers to sign up.
Plus, marketing teams can add loyalty program information to existing communications, so all new customers know. Promotions in thank you emails or customer onboarding allow for organic mentions of the program, which can explain how to participate and reward membership. Email, social media, and website real estate can help spread the word.
7. Measure success and adjust accordingly
With established goals, CX teams can implement success metrics for the loyalty program. Engagement data and revenue reports can reveal program success and potential shortcomings, so marketing teams can make adjustments.
For example, if an e-commerce business wants the loyalty program to increase average order size, it needs to determine if an existing customer is making repeat purchases and if the order size increases. If not, the company can adjust the program to offer a discount on a certain order size or value, ideally above the company average.
8. Communicate regularly and solicit feedback
In a competitive market, organizations want to remind customers about signing up for loyalty programs. When customers have a good relationship with a brand and actively participate in the program, they may respond more to social media posts, emails, and special offers.
However, organizations should not only communicate offers; they should also solicit feedback from engaged audiences. Companies benefit from feedback on the program, products, services and customer experiences. Surveys, customer events, and direct requests for feedback can help organizations engage and optimize loyalty programs.
9. Be consistent
Overall, organizations need to be consistent when creating loyalty programs and take the time to plan and implement the right type of program. Sometimes the program does not deliver the expected results, so the organization needs to change course. Yet consistency through change can maintain a positive CX.
If a business constantly changes the way it interacts with existing customers, it can confuse or frustrate that audience. Consistency can help customers integrate brands into their lives.