How to Create A Customer Loyalty Program

Itzel Fonseca

7 mins read

Just like in personal relationships, loyalty between a customer and a company is built on trust. This mutual respect and admiration creates an emotional connection that can’t be severed by a competitor’s lower price or a new product launch.

It’s no wonder, then, that customer loyalty programs have become such an integral part of doing business. These initiatives reward customers for their continued support and encourage them to maintain their relationship with a brand.

Thus, whether you’re just starting out or your online store has been around for a while, it’s never too late to launch your own customer loyalty program. And in this article, we’ll show you how to do just that.

Why Start a Customer Loyalty Program?

Apart from strengthening your bond with your customers and making sure they only buy from you, there are several other reasons why you should start a customer loyalty program. Some of these are the following:

It’s Always Cheaper to Keep an Existing Customer Than to Find a New One

According to Harvard Business Review, keeping an existing shopper is around five to 25 times cheaper than acquiring a new one. Furthermore, a study cited in the same article reveals that boosting customer retention rates by just five percent can do wonders for your business, as it can lead to an increase in profits by anywhere from 25 to 95 percent.

This only goes to show that it’s more cost-effective to keep your current crop of customers happy than to keep looking for new ones. And customer loyalty programs are a great way to do this, as they show your customers that you’re willing to go the extra mile to keep them satisfied.

Loyalty Programs Can Help You Acquire New Customers

While the main goal of a loyalty program is to keep your current customers, it can also be used as a tool to attract new ones. How? Simple: by offering incentives that are too good to pass up.

For example, you can offer a discount on the customer’s first purchase or give them double the points if they refer a friend. This way, you can entice new shoppers to try out your store while also rewarding your existing customers for their loyalty.

Customer Loyalty Programs Help You Increase Customer Spend

Customer Loyalty Programs Help You Increase Customer Spend

Customer loyalty programs are the perfect opportunity to upsell and cross-sell to your customers.

For instance, you can give them points for every purchase they make, and then offer additional points if they spend a certain amount. This encourages them to buy more from you so they can rack up the points and get rewards that are of greater value. Hence, you increase their average order value while also making them feel special.

It’s a Win-win Way to Gather Valuable Customer Data

Every marketer and business owner knows the power of customer data. After all, it provides insights into what your target market wants and needs, which in turn helps you create more targeted marketing campaigns.

Fortunately, customer loyalty programs make it easy for you to gather this data. The moment they sign up for your loyalty program, you can start collecting information such as their name, contact details, birthday, purchase history, and even their social media handles.

You can then use this data to segment your customers, so you can send them more personalized communications and targeted offers. Just make sure that you’re transparent about how you’re using this data and that you have their permission to do so.

Starting Your Own Customer Loyalty Program

Now, let’s get into the nitty-gritty of starting your own customer loyalty program. Here are the steps along with some tips on how to do it:

Study Your Current Shoppers

Of course, before you can start planning your loyalty program, you first need to analyze and get to know your current buyers. This is to ensure that the loyalty program you’ll be creating is aligned with their needs and wants.

Here are some questions you may need to answer:

  • Who exactly are your current customers?
  • What motivates them to buy from you?
  • What are their pain points?
  • What are their purchasing habits (i.e. how often do they buy, how much do they spend, etc.)?

You can use surveys, interviews, focus groups, and even social media listening to help you get the answers to these questions. If you’re using a CRM software like HubSpot or Salesforce, you can simply analyze your customer data to get a better understanding of their behavior and habits. Once you have a good understanding of who your shoppers are, you can start planning your loyalty program.

Set Goals for Your Customer Loyalty Program

Now that you know more about your current shoppers, it’s time to set some goals for your loyalty program. This is important so you can measure the success of your loyalty program and make the necessary adjustments along the way.

Some goals you may want to set for your customer loyalty program include:

  • Increasing your store’s repeat purchase rate
  • Acquiring new customers
  • Boosting customer spend
  • Improving customer satisfaction
  • Generating more leads or sales
  • Increasing your customers’ average order value (AOV)

Determine Your Budget

While a customer loyalty program can be launched and implemented solely online, you may still need to set aside a budget for it, especially if you’re planning to give out physical rewards.

To determine how much you should be spending on your loyalty program, you have to consider several factors such as the segmentation of your audience, the type of rewards you’re planning to give, and how often you’ll be giving out these rewards.

