How to Build Successful Loyalty Programs

loyalty program

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Even before you get the first customers for your business you need to be thinking about how you are going to build your customer loyalty programs. How will you convey the value and benefits of using your products or services over those of a competitor? What incentive can be offered to keep them from going elsewhere?

This is the primary premise for establishing your long term customer retention efforts. However, even if you’ve been in business for years, it’s never too late to incorporate loyalty programs into your marketing mix.

It’s no secret in business that once you get a customer you want to keep them because it is less expensive to keep an existing customer than it is to get a new one.

Loyalty Programs Are Popular for Customer Retention

And loyalty programs are a popular mechanism for keeping customers. You are probably a member of a number of loyalty programs, I know I am. I have a favorite airline (get points for free travel) and a favorite hotel chain (get free stays and upgrades) and even my car wash offers me a free wash after 5. So I am loyal to them all.

Do they work? I admit, for me they do. I do look at my “loyalty” program companies first. Why not? I get extra “benefits” for continuing to purchase from them.

For instance, when going away recently I immediately checked to see if my “favorite” hotel chain had a location there. They did. Then my real benefits of being loyal kicked in. My stay included free self-parking (huge at this destination) and a late check-out. And as it turned out, I received other great benefits upon check-in. I’m even more loyal now than before.

So, how do you go about establishing a customer retention plan that will have the same affect? I know that other hotels may offer similar customer loyalty programs, but from the start, this chain had the level of properties, amenities and variety of locations that appealed to me for what I considered a fair price. The company secured me as a client because they had the right value to benefit story for me and kept me from straying by having an easy to understand and use loyalty program.

The most common loyalty programs have a simple formula. Frequent customers earn points that they can redeem

Customer Loyalty Programs
Loyalty Programs drive Customer Retention

for some type of reward – free travel, free car wash, free TV, discount on services. A pretty simple concept. Unfortunately, many companies err by making the conversion from points to services confusing. You’ve seen them before, “fifteen points are equal to $1 and that can be used only after you’ve achieved a minimum of” and the disclaimer goes on and on. You give up trying to figure out the bonus and whatever loyalty you might have given them is lost.

Keeping it simple is key to these systems. Pet Supermarket is a good example. I am a VIP (Very Important Pet) card holder. Each time I buy dog food my card is scanned. After I’ve purchased 12 bags of dog food I get one free. Doesn’t matter the size, I get one free. So, I am loyal because I am always buying dog food for my two big dogs and appreciate the free bag.  I am loyal because they offer the food I want at a reasonable price AND I get a free bag after buying 12. Simple.

Key Elements of a Successful Loyalty Program

So, when you are designing your program keep these elements in mind:

  • Keep it Simple
  • Tie the bonus to your product/service benefit
  • Continually remind your customers of the benefits
  • Always THANK your customers for their business
  • Ask for feedback
  • Track your program (am I keeping my customers)

As your customers have more and more options to choose from (brick & mortar and internet) the best way to keep your customers is to understand who they are and what they want. I like getting an upgraded room and a free bag of dog food, it’s that simple.

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