Six Questions to Ask When Crafting a Winning Customer Loyalty Program

Part 1 of a 2-Part Series

You might be wondering if a loyalty program is right for your business. While it takes a little effort to set one up properly, the rewards are as much for you as your customers. Check out these four great reasons to get your loyalty program off the ground:

  • Returning customers spend 67% more than new customers, and are 50% more likely to try new products.
  • Customers that are engaged with brands and their loyalty programs purchase 90% more frequently, spend 60% more per transaction, and are five times as likely to choose the brand in the future.
  • Acquiring new customers is 5 to 25 times more expensive than retaining the customers you already have.
  • 90% of consumers aged 18-29 are willing to share personal data with a brand in exchange for free products or rewards.

1. How do I choose the right program format?
There are three basic types of loyalty program formats to choose from, each with its own pros and cons.

Your classic buy-9-get-the-10th-free, frequency-based program

Customers earn a specific point value based on purchase amount

In-store Credits (or Cash-back)
Customers earn credits to spend on future purchases

Punch programs are easy for customers to understand, cheap to run and easily tiered for increasing levels of purchase behavior. Downsides include missing the opportunity to collect customer and purchase info, requiring customers to bring their card, needing a custom stamp or punch to avoid program abuse

Points are more complicated as customers may not follow how much spending earns how many points. It may be tiered for customers to achieve even greater rewards for greater purchases. It’s consistent; program rewards may not change, even if prices do. Downsides include a greater effort to manage, as the store has to keep track of points for customers, and it lacks instant gratification, as this type of loyalty program makes buyers wait the longest to achieve a reward.

Customers love Store Credits (or cash back), and accruing cash back is a great way to make them feel good about frequenting your business. Requiring them to spend the reward at your business helps drive customers back for more potential sales. And, it’s simple to understand: spend X, get Y back. Store credits offer the greatest motivation for return spending and rewards can be tiered to customer spending levels. And store credits allow you to provide instant rewards for program sign up.

2. How do I bring my team on board?

  • Employees are one of your greatest assets, and they’re especially important when launching a loyalty program. The success of any loyalty program starts with management properly leading, training, and motivating employees. To get your team up to speed on your loyalty program, it’s imperative that you:
  • Gather your team for a meeting and have them all download the loyalty app to their phones, then demo it.
  • Have them practice checking themselves in like a customer would. It’s helpful to see how the process works from both sides of the counter.
  • Make sure customers are presented with the opportunity to become members every time.
  • Train staff on answering frequently asked questions

3. How do I launch my program?
You’ve picked a program and trained your staff–now it’s time to launch.

Be sure to try:

  • Set the tone for your program and make it too good for them not to join by offering a special reward for signups.
  • Prior to launch, make sure your customers know what’s coming. Place signage in-store, schedule social posts, add a message or link on your receipts, or drop a card into carryout bags. Your customers may be more likely to take an interest in your loyalty program if they’ve already been exposed to the idea.

Signups are the lifeblood of any loyalty program, but customers aren’t going to find their way to it on their own. Ensure your employees are trained to introduce it to every customer. It’s important to practice responses for common signup objections and train your staff on how to overcome them. There may also be a handful of questions customers will frequently ask. Anticipate them and make sure employees know how to respond to them in a professional manner.

Source: Adapted from a Clover white paper

See Part 2