The Beginner's Guide to Building a Customer Loyalty Program

customer-loyalty-program

Loyalty.

It's what you hope to get from your significant other, your beloved house pet, and your paying customers.

I'm no expert when it comes to the first two things, but when it comes to customer loyalty, I have some useful insights to share about how it can help you grow your business -- so read on.

(For more information about animal loyalty, please refer to the 1963 classic film, The Incredible Journey.)

What Are the Benefits of a Customer Loyalty Program?

Once you've created your product or service and started generating revenue from your customers, you might start thinking about building a customer loyalty program. No matter what your industry or business vertical, you can find a way to reward customers for their loyalty (and their hard-earned funds) with additional, exclusive benefits.

You might already be a member of a few customer loyalty programs -- for example, a frequent flier mile program, or a customer referral bonus program -- but you might not know how to start one for your own organization. 

In the increasingly competitive and crowded business space, customer loyalty programs could be what differentiates you from your competitors -- and what keeps your customers sticking around.

Members of customer loyalty programs typically spend up to 18% more than other customers, but that's not the only reason to start a program.

1. Better Customer Retention

Customer loyalty programs help you keep customers engaged with your business -- which plays a huge role in how likely customers are to stick around, and how much they're going to spend.

In this day and age, customers are making purchase decisions based on more than just the best price -- they're making buying decisions based on shared values, engagement, and the emotional connection they share with a brand. Customer loyalty programs are a great way to engage with customers beyond just the point of purchase, to interface on shared values, and to provide even more value to customers -- making them happier and more likely to keep purchasing from you.

2. More Customer Referrals

If your customers enjoy the benefits of your customer loyalty program, they'll tell their friends and family about it -- the single more trusted form of advertising. Referrals result in new customers that are free to acquire, and which can generate even more revenue for your business -- because customers referred by loyalty members have a 37% higher retention rate.

3. Cost-Efficacy

It's more cost-effective for your business to retain happy customers than it is to consistently churn and acquire new customers: Acquiring a new customer is 5-25X more expensive than retaining a current one.

4. User-Generated Content and Reviews

Almost as trustworthy as recommendations from friends and family are online customer reviews. Customer loyalty programs that incentivize reviews and ratings on websites and social media will result in lots of trustworthy and authentic user-generated content from customers -- singing your praises so you don't have to.

So, now that you're on board with the value of customer loyalty programs, how do you get started with creating and launching one? 

1. Choose a great name.

The first step to rolling out a successful customer loyalty program is choosing a great name. The name of the program needs to incite curiosity and interest to urge customers to participate, and it needs to be distinguished from the myriad other loyalty programs they are probably already a part of.

The name should go beyond explaining that the customer will get a discount, or will get rewards -- it needs to make customers feel excited to be a part of it. Some of my favorite customer loyalty program names include beauty brand Sephora's Beauty INSIDER program and vegan supplement brand Vega's Rad(ish) Rewards. These clever, unique names hint at benefits but don't give them away -- making customers curious to learn more and join.

2. Create a deeper meaning.

Customers are cynical about customer loyalty programs and think they're just a clever ploy to get them to spend more with businesses.

Even if that's the goal of your customer loyalty program (because that's the goal of most businesses, to make money), it's your job to make it about more than the money -- and to make it about the values -- to get your customers excited about it.

Tap into the "why" behind your product or service to make your customer loyalty program as compelling as possible.

Amazon Prime costs almost $100 per year to join, but the value proposition of paying more money isn't just about the free two-day shipping. Amazon offers its members a ton of other convenient rewards -- like free TV show and movie streaming, and free grocery delivery from popular grocery stores -- that speak to the value for the customer (speedy delivery) in a broader context.

3. Reward a variety of customer actions.

Another way to demonstrate your commitment to customer loyalty beyond just purchases? Reward other customer actions.

Customers watching product videos, engaging in your mobile app, following and sharing social media content, and subscribing to your blog are still valuable signs that a customer is engaging with your brand -- so reward them for it. It's what 75% of customers involved in loyalty programs want.

HubSpot's customer advocacy program, HubStars, lets customers earn points for a variety of different actions each week -- like reading and replying to a blog post, or engaging with a video on Facebook -- with more pointed earned for higher-effort actions on their part, that they can turn in for the rewards they want.

4. Offer a variety of rewards.

Another way to provide more value to your loyal customers than just discounts is to offer different rewards.

Customers who spend at a certain threshold or earn enough loyalty points could turn them in for free tickets to events and entertainment, free subscriptions to additional products and services, or even donations in their name to the charity of their choice.

Lyft does a fantastic job of this with its Round Up & Donate program. Riders can round up to the next dollar of the cost of their ride and donate the change to the charitable organization of their choice --  making it easy and rewarding for them to make an impact while using their service as they normally do. 

5. Make "points" valuable.

If you're asking customers to make the effort to enroll in your customer loyalty program, make it worth their while -- points-wise. Just like with inbound marketing, if you're asking for more of your customers' money, you need to offer them something valuable in return to make sure the reward matches the effort expended.

For example, if you're offering cashback rewards as part of your customer loyalty program, assign a monetary value to your points so customers can visualize what they can earn (and spend) by continuing to purchase from you.

Credit cards do an excellent job of this by illuminating dollar-for-dollar how points can be used -- just watch any commercial offering points in exchange for dollars, airline miles, groceries, or gas.

6. Structure non-monetary benefits around your customers' values.

Values are important to customers -- in fact, two-thirds of customers are more willing to spend money with brands that take stances on social and political issues they care about.

So make sure you tap into those values as part of your rewards program, too.

TOMS Shoes donate a pair of shoes to a child in need for every purchase their customers make. Knowing that providing resources to the developing world is important to their customers, TOMS takes it a step further by launching new products that help other important causes -- like animal welfare, maternal health, clean water access, and eye care -- to get customers excited about helping in other ways.

7. Provide multiple opportunities for customers to enroll.

Once you've launched your customer loyalty program, make sure you're hammering it home whenever possible how to join -- and the benefits of joining.

If customers get rewards from purchasing from your online store, next to the price, share the points they could earn from spending that much.

You might have experienced this when flying on an airline that offers a loyalty rewards credit card. The flight attendants might announce that you could earn 30,000 miles toward your next flight -- if you apply for the airline's credit card. 

Other ways to do this include promoting the program on social media channels and adding on-site push notifications when customers complete an activity that earns them points.

8. Explore partnerships to provide even more compelling offers.

What's better than one reward? Two rewards, of course.

Co-branding customer rewards program is a great way to expose your brand to new potential customers and to provide even more value to your own loyal customers.

Brands might offer loyal customers free access to co-branded partnerships they've launched -- like T-Mobile's offer of a Netflix subscription with the purchase of two or more phone lines by their customers.

9. Make it a game.

Everyone loves games and competition -- so use that winning spirit to get your customers interacting with your brand more frequently.

Lots of brands gamify their customer loyalty programs to earn valuable engagements within an app, website, or at point-of-purchase.

Points are easily translatable for gamification. Take Treehouse, which teaches coding and app development, and rewards engaged users with more and more points leading up to a badge -- which users can then display on their websites and social profiles to impress colleagues and potential employers with their skills.

Are you ready to launch your own customer loyalty program? Learn more about the importance of customer loyalty in this video:

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