Customer Loyalty Programs: How to Create One with Examples

The goal for any major business is to generate loyal customers that keep coming back. One way to do that is with an innovative customer loyalty program.

Keeping your existing customers on board is a tough task in this competitive world. In recent years, customer loyalty programs have changed drastically, going digital, getting more effective, and offering unique experiences.

And a solid customer loyalty program can satisfy customers, increase customer engagement, and boost conversions.

What are customer loyalty programs?

Customer loyalty programs are a set of strategies enabling you to offer customers timely incentives based on their previous buying habits with you. This will encourage customers to continue using your products or service as they being to accumulate points or earning rewards.

Today’s customer loyalty programs should reflect the needs of modern customers.

Loyal customers aren’t just regular buyers anymore, they can:

• Bring in referrals through social sharing
• Spread a good word for you
• Stick with you and your brand
• Digitally subscribe to your offerings

Customer loyalty is the product of a good customer experience. So if you want to build an effective customer loyalty program, delivering a seamless experience and service across the customer life cycle should be a priority.

Traits of a modern customer loyalty program

• Offers a frictionless transactional experience to customers across all touchpoints.
• Embraces new technology to make most of customer data and personalized offerings.
• Provides value through affiliate partnerships and third-party contracts.
• Allows you to reward customers for repeat business.
• Brings you and your customers closer.

Let's take a look at how to create a customer loyalty program that works.

How to create a customer loyalty program: 8 steps

1. Do your research
2. Keep it simple
3. Personalize for a better customer experience
4. Rewards points - traditional yet effective
5. Stay connected with your customers
6. Market the customer loyalty program
7. Choose incentives carefully
8. Set up exclusive deals

1. Do your research

Starbucks claims their customer loyalty program played a vital role in creating a 26% rise in profit and 11% jump in total revenue for 2013’s second-quarter fiscal results.

To execute a successful customer loyalty program, your team needs to put in the research before any implementation begins. There are various ways to build customer loyalty, research will help you choose the one that best fits your business requirements.

Be clear on the objective of your campaign, analyze the nature and size of your business, and create a program that helps you accomplish your business goals. Don’t forget to take into account customer expectations, behavior, and current market trends.

Customer data can come from a variety of sources, like your website analytics, inventory history, sales, conversations, etc. The idea here is to truly understand customer behavior and therefore the sorts of campaigns your customers will respond well to.

By collecting and properly analyzing data, not only can you use it to design customer loyalty programs, you can even improve your products and services. In the end, this all helps in delivering excellent customer service.

2. Keep it simple

If you overcomplicate your loyalty rewards program, there is always the chance that customers won’t understand it. If that happens, it will just end up being ignored and forgotten.

Avoid this by making the process easy for customers to understand.

But not only that, make it simple for your customers to sign up to as well.

Create a system for earning points that's easy to track so the situation is clear. Give out points to customers on the back of purchases, explaining how they can redeem those accumulated points, whether or not those points expire, and if so, when.

Have a look at the JetBlue TrueBlue program for an example of how to set up an ideal type of loyalty program.

3. Personalize for a better customer experience

Artificial intelligence is helping companies craft more personalized loyalty programs. When companies invest in these technologies, they equip themselves with the tools to offer more proactive service.

Sephora is a great example of this. Research by Sailthru on the personalization capability of brands shows Sephora coming out as a winner because:

• Offers customers a seamless omnichannel experience, be it on the web, mobile, or in a brick and mortar store.
• Personalize their product with multifaceted content and description.
• Launched a tri-tiered “Beauty Insider” program for members only to earn rewards and gifts.
• Gives customers a product try-on with a virtual assistant, to help them find the perfect product for their skin type.  

Personalizing customer experience doesn't have to be complicated. Many brands personalize experiences with the help of visual engagement tools, enabling them to assist customers by accessing their web or mobile browsers and collaborate on completing tasks.

4. Rewards points - traditional yet effective

The rewards you provide should make financial sense for your business, whilst simultaneously offering something your customers want. Whether you choose to offer your customers discounts on repeat purchases, free rewards, or even a combination of the two, always remember the most important rule: The rewards have to offer value to the customer.

Some grocery stores have partnerships with fuel companies to offer discounts on gas. As gas is an essential commodity and an unavoidable cost for many consumers, this is a very useful tactic. These customer loyalty programs often utilize special credit cards already used for getting discounts, with insightful sales data provided on the back of it.

5. Stay connected with your customers

Experian data shows emails targeted toward your loyalty program participants have 40% higher open rates, 22% higher click-through rates, 29% higher transaction rates, and 11% higher revenue per email.

It is an absolute necessity to stay in touch with your customers after creating your loyalty program and email campaigns are one of the best ways to do this.

Using an email campaign to let your customers know about renewals (if your customer loyalty program requires it), and special deals just for loyalty members, can make your program work better.

Message them about the campaign after a certain amount of time as a reminder. This helps build a positive impression of your brand. Below is a brilliant example of how to stay in touch with customers:

The company has demonstrated creativity with this “We miss you” campaign!

Another great way of connecting with your customer is through live chat. It allows you to inform customers about loyalty programs during conversations as well as building trust, increasing customer loyalty.

6. Market the customer loyalty program

No matter how great your customer loyalty program is unless your customers know about it, it’s not going to get you very far. Invest in marketing so your customers are aware. Make sure you create a marketing strategy that fits with your business.

Below are some of the ways you can go about it:

• Online Ads
• Social Media
• Press Releases
• Newspaper Ads
• Outdoor hoardings
• In-store signage
• Send out a customer satisfaction survey
• Send email newsletter
• Develop a customer referral program
• Hold an online contest
• Publish distributed content

7. Choose incentives carefully

When deciding on the most appropriate incentives for your loyalty program, analyze the needs and behavior of your target customers.

Sometimes freebies devalue your product or services, so try and think of options that make incentives exclusive. However, simple gestures like free shipping are always a great incentive.

Experiential rewards are popular because they make customers feel good, adding value to their lives. They also help your business stand out from the crowd and generate long-term loyalty in your customers.

For instance, Starbucks has designed a fantastic loyalty program called My Starbucks Rewards. There are multiple ways to enroll in the program, including creating an account or downloading the Starbucks mobile app. For each purchase, you receive one “Star”.

8. Set up exclusive deals and discounts for your customers via social media

Your social media followers and email subscribers are all potential customers. Use social media and email newsletters to give your followers exciting and exclusive limited-time deals and discounts.

Try creating a unique hashtag for the offer. Provide a discount code and use the hashtag across all your social media, keeping it consistent during the campaign. You can easily track and tweak things based on how the campaign is performing.

This type of marketing campaign makes your customers feel like they are part of an exclusive club, and as a result, they will refer your business, providing new people to join your email list and follow you on social media channels.

Loyal customers bring long-term success

Done right, customer loyalty programs can boost profits and improve customer retention. This means they have the power to make a significant impact on your bottom line. Implement the right loyalty program for your customers, manage it well, and you can ensure long-lasting success for your business.

Have any of the tips above helped you create a customer loyalty program? Think we missed anything? Let us know in the comments.

Sam Suthar

CMO, Acquire.io

Sam Suthar is Acquire's Head of India office, where he manages day-to-day business operations.