Why a Customer Loyalty Program Is Important for Your Business and How to Build It the Right Way

"You’ll never have a product or price advantage again. They can be easily duplicated, but a strong customer service culture can’t be copied."
Jerry Fritz, Director of Wisconsin Management Institute.

Today, after numerous reports issued and hundreds of articles written, there is no need to prove that customer retention is cheaper for any business than gaining a new following. Repeat customers are loyal clients of your brand who can turn into a constant source of income, provided you cultivate their loyalty on a regular basis.

According to the 2018 Retail CX Trends Report by InMoment,

• 60% of loyal customers are likely to buy more often and 50% are likely to make more purchases from their preferred companies;
• it took 80% of customers some time to grow brand loyalty, after they experienced great products and service;
• 77% of customers have stayed loyal to their preferred companies for more than 10 years.

What do these numbers tell us? First of all, customer retention is worth bothering, because once you’ve gained people’s trust, chances are good they would maintain the long-term relationships with your company. Second, gaining loyalty is a journey that requires a long-time commitment: it may take years of high-quality products and smooth buying experience to cultivate brand-level appreciation. But keep in mind that the reverse process is way faster. One or two really bad experiences, bad reviews on multiple platforms, a sudden decrease in the product quality, or the loss of the brand identity can cease commitment of even the most devoted clients. Breaking up isn’t easy for anyone, and still few people would give you more than one chance to fail before looking for better experience elsewhere.

Key Elements that Drive Customer Loyalty

"Customer service has more in common with selling an identity than it does with selling a product."
Than Merrill, CEO & Founder, FortuneBuilders.

So how do you keep people coming to you over again and recommending your brand to friends? Many would say by offering the lowest price on the market, but it most likely will not build customer loyalty.

Yes, a significant price drop or lucrative discounts can earn you new prospects ready to give your company a chance. But with so intense competition, tomorrow these very prospects can find another company offering even lower price or newer design: modern search engines allow to do it within seconds in several clicks. You can’t always have the best offer in terms of cost or novelty, but it takes more than a color update or size availability to organize a great customer service. When you focus on your customer shopping experience, from making an order to shipment confirmation, rather than on digits, you have a better chance to win the competition. Loyal customers actively engage with the brand because they trust them, and this trust is determined by many factors:

• price-performance ratio of the product;
• consistency;
• product range upgrade;
• easy-to-reach 24/7 support;
• fast order management;
• relevant and personalized campaigns;
• loyalty programs;
• exclusivity;
• human-like brand image with the story behind;
• strong positive presence on social media;
• effective post-purchase strategy;
• attention to feedback and reviews.

You may probably complete this list with several other elements or rank the above in different order. This, however, doesn’t change the point: the product itself is no longer the holy grail of the successful business unless you’re SpaceX or Blue Origin who promise to deliver really exclusive offers (at least by far) of space voyages. All the rest need to team up the effort of all departments to show customers why it’s so beneficial to be part of your community.

How to Create a Successful Loyalty Program

Even the best loyalty program won’t win you much love unless all other stages of customer encouragement are also well thought. A good loyalty program must be an organic part of the overall marketing strategy, and has to rely on your business type, target audience, concrete goals, and definite metrics to determine the progress.

Below, we’ll show you where to get started and what features need to be incorporated; next, it’s up to you to decide how to employ them in the best possible way for your particular program. We’ve also included great customer loyalty program examples by major brands for better visual support and inspiration.

1. Make a clear reward system.

The most popular loyalty program tactic is to give points in exchange for a purchase. Different numbers of points let a customer claim a certain reward - a discount, free shipping, extra service, custom offer, etc. The best part about this methodology is its multipurposeness: the point system is applicable for any type of business. Airlines give points for miles, gas stations - for gas liters, coffee shops - for cups of coffee. And though the system looks rather simple and understandable, some companies bring some confusion by making the exchange conditions rather complicated.

"Buy four pairs of shoes, Size 10 only, between May 10-15, to receive 200 points that equal $1. Only Master Card payments are applicable. A purchase made via any other payment method brings you 100 points that equal $0.50. A purchase of sizes other than 10…..” Well. you’ve got the idea. A reward system should be clear and understandable, without multiple conditions and sub-conditions. Avoid causing your customers a headache, and stick to simple terms, organized in an easy-to-read way.

2. Introduce a Loyalty Card.

Loyalty cards are typical of many retail businesses. Looking like plastic credit cards, they’re in fact encouragement programs that motivate customers to keep returning to your company. Loyalty cards accumulate discounts, provide exclusive access to new products, special offers, staff favorites or workshops, and give the customer ongoing access to how many points they have in store and how many need to be earned to get a particular discount.

