Loyalty[1]: faithful adherence; faithfulness to commitments or obligations

As a business owner, manager, or marketer, you want your customers to be loyal: to choose you over a competitor, and to return time and time again. Read through the definition of loyalty again and let it sink in. And consider from a customer’s perspective what you are asking for. And then ask yourself: am I giving customers enough good reasons to come back?

Your own experience tells you that loyal customers will bring the greatest benefit to your business in the long run. Depending on your industry and which study you’re reading, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one[2].

In today’s consumer environment it’s becoming more difficult to engage with and retain customers. It’s likely that you have thought a lot about what new strategies you could try. Let’s start with a definition of loyalty program and then cover five possible strategies you could try.

Loyalty program, defined
Structured strategic engagement with customers to influence their purchase of goods or services. A program includes incentives such as discounts, coupons, or other special offers, points or credit toward future purchases, or special access or privileges (for example, line cutting,  discounted/free delivery, or early access to pre-release products).

What makes a good loyalty program?
Here are five tactics that successful companies have used.

  1. Offer incentives that are easy to understand. 
The top two reasons why consumers continue to participate in a loyalty program are: that it’s easy to understand (81%) and the rewards and offers are relevant (75%)[3].
 
Outdoor outfitter Cabela’s offers a Cabela’s Club credit card with rewards points that customers can spend on future purchases. They earn points by using the card at any merchant. Although the method used to calculate points earned can be found in the fine print, Cabela’s Club doesn’t try to communicate it in its marketing materials. What customers care about is how many points they have to spend when they go to shop. And that part is simple: One point equals one dollar to spend on future purchases. By signing into their account online, customers can see, right up at the top of the page, how many points they have earned. Plus the company’s checkout process offers an easy way to apply points to a purchase.
  1. Offer an immediate incentive just for signing up, and another for referring friends who sign up.
Waiting for points to stack up can be frustrating and may cause customers to forget about your program.
 
The top two reasons why consumers stop participating in a loyalty program are: it was too hard to earn points for rewards (54%) and the program did not provide offers that were of interest (56%)[4].
 
Once they sign up for your program, email a coupon or send a small thank-you gift – in the mail. After all, who gets happy mail anymore? These personal touches can go a long way toward generating good will and loyalty.
  1. Keep customers engaged. If your customer has given you permission to contact them via email or text, set up campaigns to keep in touch. If they haven’t visited in a while, consider an incentive to draw them back.
  2. Try a tiered system. You might base it on frequency of visits or dollars spent within a certain timeframe, or size of orders. One U.S.-based 600-unit quick service restaurant puts customers into tiers based on how much they spend. Top customers get a very generous order for free on their eighth visit. A generous reward means the customer may invite friends or family along, adding a tangible viral element to the rewards program. A customer app tracks visits and spend, and the program is generating amazing results.
  3. Make your program tangible in more than one way. Make it easy for customers to see their status. Use touch points that foster excitement. In the loyalty program mentioned above, customers can choose their free item(s) after their sixth visit. Even though they won’t receive their reward until the eighth visit, the opportunity to select it after their sixth visit keeps them engaged in the program and fosters excitement for the eventual payout.
An engaging loyalty program is more likely to move the needle on customer acquisition, retention, and sales. But it’s only one part of your overall loyalty strategy. Smart business owners and managers also always strive to deliver positive customer experiences, improve customer satisfaction, and enhance the value of products or services.
 
[1] loyalty. (n.d.). Dictionary.com Unabridged. Retrieved September 28, 2017 from Dictionary.com website http://www.dictionary.com/browse/loyalty
[2] https://hbr.org/2014/10/the-value-of-keeping-the-right-customers
[3] https://www.colloquy.com/latest-news/tough-lesson-from-our-new-research-report
[4] https://www.colloquy.com/latest-news/tough-lesson-from-our-new-research-report

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