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infographics of facets what is a customer loyalty program

Did you know that more than 90% of companies have some sort of rewards program? You’ve probably been encouraged to join one already, as research shows that the average consumer currently belongs to at least 13 loyalty programs!

Whether it’s your grocery store or coffee shop, all of them are offering some sort of loyalty program to try to turn casual customers into lifelong fans, building brand loyalty. So what is a customer loyalty program? It could be something as simple as a punch card or as complex as a tiered system that earns you cash back and other perks.

If you’re wondering whether or not your business needs a customer loyalty program, the answer is a resounding yes! What can a customer loyalty program do for your business? Read on to find out.

How Does A Loyalty Program Work?

In short, a customer loyalty program incentivizes your customers to shop with you. You can encourage customers to shop more frequently, make larger purchases, use your company exclusively, and even refer new customers — all to get rewards set up by you. Customer retention and expansion are critical goals for any business, and loyalty programs could be a key part of your marketing strategy.

Typically, you’ll need to get some personal details from your customers, including age and contact information (email or phone numbers) in order to create a rewards account. If you’ve only got a small number of customers, it’s easy to keep track of it all, but with hundreds or thousands of rewards accounts, you’ll need a management system to automate your program and help you keep it all straight.

Types of Incentives

Research shows that over 50% of consumers join a loyalty program because they want to earn loyalty points on every purchase that can be redeemed for cash back or free items. But there are many types of incentives that could work better for your business, including:

  • Early access to new products and sales
  • Member-only sales and discounts
  • Free merchandise offers
  • Exclusive services, like free shipping

Every time a customer uses their unique rewards number, you and they can keep track of their purchases and the rewards in their account.

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Is There Any Other Benefit for Businesses?

So you’re already getting people to shop more and refer their friends to you through your customer loyalty program, but is there anything else you can get out of it? Of course! Consumer information provides precious data that you can use to enhance your business. Everything from the demographics of your average shopper to their buying frequency and purchase preferences gives you more to work with.

As the data about your loyal customers start pouring in, you can see what is working best for your business. Do certain deals bring out your entire customer base? Are your existing customers bringing in referrals during certain times of the year? Do people prefer to opt-in for your points program or your VIP program? Are customers using credit cards or cash? Do they find you via a mobile app or online?

Everything you learn can help you tweak your entire business to better cater towards your target audience, building a better customer relationship and encouraging the next purchase.

Types Of Loyalty Reward Programs

infographics of loyalty programs what is a customer loyalty program

Did you know that retail loyalty programs can be traced back to boxtop collection and redemption in the 1800s? Today, however, successful loyalty programs have kept up with the digital age. Check out these different types of programs to choose the one that will build customer loyalty for your business.

Points-Based Rewards Program

This is the most common type of membership program. The points system allows customers to accumulate points for every purchase that they can later redeem for perks, free items, and cash back — all of which are dictated by you. You can customize how many points a customer gets with each purchase, how many points each perk costs, what their loyalty card looks like, and how frequently customers can redeem their points.

You might also offer customers points when they leave reviews, make a successful referral, check-in to your store, or tag you on social media. While these aren’t as good as a purchase, they still help promote brand awareness and engage new potential customers through word-of-mouth.

Tiered Programs

With a tiered program, you’re creating a type of membership where customers get different rewards based on their rank. They move up through the ranks based on metrics of your choice, like sales or engagement, and the rewards benefits improve at higher ranks.

In addition, to repeat purchases to earn their current rewards perks, loyalty program members are also incentivized to shop more to get to the next tier for even more exclusive rewards.

Paid Loyalty Programs

This fee-based loyalty program provides your customers with upfront rewards and ongoing benefits for a small fee. These fees can be a one-time signup cost or a recurring subscription. Your special offers and customer experience with paid loyalty programs will need to be extremely valuable to customers in order to get signups.

If customer data is showing you that a paid program could work for you, consider one like Amazon Prime. Here, a flat rate once per year offers expedited and free shipping, easy returns, affordable subscriptions, and scheduled delivery. How can you turn their model into something that works for your business?

To make a paid loyalty program work, you’ll need to meet these metrics to ensure customer satisfaction:

  • Benefits that very clearly outweigh the fees
  • Personalized customer rewards, experiences, and member-only offers
  • High customer engagement and customer support

Value-Based Programs

image of quote what is a customer loyalty program

This type of loyalty program example is all about connecting with repeat customers on a deeper level. You want to show them that you care about the same things they do with values that align with theirs. Instead of free products or gamification, consider allowing customers to convert points into donations for the charity of their choice or donate a part of every purchase.

While your customers won’t be getting any perks themselves, they’ll feel like they’re affecting social and environmental change that benefits the world.

The Best Customer Loyalty Program For You

Whether you’re part of a small business or a massive franchise, finding the loyalty program that guarantees repeat business depends on your goals. In fact, it might take a little experimentation to figure out which one will actually work. We recommend exploring customer loyalty software or customer success software to help you tinker and tweak a custom rewards program that gets people talking. Also, get familiar with CX tools that help you build strong customer relationships and drive loyalty.

Convinced Customer Loyalty Products Can Work For You?

Customers who feel like they’re getting great value out of their shopping experience become loyal for life. And happy customers won’t stop talking about how much they love your business. Make your loyalty program something truly special to reward customers and yourself at the same time!

When you’re ready to put all the tools at your disposal to work, turn to The CX Lead to take your business to the next level with guides, tips, and advice.

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Hannah Clark
By Hannah Clark

Hannah Clark is the Editor of The CX Lead. After serving over 12 years working in front-line customer experience for major brands, Hannah pivoted to a career in digital publishing and media production. Having gained a holistic view of the challenges and intricacies of delivering exceptional experiences, Hannah aims to help CX practitioners 'level up' their skills by amplifying the voices of today's thought leaders in the space.