Many big enterprises team up plastic cards with loyalty card apps for more convenience; smaller companies may opt for a customized stamp card. Being a less expensive option, such cards still generate results, especially when it comes to beverages and food. We all know those multiple coffee shops that offer a stamp for each cup of coffee, and 10 collected stamps equal a free drink or a new item on the menu. This may look small, but as they say the devil is in the detail.

3. Charge for a membership.

An annual fee for becoming a member is a way better idea than it sounds at first. Yes, loyalty programs should be more about giving rather than asking, but let’s take a look this way. Many customers abandon carts after learning about all the extra charges, like shipping and taxes. A loyalty program, on the other hand, relieves of this shock, thus securing the purchase. For example, an upfront fee by Bed Bath & Beyond of only $29 a year provides 20% off all purchases, free shipping, and 50% off design services, and we bet few people wouldn’t find this membership beneficial.

4. Provide non-monetary rewards.

Depending on your industry, connect with the audience in ways that don’t involve digits and coupons, and yet can deliver great value. Outdoor recreation retailer REI’s lifetime membership may be fairly called one of the best loyalty programs on the market. For a one-time 20$ fee, you get 10% back on purchases, access to members-only specials, and special prices for rentals. But what’s more important, the REI community can enjoy free tours, outdoor adventures, and great events such as REI Outdoor School Classes or Garage Sales, where you can purchase returned goods at a good price.

To go even further, every spring, the REI holds a board of directors election, where all members are able to vote on the candidate they have more liking for. This is how the company shows they do value the customers’ opinions and ensure staying true to the brand’s identity. The REI Co-op often participates in non-profit activities and organizes events where members can volunteer and support the environment. All these cool activities create amazing bonds between customers, company staff and local communities, and this experience is way more valuable than even the biggest discount.

5. Use a tier system to encourage all-round engagement.

To build a loyal community, you need to reward not only purchases but also promote brand awareness in any possible way. Points offered for additional information, referring friends, leaving a feedback, or sharing on social media stimulate behaviors beneficial to the company. Any action is made with the brand in mind, which turns your loyal customers into the best promoters. People are more likely to react to a friend's recommendation rather than to a commercial, meaning you not only encourage repeat customers but also gain a new following.

Tarte Cosmetics’ loyalty program is a win-win solution for both parties: customers have more options to earn points; the time between a purchase and a reward claim is reduced (meaning there are more chances people would not forget about them and actually use); program members have the opportunity to move up the loyalty ladder and eventually take advantage of additional perks; the product gets coverage on social platforms; the company collects more data on customers to create more personalized offers.

6. Team up with other brands for beneficial partnership.

Consider forming a joint loyalty program with other companies that may complement your products. A zoo shop may cooperate with a vet service, a travel agency can unite with an outdoor gear company, and any cosmetics producer would make a good match for a beauty salon. Enable customers to take advantage of the service that goes beyond what you alone can offer to show you understand their needs.

7. Let customers make a difference.

People like to be part of something big. Make the general welfare part of your program to build a stronger relationship with your customers. Besides earning points and getting % off, provide a unique possibility to have an impact on the environmental situation, participate in a charity, or volunteer at any local non-profit event.

Members of Love Your Body Club by The Body Shop can choose to donate their rewards to a charity partner they share the same values with. This option takes the point system beyond just commercial relationships: you connect with your customers on a deeper level and surround yourself with like-minded audience that sticks to the same philosophy.

8. Think of a unique name.

As with the name of the brand, the name of your loyalty program should stand out and be recognizable. Sephora’s Beauty Insider Program, D'addario's Players Circle, Workout Empire's Sassy Army, GONGSHOW's Gonger Nation Rewards Club, Happy Way's Happyway Fam, Maggie Louise Confections Club Cocoa - a creative and smart name sparks a strong desire to find out whether you’re as creative when working on your products. An appropriate loyalty program name resonating with the brand identity raises brand awareness and boosts customers’ retention. Because who doesn’t want to be part of something fun and innovative?

As you’ve hopefully realized, a good customer loyalty program can make a stable revenue source for your business by generating the return on your marketing investments and improving the overall company image. Start with establishing trust; next, deliver consistent value and introduce new options. Over time, you may consider creating new status tiers, add extra conditions for point-earning, simplify the process of earning, and claiming discounts, or come up with a new loyalty card design. Customer loyalty isn’t built in one day, and you’ll always have something to work towards, but the love and commitment of your customers are worth bothering, aren’t they?