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Designing an effective customer loyalty program

12th Mar 2019
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What if you could increase sales without increasing your marketing budget?

Imagine reducing your marketing and increasing sales.

Would you do it?


With the right strategy, you’ll be working smarter and earning more. The most cost-effective way to do this is by focusing on your existing customer base and incorporating a solid customer rewards program.

Rewards programs will track the spending behaviors of your customers and provide you with valuable insights as to what they like and will motivate them to keep coming back.

By keeping existing customers coming in to your store, you won’t have to focus on bringing in new customers. You can also reward loyal customers when they refer their friends. This will incentivize them to become advocates of your store.

Customer Loyalty Programs Improve Customer Retention

The main goal of a customer loyalty program is to improve customer retention. Through incentives, your existing customer base will purchase more from you.

Customer retention rate is the rate at which your customers return each month. As it grows, you can stop spending as much time or money increasing your overall number of customers.

Your loyal customers have a greater conversion rate and will be more profitable. They tend to make more frequent purchases and spend more overall.

When you increase your retention rate by 5 percent, you can essentially increase your profits by 25-95%.

Loyalty Programs Reduce Marketing Costs

With a solid retention rate ensuring a steady stream of customers, business owners can shift the focus of their marketing to their loyal customers and away from the expensive customer acquisition process.

Repeat customers who love your business will love you even more as you offer them discounts on their favorite products and freebies for referring their friends and family.

The great news is that the loyalty programs can be much more profitable than the customer acquisition process by five to twenty five times.

4 Ways to Encourage Repeat Business

The main benefit of a customer rewards program is a personalized experience for the customer. The more personalization that you can offer, the more loyal your customer will be.

As you gather more information and feedback from your customers, you know what will bring them back. Simply offer it to them so they’ll select your store over the one across the street.

Get engaged with your customer. They’ll feel that you care about them, which is something that is becoming rare in this technology driven world.

Engagement builds that emotional connection that everyone is seeking.

1. Offer Value - Not Just Discounts

Many loyalty campaigns will fail because they simply offer a discount based on customer spending. Discounts are easy to find with a google search.

Your loyalty program should offer more than a simple discount. You can offer valuable information, birthday gifts, seasonal rewards.

Dunkin Donuts offers a free coffee for customers on their birthday.

2. Gamify Your Offers

People love games and sports. It fuels their competitive nature. You can tap into this love with gamification.

Make a game out of the shopping experience and you can directly influence a personal motivation to complete a task. Loyalty programs that allow customers to earn rewards by completing certain actions - signing up for an email list, or referring a friend can benefit from gamification.

The simplest way to gamify your loyalty program is the straight forward rewards based program.

Gamification types:

  • Redeemable points - Earn points for certain tasks that you can redeem on your next purchase.
  • Badges - Customers can earn badges after completing more complicated tasks, such as a 30-day challenge.
  • Performance Graphs - Track the customer’s progress through a graph that will motivate them to continue their engagement.

Jillian Michaels implements gamification with her fitness app. She offers badges for the tasks along with a performance graph.

Jillian incentivizes her customers to engage with her further through these tools and they continue to pay their monthly subscription to have access to them.

Red Robin’s Royalty program gamifies earning free burgers and allows customers to see when they’ll earn another one.

3. Provide A Deeper Connection

A rewards program that aligns their brand with a charitable cause will attract many people who are searching to make a difference in the world.

Your customers will realize that your values are similar to theirs when you align your company with a charity. They’ll feel more connected to you on social issues and not just shopping.

This will entice the liberal crowd. Seventy-eight percent of liberals want their brand to align with a cause and take a stand. Nearly ⅔ of all customers are more willing to shop with brands who offer a program benefitting a cause.

This is a great strategy for retention rate.

An example of a brand aligning itself with a cause is Lyft’s Round-Up program. It allows users to round their fares up to the nearest dollar and donate to a cause of their choice.

4. Go Digital with Your Loyalty Program

 Loyalty punch cards are often lost and forgotten about. However, digital loyalty programs allow you to send SMS text messages to your customers. This can encourage engagement and feedback.

Customers are more likely to participate when they receive communication from you whether it is through texts or email. After all, if your customers lose their punch cards, they probably won’t be motivated to return.

The digital loyalty program solves this problem by keeping it mobile. Most people have their phones handy at all times.

Loyalty reward apps, such as CandyBar, allow customers to give retailers feedback through polls, check their rewards status and redeem points.

It is easy to set up for any business and simply requires that the customer enter their information into the rewards app to earn points for their purchase. It is the equivalent of a digital punch card.

The best part about a digital loyalty program?

Business owners can track customer data to help improve their business. You can discover spending patterns and habits. You can also learn when your customers shop and what they buy.

This will allow you to tailor rewards to them.


Designing an effective customer loyalty program doesn’t need to be a huge project. Get started gathering information about your customers through a digital loyalty program. Test out different rewards and start asking for feedback from your current customer base.

Once you discover what motivates your customers, you’ll have clear direction on how to bring them back to your store. Finally, you'll want to measure the success of your rewards program

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