Customer loyalty programs are an important strategy for retaining customers and strengthening their relationship with the respective brand.
It is a popular strategy for both large and smaller brands and has proven to be particularly effective, as according to surveys 66% of consumers report that the ability to obtain rewards affects in a positive way their purchasing habits.
In this article we take a deep dive into the world of customer loyalty programs and analyze the new trends!
Let’s start!
In this article we will see:
- What are loyalty programs?
- How do they work?
- Why invest in a customer loyalty program?
- How to choose and integrate a loyalty program in your business
- Examples of loyalty programs
- What is the future of customer loyalty program?
What are customer loyalty programs?
Loyalty programs aim to create relationships of trust between each brand and its customers, offering various rewards, privileges and savings opportunities. Simply put, a customer retention scheme encourages your customers to continue to choose your business over competitors. So the more they buy or interact with your business, the more rewards they get. An effective loyalty program doesn’t just benefit your customers – of course! Instead, it also rewards you for your generosity by providing you with multiple benefits. In particular, a loyalty program:- Strengthens the engagement of your customers with the brand
- Provides you with useful information about their consuming behavior
- Helps you reach your “dormant” customers with unique reward opportunities
- Turns your most loyal customers into ambassadors of your brand
How do they work?
Although there are many types of Loyalty programs, below we will go over a general overview of how they typically work. Program Enrollment: Customers enroll in the customer loyalty program, typically by providing their contact information such as name, email, and sometimes more personal details. Earn Points or Rewards: Customers earn points, miles or rewards with every purchase or interaction with the brand. This can include making purchases, referring friends, writing reviews or interacting with the company on Social Media. Accumulate Points: Over time, customers accumulate points or rewards as they continue to interact with the brand or make purchases. Price Tiers: Some loyalty programs have price tiers, where customers can unlock additional benefits or rewards as they reach higher levels. Reward Gifts: Accumulating points allows users to ‘unlock’ various benefits such as discounts, free products, exclusive access or even cash back. Personalized Offers: Many customer loyalty programs use customer data and purchase history to offer personalized offers, encouraging repeat purchases. Communication: Loyalty programs usually involve regular communication with customers, including sending them updates, special offers and information about the status of their rewards. Retention and Engagement: The goal of customer loyalty programs is to retain customers and keep them engaged with the brand, encouraging repeat purchases and long-term loyalty.Why invest in a customer loyalty program?
The value of introducing a loyalty program lies mainly in the common goal that the concept of loyalty schema shares with your business! A rewards program aims to cultivate the trust of your customers, enhancing their loyalty to your business. Accordingly, the very existence of your business aims in the same direction! In particular, according to a Forbes survey that gathered useful information from different sites:- 71% of consumers say loyalty programs are an important part of their brand relationships.
- 15% of consumers are more likely to buy from a brand if they are part of a customer loyalty program.
- By adding a customer loyalty program to an e-commerce platform, you can increase average order quantity by 319%.
- 73% of consumers are more likely to recommend brands with good loyalty programs.
- Loyalty program members spend 27% more when the brand creates a positive emotional connection.
How to choose and integrate a customer loyalty program in your business?
There are endless options and designs for loyalty programs and each one applies to the needs of each business. But how do you choose which loyalty program is right for your business and how do you successfully integrate it?1. Choose a loyalty program that goes hand in hand with your brand
There are hundreds of ways to keep a loyal customer: offers, discounts, refunds and more. However, depending on the type and products of your business, the corresponding loyalty program is also designed. Do not forget: in any case, your offer must be attractive to the customer!2. Set your customer loyalty program goals
What do you want to achieve by launching a loyalty program? Increased sales or loyal customers? Do you want to increase awareness around your business and attract new customers? By understanding your goals, you’ll take a big step toward designing the right customer loyalty program for your brand.3. Know your audience
If you understand who your target audience is and what motivates them to make a purchase from you, you will also understand how to attract your prospects. By analyzing your customer data, you get to know better the behavior of consumers and the way they interact with your brand. By studying the behavior of your audience, you will discover which products or services your customers respond best to.4. Personalize your customer loyalty program
The history or particulars of each customer can help you build personalized loyalty programs that will significantly enhance the CX of your business. If, for example, a retail store maintains a history of a customer’s previous purchases, especially information about the volume of their purchases, it can re-engage them more targeted and effectively. In addition, elements such as birthdays give an even more personal tone to loyalty programs, strengthening relationships with your audience.5. Loyalty program and advertising- is it possible?
