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Building Successful Customer Loyalty Programs: Types, Tips and Benefits

Updated: May 28

It’s evident that successful businesses have loyal customers. These customers buy goods or attain services from that business from time to time, showcasing their trust. It’s a better prospect for businesses rather than looking for new customers every other day.

Now, are you having problems getting customers to want to buy from you again and again? Brands these days are fiercely competing to keep consumers buying from them. However, a method known as a client loyalty program may be helpful if you are losing some clients and want to maintain a strong bonding.

In this blog, we will cover every feature of customer loyalty programs. We'll discuss the various varieties, their functions, benefits and even how to create one for your company.

What Is a Customer Loyalty Program?

A customer loyalty program is similar to a private club that a store establishes as a way to express appreciation for repeat customers. Every time a regular customer shops there, they get rewarded with discounts or points. They can utilise these awards to receive exclusive offers or freebies. Customer loyalty programs are fantastic options because they help the store maintain a happy client base and make the client feel unique and valued.

How Do Loyalty Programs Work?

Loyalty programs benefit businesses as well as customers. When customers consistently return to a specific business, the business benefits from increased revenue. In exchange, the company brings its regular clients amazing offers like freebies, exclusive access to new products, or additional benefits. Though each loyalty program varies slightly, the general concept is as follows:

1. Firstly, a corporation may ask its customers to join its particular club if they make any purchase, receive any service or provide the company with their details.

2. If the customers answer positively, they may sign up as members and receive rewards each time they shop at the store.

3. Those selected consumers can get more rewards as they utilise the membership during shopping.

4. There are various rewards, such as earning points for every purchase, receiving free items, or gaining early access to new products.

It’s a win-win situation where a client can win awesome prizes, and at the same time, the retailer receives repeat business from satisfied customers.

customer loyalty programs

Types of Customer Loyalty Programs

There are various strategies to keep clients coming back for your services or products. You can choose how to reward your customers for doing business with you based on the type of customers you have. There are four different program categories to choose from.

Paid Loyalty Program

Customers can purchase exclusive perks with a one-time payment in a paid loyalty program. This is similar to paying a monthly fee to use Amazon Prime. They can watch their favourite videos, listen to music, and enjoy free shipping on orders when they have Amazon Prime. It's fantastic because they get a lot of beautiful items in return for paying you.

Paid Loyalty Program

Many companies offer exclusive programs that present rewards when a regular customer shops from them or attains service. There is one kind, though, where they receive rewards based on how much they are spending. Let's explain using an example:

Assume you are a member of the Virgin Atlantic Flying Club. They give you tier points for flights rather than just points or miles. These tier points determine the cool stuff you get. Thus, frequent Virgin Airlines flyers will earn more points and receive amazing benefits.

Hardly all airlines provide these reward schemes, and that’s why Virgin stands out for having such a program. It provides consumers with a motive to stick with Virgin over other carriers. Furthermore, customers get fantastic deals and items from Virgin the longer they stay with them.

A Rewards Program

Customers frequently visit a store and make purchases. They may receive points from the store as a thank-you for their continued support. After that, they can utilise these points to receive deals or even free merchandise from the retailer. It's a popular method since it's simple to sign up for and follow.

Starbucks, for instance, offers a loyalty program known as Starbucks Rewards. Customers receive points known as "stars" for each purchase they make there. Once they've accumulated enough stars, Starbucks will give them freebies. They even have an app to make using and keeping track of customer's stars easier.

Value-Based Loyalty Program

Value-based loyalty programs are unique loyalty programs that don't offer discounts or freebies to customers. Instead, they convince them to return and make extra purchases. How? Rather than offering discounts or freebies to consumers, the business offers to donate a part of its earnings or support worthy causes like aiding people in need or any sustainable environment fund.

For example, the cosmetics business Lush offers a loyalty program called 'Charity Pot'. A specific body cream has a charitable donation attached to it. Customers will want to buy that cream more often, and the brand will appear more respectable due to its charitable efforts.

How to Create a Successful Customer Loyalty Program?

An organisation should create a loyalty program to increase sales to their current client as well as increase the bonding. Whatever the nature of the firm, loyal customers can receive unique benefits that will make them feel valued. It also sets the company apart from competitors. Explore the following steps if you are planning to build a customer loyalty program.

