The Beginner's Guide to Building a Customer Loyalty Program

2. Increase Customer Retention - in times of unprecedented competition and easy access to products and services it’s so easy to lose your customers to your first competitor. However, research shows that 78% of consumers will continue doing business with a brand that offers them loyalty program benefits.

Give your customers a reason to stay with you - a rich points and rewards program is a great way to achieve this. Offer your customers various ways to earn points which they can redeem for a reward at your store like a special discount coupon, a product you know they love and adore, free shipping coupon and much more. This shows your customers that you care about them and are offering them an opportunity to earn with each interaction with your brand.

Pro tip: Guide your customers on their shopping journey at your store by sending them email notifications with their points balance and the next reward that is waiting for them down the road. 

Source: ULTA Beauty

Make sure it’s a reward you know your customers will love!

Tailoring the reward offer to be relevant to your customers assures they’re 8 times more likely to get out of their way to use them.

3. Increase Revenue (customer lifetime value) - offering the right incentives at the right time allows you to encourage repeat purchases and boost the spending amount of your customers.

Through the deals and rewards you’re strategically offering, you’re effectively increasing the rate of repeat customers in your base. People earn something more with each purchase they make at your store.

Pro Tip: invest some effort into getting to know your customers: what is it they desire the most? Do they respond well to percentage off deals? Or maybe, a free product is more lucrative to your audience?

Once you have this information, strategize with it: what do you want your customers to do in order to reach this reward you’ll give them?

Spend X amount of money at your store? 

Make Y number of purchases? 

Or reach a specific amount of points and enter one of your tiers where you’d be offering this reward?

There are a lot of business goals you can address with your loyalty program and when you think about this first step always start with defining SMART goals, and then strategize the actions that customers need to take in order to help you achieve them.

Read on how to do this next.

2. Structure your program

Structuring your loyalty program consists of 2 steps: 

• defining the actions your customers should take to qualify for a reward and 

• defining the rewards you’ll offer them once they perform the desired action.

Before you start strategizing on which actions and rewards to choose, do some research into your customers and answer 2 questions:

• Who are your customers?

• What motivates them to buy from you?

When you have this information at hand, it’s  easier to develop a strategy that ultimately helps you achieve the major loyalty objective: increase revenue at each customer interaction. 

Let's tackle the 2 steps in detail.

1) Define the Action

This boils down to answering a simple question: 

What should your customers do to help you reach your previously defined goals?

Source: The Dharma Door

It may sound very simple, but in order to choose the right actions, you first need to understand the role of the action in a loyalty program. 

To be effective, the right action has to be mutually-beneficial and intentional - you have to purposefully choose which customer behavior will you reward. 

This is because you’re trying to build true loyalty from your customers which doesn’t happen by only rewarding transactional actions, but also incentivizing many other non-transactional actions (like leaving you a review, following you on social media, reading a piece of content, downloading your app etc.). 

This way you’re ensuring increased revenue over time and building solid brand loyalty.

To choose the right action to incentivize, you have to know who your customers are and where they are in their buying journey. 

If they’re new customers who just joined your program, you want to make sure you incentivize an action that will be relevant to them, for example: reading a piece of educational content. This way, they will educate themselves on your product/service and make more informed decisions about it at their next buying stage. 

Similarly, to customers who have made 10 purchases from you, you want to offer a different incentive that resonates with them at this stage of the buying process, for example: make 15 purchases to enter the Silver VIP tier in your program where you offer lifetime discounts of 25% on each order.

Also, a customer who has been with you for a very long time is an extremely valuable one whose loyalty you want to leverage; encourage them to leave you a review.

An e-commerce business has many customer touchpoints and with the data at hand, you can strategize on which action you wish them to take at each touchpoint in order to help you achieve your goals. Of course, each action they take has to be mutually beneficial, so let’s see how to choose the right reward to each action.

2) Define the reward for the action

When it comes down to choosing what reward to offer for the actions customers perform, it’s important to know 2 things:

• What is valuable to your customers and motivates them to shop at your store;

• How costly is that to you?

You may think that high-value rewards are always associated with high costs, but that isn’t the case. While you can always offer financial rewards such as percentage off or a fixed amount off, you can also experiment with alternative options for rewards, such as free shipping, a free product, exclusive access to early sales events, special rewards like tickets to a show etc. 

There are many types of rewards you can choose to offer your customers, but you should always make sure you’re not offering too little or too much. Offering too little may undermine the confidence and respect your customers have for you, while too much may drain your budget even though it can quickly drive sales. 

Bottom line when it comes to choosing a proper reward is to define what is valuable to your customers, and how can you choose a financially justified reward type.

3. Launch and Promote your Program

Now that your program is structured and you have defined the goals, actions and rewards it’s time to launch your program and most importantly to let your customers understand its value so they can engage in it. 

You can always start a loyalty program manually. 

However, this takes time, effort and an investment which may take some time to see a return from. Alternatively, you can choose a loyalty program software like Lootly, with which you can launch your program in a matter of minutes. 

Source: Lootly

Once you launch your program, the next step is to promote it. 

The goal of promoting your program is for your customers to understand its value so they can engage with it. You want this to be as flawless as possible because it’s crucial for the viability of your program.

There are few things you should consider doing to make your program easy to understand and enjoyable to use: 

1) Brand it

Give your program a catchy name, something that sticks with people and is on brand at the same time. 

This is important for several reasons:

• it makes your program an entity of its own

• It gives customers the feeling of belonging to a special group;

• It is attractive to people, sparkling their curiosity and stimulating them to engage.