Did you know that you can reward a loyal customer and attract a new one at the same time? How is this possible? You can give your customer the possibility to “invite” a friend and win gifts or a discount. This can be achieved by mentioning your brand on social media or offering unique codes and links.6. Promote your customer loyalty program
Especially if the loyalty program is a new addition to your business, be sure to promote it to existing customers first. Make sure your company’s marketing team encourages your consumers to take action (e.g. sign up for the newsletter) and adequately inform them about the benefits of the loyalty program. Promotions and mentions of the new loyalty program in communication with your audience will catch their attention and lead them to the desired actions.7. Analyze program success and adjust accordingly
If you have set specific goals, it is easy to track the progress of a customer loyalty program and whether it is ultimately successful. By analyzing data, you can identify failures or gaps in program design and act accordingly.8. Maintain regular communication with your audience
In a highly competitive market, businesses, in order to stand out, must remind their audience of the benefits they offer over other brands. This includes reminders and updates about loyalty programs via emails or social media posts. However, for a properly structured relationship with your customers you must remember that communication is two-way: you must seek feedback from your customers. Based on this feedback, you will be able to better understand the needs of your audience, design the most appropriate loyalty programs and improve your brand CX.
9. Be consistent
Remember that a successful loyalty program needs time to be implemented and bring the desired results. Even if the results are not what you expect, you must have the flexibility to modify them to your advantage. Be careful though! If you make constant changes and don’t follow a specific tactic, you run the risk of confusing and disorienting your audience. With consistency, you are more likely to build trusting relationships with your customers.Examples of customer loyalty programs
Starbucks Rewards
Starbucks Rewards is one of the most successful loyalty programs and has over 40 million members. Through an app, it enables consumers to purchase their coffee and receive reward points. Points can then be used to purchase food or drink, priority service and birthday bonuses. Recently, the brand also went ahead with additional gifts, such as free breakfast in case of accumulating enough points. In addition, program members can participate in exclusive contests and games to win prizes or 50% discounts. This way, Starbucks rewards loyal customers even when they don’t make a purchase.Beauty Insider, Sephora
The Beauty Insider program started in 2007 and unlike other brands, it allowed customers to choose their reward gifts. The program has 3 categories of consumer inclusion in the program, depending on their expenses. In addition to gifts and discounts, members of the loyalty program can participate in exclusive events and have first access to new products. The goal of this particular loyalty program is to strengthen the emotional engagement with the public and to create a community around the brand.The Body Shop
Over 80% of Millennials are loyal to businesses that share the same values as them. The Body Shop, in addition to selling body care products, actively participates in social and ecological campaigns. Therefore, in addition to being rewarded with points on every purchase, access to exclusive events and birthday bonuses, it enables consumers to donate the vouchers they earn to organizations such as Black Lives Matter, No More and World Land Trust.DSW
With DSW’s customer loyalty program, consumers are classified into 3 tiers, depending on their purchases. Rewards include free shipping, as well as extra points for donating unwanted shoes.Miles + Bonus
The loyalty program of Aegean Airlines allows customers to accumulate miles when they use the company or its partners for their flights. Miles can then be redeemed for airline tickets, seat upgrades, hotels, car rentals and purchases. In addition, members of the program benefit from exclusive offers and discounts from both Aegean and its partners.What is the future of customer loyalty programs?
Loyalty programs, in the context of strengthening relations with the public, tend to become more dynamic and interactive. Businesses now aim for relationships that are not purely transactional in nature, but to create positive experiences for their audience, which will make them stand out from the competition. The creation of interactive activities, such as games, is the new trend and comes to renew the traditional loyalty programs that work by accumulating points. At the same time, personalized communication with consumers and the approach of Gen Z are the decisive factors taken into account when designing a new customer loyalty program. Gen Z now has an active role in the market, so tactics for building relationships with the new generation are constantly being renewed. The only certainty regarding the future of customer loyalty programs is that innovation will be rewarded, since in any case it is what makes any business stand out from the competition. That is why experimentation with reward methods, the application of new technologies and the exploitation of marketing, will create the ideal loyalty programs that will keep your customers loyal and happy.
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