Know the Audience

A business can determine how to encourage repeat customers to purchase more by identifying its target market and understanding what motivates it. An organisation can also learn about its customers' preferences and needs by observing how they behave and communicate.

By monitoring this data, the business can get to know its clients better and learn how to win over new ones. Customer experience teams should consider what data to gather from customers when interacting with the business. Teams can use this information to further inform clients and improve their experience with the company.

Create a Points System — Make it Simple

A loyalty program is like a game in which points are accrued for each purchase from a customer's preferred retailer. After that, they may exchange these points for fabulous prizes. It resembles gathering stars or stickers on a chart. The point system is ideal for locations where clients often buy groceries or clothing. The best part is that they can earn extra rewards the more they shop.

Offer Incentives Through Referrals

Companies can expand and increase sales by asking satisfied consumers to recommend them to their friends. Consumers may post positive reviews or share something on social media when they find something they enjoy.

Businesses can thank customers for spreading the word by offering little gifts or exclusive promotions. Customers are satisfied, and the company is happy as a result. Teams responsible for customer satisfaction might establish objectives for this program. The company's earnings and the number of people discussing the business are two indicators of how well it’s performing.

For example, an online retailer can encourage consumers to make repeat purchases and spend more money each time and then check if they are doing so. If not, they can change the programme to offer discounts to customers upon reaching specific criteria, such as exceeding their average monthly spending.

Charge an Upfront Fee

It is sometimes a good idea to charge a one-time price upfront so clients can relax and make further purchases later. How do people get to buy things without paying for shipping whenever they join Amazon Prime? That's how it works!

Offer Distinctive Rewards

In exchange for a client's purchase, a corporation may offer them extras as a token of appreciation. Not everything needs a discount for later. You may provide them with free event passes or other benefits if they spend a specific amount.

Additionally, most consumers want to support businesses that share their values, whether protecting the environment or promoting particular social causes. Thus, companies can create initiatives where a part of their purchases supports charitable causes or other social good causes.

Promote the Program

When a store introduces a new customer rewards programme, the marketing staff must first notify the existing customers. They may attract people to join by making the benefits seem fantastic.

They must include information about the benefits in emails. For example, they can discuss the benefits when they say "thank you" for purchasing something. To inform everyone, they can also discuss them on the companies' websites and social media accounts.

important of customer loyalty

Benefits of Customer Loyalty Programs

Businesses use customer loyalty programs as a strategic tool to build long-term connections with their clients by providing a range of benefits and incentives. These initiatives aim to boost client engagement, promote recurring business, and eventually boost income. The following are some main advantages of client loyalty programs:

Boosts Revenue and Retention

Customer loyalty programs are an excellent way for businesses to increase revenue and customer retention. Customers can receive rewards for their purchases from that retailer when they sign up for a loyalty programme. They can buy more items or visit the store more frequently to get such benefits. They become massive fans of the brand and want to keep buying from that particular business as a result. Additionally, it means that over time, the company will profit more from them.

Builds Stronger Customer Relationships

Creating a loyalty program can help you build stronger relationships and a closer connection with your clients. Giving them rewards and treating them with value showcases that you care, and you prioritise having them as your customer for a longer period.

Increase CLV (Customer Lifetime Value)

The money you make from a single customer over time is shown by their customer lifetime value or CLV. Customers who take part in loyalty programmes spend more money and stick with you longer. As a result, CLV rises due to repeat business and larger purchases.

Turn Customers Into Brand Advocates

Your loyalty programme becomes an excellent means of attracting new clients when you offer incentives to customers who refer others to your business. Like Dropbox, which provides extra space for users who recommend others. Specific programmes award points for actions such as social media sharing, much like what TOMS Shoes does with post likes and shares.

Increase Purchase Frequency

Like in coffee shops, loyalty programmes encourage frequent purchases to gain benefits. For example, McDonald's offers an extra beverage upon purchasing five. With features like Loyalty Tiers that improve with spending, LoyaltyLion promotes more purchases to advance to higher tiers and more advantages.

In The End

Customer loyalty programs are like hidden keys that let businesses and customers together find unique treasures. At Flamingo Digital, we utilise modern technology to improve these programs. Thus, companies have the ability to satisfy their clients and encourage them to return for more. Together, let's create magic.

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