Design an Effective Customer Loyalty Program for Your Business

Customers are the guiding light for the success of businesses. A loyal customer means a steady income for the business. Loyal customers are frequent customers who enjoy their purchases and share their experiences with their friends and family. Such customers should be rewarded from time to time, to keep them engaged. The most obvious incentive is discounting a high spending customer. Giving out discounts to high spending customers is an overt way to continue to maintain a stable relationship with them. Another approach to reward customers is to have promotional purchase deals, such as giving away free items with certain purchases. The most used scheme is the “Buy 1 Get 1”, or BOGO, method.

With these promotions and deals for customers, it’s important to not overuse this tactic for customer engagement. Many brands get overconfident with this scheme and use it a little too often. Therefore, it’s imperative for brands and businesses to come up with loyalty programs so that it’s a win-win situation for both customers, as well as business owners. This blog will share types of customer loyalty programs so that business owners can figure out how they want to reward their customers and stand out from the competition.

What is a Customer Loyalty Program?

According to ZenDesk, “a customer loyalty program or rewards program is a customer retention strategy that motivates customers to continue buying from your brand instead of a competitor.” Businesses use omnichannel marketing to promote such programs to their customers. If handled and executed well, these programs give your customers a sense of excitement and energy when coming back for another purchase. According to Investopedia, “loyalty programs benefit companies not only by developing customer loyalty but by providing crucial information on how customers are spending and what products or types of offers are most appealing.”  This allows you to discover and understand your customers’ needs and expectations. You want your customers to love your brand for as long as possible. This means having engaging loyalty programs that provide incentives that they care about. These programs are crucial for building an audience of customers.

So, why are these programs important? Here are some compelling reasons behind customer loyalty programs:

  • Boost revenue through repeat purchases and upselling and cross-selling
  • Improve customer retention by engaging them with the business
  • Increase customer lifetime value (CLTV) through customer appreciation
  • Drive customer satisfaction to encourage word-of-mouth marketing
  • Build stronger customer relationships
  • Differentiates a brand from its competitors

Aspects of Customer Loyalty Programs

Aside from the two most common incentives for customers – buy one get one free and discounted sales, there are a wide variety of customer loyalty programs.

Points Loyalty Program

The points loyalty program offers a certain amount of points after every purchase you make, usually depending on the amount spent on the purchase. An example of this would be the cosmetics business Sephora. At Sephora, you earn 1 point in the loyalty program for every dollar spent on purchases. The accumulation of points can be redeemed for gifts or discounts on future orders. This helps drive down some of the higher prices of Sephora’s products, keeping customers engaged through the collection and use of these points.

Tier-Based Programs

A tier-based program is like a game. The higher the customer levels up, the more perks they get for the purchases they make. Typically, a tier-based program is created on three or four levels – bronze, silver, and gold, sometimes platinum. Customers increase their level by earning points for each purchase. Brands offer a list of benefits that increase in value as customers reach higher loyalty levels. Tier-based programs are designed based on customer-buying behavior and include rewards like free shipping and discounted prices.

VIP Program

A VIP program allows customers to claim instant membership and access to exclusive benefits for a certain brand. This typically happens with beauty products and clothing brands, such as Victoria’s Secret or Macy’s. These programs typically give customers a “credit card” for their specific business and customers can use that as a method of payment within the store. It’s similar to a pay-later system. VIP programs like this also allow customers to get free shipping on their entire order.

Designing the Perfect Perks for Your Customers

Want to know how to create a successful customer loyalty program? PxidaCX is a great tool to help you figure out all the nitty gritty details of your customers’ needs and expectations. That way, you can address what they need through a customer loyalty program to keep them coming back for more. Sign up today for a free trial!