What are loyalty programs?

These customer loyalty programs are strategies devised by companies to encourage customers who have already made purchases to do so again.

In today’s highly competitive markets where prices are driven down as much as possible, it is crucial to offer added value with each purchase to earn their trust more easily. Additionally, SPS Commerce confirms that 64% of retailers say their loyalty program is their best method of connecting with customers.

In our definitive guide, we explain the key aspects of creating a channel loyalty program.

Types of Customer Loyalty Programs

Most customer loyalty programs are based on similar strategies, such as discounts, redeemable points programs, or other benefits for accumulating purchases. Some of the most notable include:

Multi-sponsor

You’ve likely heard of Travel Club, and the multi-sponsor program follows that kind of idea. That is, several companies join together and offer benefits to all customers by exchanging their services and products. To run a campaign like this, you’ll need to partner with other companies that offer services or products complementary to yours.

Special treatment

The program offers the option to access more competitive prices or VIP products, usually reserved for those customers with high consumption levels. For example, Sephora has a rewards program and, for top customers, a special program.

Points

This system awards points based on the number of purchases made or the amount of money spent. Thanks to points, your customers have access to various discounts or gifts.

Rewards

This customer loyalty program offers customers discount coupons depending on their consumption. Depending on the company, they have an expiry date and may or may not be combined with others. Supermarkets most commonly use this type of loyalty strategy.

Events

Often used by automotive companies, like Mini with its “Mini Club.” Events are held where customers can get to know both the products and the manufacturers better.

How to Create a Customer Loyalty Program?

Customer loyalty programs are very useful tools for retaining customers, as they are aimed at keeping them from purchasing at your direct competitors. Therefore, we have prepared a complete step-by-step guide for you to create the best loyalty program tailored to your business.

Firstly, you must understand that creating this program is a marketing action and needs control, monitoring, and review to ensure it works and to address any issues as they arise.

1. Before the First Step

You need to compile a database of all your customers, which will be easier if you have CRM systems. Be aware that 20% of consumers make up 80% of your revenue; therefore, you should select the best customers for such a campaign.

2. Define the Objectives and the Program

What do you want the customer loyalty program for? You might want to reward loyal customers, attract new visits to your shop, capture non-loyal customers, increase their spending, etc.

You can earn customer loyalty rationally or emotionally. In the case of emotions, you need to associate the product with an intangible that consumers adore. The best examples are Coca-Cola and Apple. If you opt for rational, reward their purchases with promotions, discounts, or gifts.

But ideally, you should combine the two. Look at what your competition has and improve it.

3. Who is the Target Audience?

It’s different to direct a campaign at someone who knows you than at someone who has never interacted with you.

There are four types of customers:

– Occasional: They buy a specific product and only come to your store when they need that item.

– Sporadic: They buy almost by chance. They have stumbled upon your store and have just met you.

– Regular: They are the most numerous. They buy regularly, don’t spend a lot, and are loyal to a point.

– Exclusive: They are the most loyal. Whenever they need something, they turn to you and wouldn’t switch for anyone else.

Depending on the type of customer you are targeting, you should develop a corresponding strategy to retain them.

4. Choose the Loyalty Program

Once you know what you are looking for and whom you want to target, choose the loyalty program that best suits your capabilities and needs. The benefits it offers should not run counter to your business but should aim to increase its profitability. Evaluate the costs of maintaining the engagement program and whether it is useful and profitable for your business.

For the program to be effective, it must not be the same as your competition’s, as it will lose value. Remember, loyalty is a marathon, not a sprint.

Of the five types of programs focused on earning your customers’ loyalty that we have seen earlier, do you already know which one is most suitable for you?

5. Difusion

Promote your customer loyalty program through social media, with a newsletter, or with properly targeted paid advertising. Make sure everyone knows about your program and attracts new users to your business.

6. Tools

If you want to offer a point card with a barcode, there are market solutions where each customer has their own code and accumulates points with each purchase. These types of costs fall within the marketing budget, and about 300 cards can cost 565 euros.

7. Outcomes

Customer loyalty can increase your profits between 25% and 85%. Losing a regular customer can cost about 6,000 euros annually.

As you can see, an effective customer loyalty program not only helps you retain regular customers but can also help you attract new ones and demonstrate why they can trust you.

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