This is also the perfect time to decide what type of program you want to create. Are you planning to give out points for every purchase? Do you want to offer tiers or levels? Whichever you choose, make sure it aligns with your overall budget and the shopping habits of your target market.

Create the Right Incentives

Once you’re all set with your goals and budget, it’s time to start planning the incentives for your loyalty program. Incentives are what will motivate your shoppers to join and participate in your loyalty program. So, it’s important that you offer the right type of rewards that will appeal to them.

During this planning stage, you also need to decide how customers can earn these rewards. Will they get points for every purchase? For referrals? For sharing your content on social media? Make sure the earning process is easy and straightforward so your customers won’t get frustrated.

You also need to consider how you’ll deliver these rewards. Will you send them via email? SMS? Or, will you have a dedicated loyalty program app? Be sure to choose the delivery method that’s most convenient for your customers.

Introduce the Program to Your Customers

Before you start launching and implementing your loyalty program, you need to let your customers know about it. Apart from making them aware of the program, this is a great way to give them something to look forward to.

There are several ways you can introduce your loyalty program to your target market. You can launch a marketing campaign specifically for this, or you can announce it through your existing marketing channels such as your website, social media accounts, or email list. You can also partner up with a few micro influencers who are avid shoppers of your store or are well-liked by your customers.

Implement Your Loyalty Program

And finally, it’s time to launch your loyalty program. If you’ve done everything right, then you should have no problem acquiring new members and keeping them engaged.

To get started, you can create an account on software or apps like LoyaltyLion and ShopHub, and connect it to your Shopify or online store powered by any ecommerce platform. These platforms will help you automate and manage your loyalty program so you can focus on strategizing and curating your next marketing campaigns.

Track and Adjust Your Progress

Of course, the process doesn’t stop there. Once your loyalty program is up and running, you need to track its progress and see if it’s achieving the desired results. Most customer loyalty program software are already equipped with analytics and reporting tools that can help you track your progress. However, you can still do your own research and surveys to get feedback from your customers.

If you see that your loyalty program is struggling, don’t hesitate to make the necessary changes. Try different rewards, revise the earning and redemption process, or even adjust your budget. The key is to always be willing to experiment until you find what works best for your business.

A Few More Tips on Creating an Effective Loyalty Program

Ready to launch your own customer loyalty program? Not so fast! Here are a few more tips to keep in mind:

Choose the Right Customers

While customer loyalty programs are designed to make your loyal shoppers feel appreciated and attract potential ones, giving too much rewards to everyone can end up draining your budget. So, it’s important that you’re strategic about who you give rewards to.

To do this, you need to segment your customers based on their purchase behavior. For example, you can create different tiers for your loyalty program members, and offer different rewards depending on the tier. This way, you can give more to your most loyal customers without breaking the bank.

Make it Easy for Customers to Join and Use the Program

If it’s too much hassle to join your loyalty program, then customers won’t bother. Make sure the sign-up process is quick and easy, and that customers can easily view and keep track of their progress.

The same goes for the rewards themselves. Make sure they’re relevant and useful to your target market so they’ll actually want to redeem them.

Communicate Regularly with Your Loyalty Program Members

Your loyalty program members are your most valuable customers, so it’s important to keep them updated on the latest news, rewards, and perks. You can do this by sending regular email newsletters or push notifications.

Build a Community

Ulta customer loyalty program, Ulta rewards program

One of the best feelings one can get when supporting a brand is being part of a community. This is why as you implement your loyalty program, it’s also important to create a community for your loyal customers. This can be done by creating an online forum where they can interact with each other, and with you.

Sometimes, even as simple as coining a certain name for your loyalty program members can also make them feel more connected to each other and to your brand. For instance, Sephora calls their loyalty program members “Beauty Insiders”.

Here’s to Having More Loyal Shoppers!

Making your customers stay loyal to your brand is no easy feat, but it’s definitely doable with the right strategies in place. And once you have a solid customer loyalty program, we’re sure you’ll definitely see the positive results in no time! The key is to always keep your loyal shoppers happy, and to keep finding ways to attract new ones.

Want more tips on marketing and managing your POD powered online store? Check out our blog or sign up for an Awkward Styles account today!

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