How to make customers loyal fans: Loyalty programs

While you intuitively want to attract new customers, it's just as important to focus on the ones you already have, not only because they're the ones who will help you reinvest in new prospecting strategies, but also because they'll generate new business for you if you manage to retain them. What's more, on average, a repeat customer spends 67% more than a new customer.

What are loyalty programs?

A loyalty program is a marketing strategy designed by a company to encourage the purchasing behavior of its customers, resulting in a sense of loyalty and brand loyalty. This type of program offers access to store credit, discounts, prizes, or any other benefits that reaffirm their commitment. Like any other marketing strategy, a loyalty program requires dedicating resources that you may have already allocated to other activities.

Through trial and error, you'll be able to determine which incentives create a greater desire to buy and which, conversely, don't produce the same results. A loyalty program establishes a beneficial relationship for both your customers and the growth of your business. It offers a wide range of rewards for a wider range of customers. Depending on your customers' intentions to shop online or offline, you can design a rewards program that meets their needs. For example, if you've noticed that online shopping is driving the most sales, your efforts to improve your rewards system should be directed there. Depending on your needs and customer behavior, you can choose one or the other program, or both. Once a loyalty program is launched, due to its cyclical nature, it becomes a self-sustaining machine that keeps on running. The more often a customer shows purchase intent, the more rewards they will receive, which means they will keep buying.

7 types of loyalty programs:

• A simple program with a point system;
• A program with a tiered system;
• A paid program that allows customers to receive VIP benefits;
• A program with a non-monetary structure based on customer values;
• A partnership program with another company to provide bundled offers;
• A program in the form of a game;
• No defined program.

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A simple program with a point system

This is the most common method of loyalty programs. Frequent customers earn points that can then be redeemed for a reward, whether it be a discount, free gift, or special offer. With this type of program, customers strive to accumulate a certain number of points in order to earn rewards. Many companies use this method incorrectly: the link between points and tangible rewards proves to be too complex and confusing. Using a points-based loyalty program is a great idea, but you need to make sure the conversion is simple and intuitive. While points systems are the most common loyalty programs, they are not the best strategy for all organizations. This system is ideal for brands that encourage frequent and short-term purchases, such as Starbucks.

A program with a tiered system

Finding the golden mean between tangible and expected rewards is a challenge for most companies designing such programs. One possible solution is to implement a tiered system that rewards initial loyalty and incentivizes continued purchases for increasing benefits. Provide small rewards, such as initial offers, for participating in the program and then incentivize customers to continue shopping to increase the value of the rewards based on their level of loyalty. This helps solve the problem of members forgetting to use their points because of the long time lapse between when they make a purchase and when they receive the reward. The main difference between a points system and a tiered system is that in the latter, customers receive short-term benefits. Tiered programs are ideal for companies that require a large commitment due to the high price of their products or services, such as airlines, accommodation services or insurance companies.

Paid program with VIP benefits

If the goal of loyalty programs is to bring customers closer to companies, why charge them a fee? In some cases, an annual or one-time fee that allows customers to overcome certain obstacles in the buying process is a real win-win for both parties. If you can identify the factors that can drive customers away, you can design a loyalty reward program with those factors in mind. Statistics show that nearly 98% of online shopping orders go unattended or don't convert into a purchase. This is often because the customer sees the price after tax or shipping is included.

A non-monetary structure program based on customer values

To deeply understand customers, you need to know their values and what they consider important. Sharing certain values has a big impact on customer trust, and as noted in one customer loyalty study, 83% of customers say their brand loyalty is driven by trust. Depending on the industry you're in, your customers are likely to value rewards that aren't based on discounts or monetary gain. While any company can offer promotional coupons and discount codes, brands that are able to establish a deep connection with their audience don't reduce the value of their benefits to monetary terms. For example, an eco-product brand might run a reforestation campaign in a geographic area that is important to its customers.

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Partnering with another company

Strategic partnerships (or coalition programs) can be very effective in retaining customers and growing your business. To determine which company to partner with, you need to understand your customers' lifestyle and buying process. For example, if your business sells dog food, you can partner with a veterinary clinic or pet care facility to offer offer offerings from both brands that will benefit both your business and your customers. When you offer your customers something that is important and useful to them, and that goes beyond your brand's normal range of products, you are showing that you understand their needs and care about them. In other words, you are putting the customer first. What's more, it will help you get closer to your partner's customers.

A program in the form of a game

Who doesn't like to play games? If you turn your program into a game that encourages repeat purchases, you can strengthen your brand image. Keep in mind that with any contest or sweepstakes, you run the risk of your customers thinking that your company is playing games with them to get more value. To prevent this from happening, it's important that customers feel like they're not looking for a needle in a haystack; they should have at least a 25% chance of winning a reward, and the purchase requirements for entering the contest should be affordable. Make sure your company's legal department is aware of and agrees to all the details of publicizing the contest. When implemented properly, such programs can be beneficial to almost any organization, even B2B companies. If your audience likes to have fun and makes frequent purchases, this type of loyalty program can make the sales process more dynamic and interactive.

Lack of a specific program

Given the large number of marketers offering loyalty programs, an innovative idea might be to offer none at all. Instead, you can offer incredible benefits to new users to attract them to your brand, and continue to provide these benefits with each new purchase to build loyalty. This approach is ideal for companies that sell unique products or services. It's not necessarily about offering the lowest price, best quality, or unbeatable benefits; it's about reinventing the product or category you specialize in. You may not need a loyalty program if your company offers an innovative product or service. Customers will be loyal to your brand simply because few other brands offer such an incredible experience as yours. In the case of this strategy, it's important that you emphasize unique value from the first interaction with users.