Now’s a good time to start a customer loyalty program

7 min read
Benjamin Taylor

UPDATE: This customer loyalty post was originally published on 13 April 2020 and was updated on 27 April 2020.

Given the current situation in India where many businesses are temporarily closed, you might think the topic of customer loyalty is on hold.

But this is exactly the time your customers need to hear from you.

Their normal routines have been disrupted and many are cut off from the comforting presence of friends and coworkers. They need to know that the businesses they have come to rely on are still there for them.

In this post, we will explain how to create a loyalty program that will warm the hearts of loyal fans.

What is a customer loyalty program?

Loyalty or reward programs are a mutually beneficial partnership between customers and businesses. They involve an incentive — cash back, discounts or loyalty points — offered by the business in exchange for a purchase or some other action taken by the customer.

As per a KPMG report, 47% of Indian respondents voted their loyalty to a brand they believe in, even after one bad experience.

Loyalty programs act as a critical connection between businesses and customers, helping create a thread of engagement beyond just purchase transactions.

Editor’s note: If you have yet to get a business website, now is the time. Put your business online in less than 5 minutes with Online Starter Bundle.

A 7-step guide to launch your loyalty program

Getting a loyalty program off the ground sounds more complex than it is. Follow these essential steps:

  1. Set customer loyalty program goals.
  2. Get to know your customers.
  3. Sanction a budget, estimate expected ROI.
  4. Design a simple rewards program.
  5. If possible, automate your program.
  6. Promote the program (heavily).
  7. Analyze and improve the program.

Before we explain how to create such a program for your business, let’s look at why these programs work so well, including a few brand loyalty examples.

The business impact of loyalty programs

Here are a few reasons why customer loyalty programs work so well:

They offer value

In the winner-takes-all (or most) market we operate in today, engaging your customers is a mighty task. Through a loyalty program, points earned or discounts won become recurring gifts that keep on giving to the customer.

Customer Loyalty Stick with Me Sign
People will come back again and again if you give them an incentive.
Photo: Cory Bouthillette on Unsplash

They drive repeat business

Businesses can be assured that new and existing customers will engage in future purchases if satisfactory loyalty experiences are delivered. For example, 66% of consumers adjusted their spending patterns to increase points or rewards, according to a study by Bond Brand Loyalty.

They generate new customer referrals

As customers realise the value that loyalty programs deliver, they spread the word. With the business being promoted, new audiences are reached, turned into leads, new customers and finally, loyal customers.

They provide insight into customer behaviour

Insights from data captured through the loyalty program (for example, the categories of offers redeemed the most) help businesses understand customer behaviour patterns. This becomes a new avenue to explore in future rewards.

Related: A practical gudie for small business during the global crisis

Brand loyalty examples

The cost incurred in creating a successful loyalty program pales in comparison to the cost of acquiring new customers.

Another statistic from the KPMG study previously cited: 84% of Indian respondents trust in customer loyalty programs.

There are high chances of them buying new products from the firm as well.

To understand the market impact loyalty programs have, we cherry-picked three successful brand loyalty examples from across the world.

The word of mouth publicity for JetPrivilege is powerful, making it an iconic brand loyalty example in India. The frequent flyer program is one of Jet Airways’ biggest selling points, as points can be redeemed for air travel, as well as shopping, hotel bookings and more via partner tie-ups.

Nike +
A key reason behind Nike's global success is its 'Nike+' program, designed to create a lasting emotional connection. The loyalty program has over 100 million members and focuses on the activities undertaken by the people wearing their products, not on the products themselves.

guide Gold
Zomato, India’s first restaurant listing platform, is another top brand loyalty example since it rolled out a dream subscription plan for members to win enticing deals on food and drinks. The program has rapidly grown on the back of significant interest from members.

Customer Loyalty Restaurant Buffet
Restaurants and tea shops are prime users of rewards programs.

Start your own loyalty program

Loyalty programs come in all shapes and sizes — from a simple punch card (“Get the 10th tea free!”) all the way to sophisticated digital apps that track rewards. But here are the basic steps to starting a rewards program for your business:

1. Set customer loyalty program goals

To begin, you must analyse any available data during the planning process. Simultaneously, business goals expected from the program must be set so you can measure your success. Keep your goals low to start and adjust once you get going.

2. Get to know your customers

Finding approaches that will set your program apart from your industry peers is vital.

Undertake research to understand what motivates your customer.

Use the reporting feature of your customer relationship management (CRM) software (if any) to understand basics like age, location, purchase history, etc. Then read this post on customer research for help gathering information. The better you know your customer, the easier it will be to select rewards they will love. To quote Apple co-founder Steve Jobs:

“Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves.”

3. Sanction a budget, estimate expected ROI

Nothing can be done without allocating a budget that allows the program to function well and show expected results.

Small and medium enterprises (SMEs) aiming for a profitable customer loyalty program must know the returns vs. investment ratio before spending a rupee. This article can help with this calculation.

4. Design a simple rewards program

Do not create a complicated process whereby your customers earn, accumulate and redeem points.

In a complex world, simplicity works magic.

The KPMG Customer Loyalty Report referenced earlier reveals 76% of Indians find some programs are too complicated to join or use. A program that’s complex won’t be used.

5. If possible, automate your program

Customer Loyalty Coupon Graphics

Whether you use a point-based, cashback or another mode of rewarding customers, build a strong operational process that doesn't break over time.

The most successful programs self-operate through an automated process. Today's digital systems make it easy without the need of spending a great deal. Check out the 18 software options here.

6. Promote the program (heavily)

Customers today find themselves the target of multiple loyalty programs. Be sure to spread the word about the benefits of becoming a member. Use channels regularly visited by customers — Facebook, WhatsApp — as a means to remind them of what they are missing out on.

7. Analyze and improve the program

Measurement and feedback are vital parts of closing the loop of a successful rewards program. Analyse program use, results and challenges throughout the year to make necessary amends. Ultimately, the objective is to continuously improve the program based on what you’re hearing from customers.

Reward them to nurture customer loyalty

Loyalty as a key customer lever is on a path of revival, as brands see its value in a digital-first, brand-conscious generation of buyers.

Loyalty is not simply a good-to-have program, but has a direct business impact.

Today, it is easier than ever to plug loyalty program software into your business and connect it with your CRM or enterprise resource planning ERP systems. Use data analytics from the latter to refine your customer loyalty strategy and boost your business prospects in record time.

Products Used