The Definitive Guide on Creating a Customer Loyalty Program

Are you an Apple smartphone user? If the answer is yes, then it’s quite likely that you’ve been an iPhone user for a long time. In fact, Apple’s customer loyalty hit an all time high in 2021, with 92% of Apple users staying loyal to the tech brand. 

It’s one of the biggest reasons as to why Apple is one of the biggest companies in the world and goes to show the importance of customer loyalty. While there are many ways to build customer loyalty, a loyalty program is one of the most used and for good reason.

When done well, they have the power to grow your business in many ways. In this article, we’ll go over just what a good customer rewards program can do for your brand, and how to create a great, unique and creative program.

5 Benefits of Customer Loyalty Programs

From improving customer retention to giving you free marketable content, customer loyalty programs do it all and should be a part of any good ecommerce marketing strategy. Let’s take a closer look at why these programs work to grow your business.

Benefit 1: Improve customer retention

Keeping customers is easier said than done but it’s a practice that you should actively be doing. After all, getting your customers to repeatedly purchase from you is much cheaper than undertaking activities to find and convert new ones.

Customer loyalty programs give your existing customers a reason to stick around and to continue to make purchases from your business. A good program will increase customer retention and maximise the profitability of each and every customer you have.

Benefit 2: Increase customer lifetime value

Customer lifetime value (or CLV) is the predicted net profit of the entire relationship with a customer. How do you calculate CLV? You take the average profit a customer generates and minus costs such as acquisition fees and retention expenses.

Studies have shown that when customers build an emotional connection with a brand, their CLV skyrockets by roughly 307%. And since customer loyalty programs are a way to build that connection, you’ll be increasing the profits you get from your customers.

Benefit 3: Stop competing on price

Loyalty programs can help you increase your market share and reduce the amount of price competing you do with your competitors. Let’s take a look at the USA’s coffee shop market for example. Starbucks owns an incredible 40% share despite its many competitors like Dunkin’ Donuts, Panera and Caribou.

While their coffee quality is debatable (in our humble opinion) and their prices might be slightly higher, it’s things like their unique rewards programs that have allowed them to become such leaders in their market.

Benefit 4: Attracts new customers

A loyal customer is one that is eager to share their love for their favourite brand. Word of mouth marketing is a super powerful tool and building customer loyalty through rewards programs is a great way to create your own brand advocates and ambassadors.

If your programs are well-made and offer great rewards, they’ll also have the power to turn prospects and leads into full-fledged customers.

Benefit 5: Create user-generated content

Customer loyalty programs can create user generated content (or UGC) that you can use for your own marketing like social media. Loyal, passionate customers are likely to create content on their own – just look at the amount of UGC streetwear brands such as Supreme, Carhartt or Vans have on Instagram. You can also specifically ask customers to create content through your programs, where UGC is rewarded for points.

How to create a great loyalty program

Now that we’ve looked at why your ecommerce store should have a customer loyalty program, it’s time to look at how to build one. Let’s take a look at the most important things when making your program!

Choose your program

Customer loyalty programs come in many shapes and sizes – it’s up to you t o figure which one is both feasible and effective for your business. The most common format is a points program where users earn points for different things which they can then redeem points for discounts or freebies.

Here are some additional types you may want to consider:

  • Gaming Programs: turning your program into a game can make it more enticing to participate in. Simple video game features such as leveling up, earning ‘badges’ and unique in-store currency are some key parts of a gaming program.

Duolingo embraces video game mechanics to encourage frequent engagement with the app, from ‘XP’ to ‘Lives’ and ‘Streaks’.

  • Referral Programs: reward customers for referring their friends and family, for example, giving a $50 discount for every new customer they refer.
  • Cashback Programs: common in financial companies, cashback programs reward users when they spend money using a debit or credit card with ‘credit’ to spend with the business.
  • Tier-based Programs: these programs give customers incentive to engage with your business more by offering locked loyalty tiers which contain significantly more rewarding perks and benefits.

Starbucks’ Rewards offer two different tiers which can be unlocked with more ‘Stars’.

Create a great name and design

First step to a great program is a great name and design. Make your program attractive with both words and visuals! Especially so with the name of your customer loyalty program – it needs to pique the curiosity and excitement of your customers and encourage them to join and participate.

Source: Priceline

A great example of this is Priceline’s Sister Club, which directly targets the female demographic.

The webpage that details your program needs to be visually appealing as well. A great looking page will attract customers but good design isn’t just limited to nice imagery – it also needs to be well-written, clear about its mechanics and be on brand with the rest of your website.

Source: Sukoshi

Take a look at Sukoshi’s program page which is easy to understand, consistent and fun to look at!

Reward a variety of customer actions

You shouldn’t be limiting the ways in which your customers earn points or benefits. Doing so essentially turns your program into a grind where the effort might outweigh the reward. By rewarding a variety of actions you are encouraging customers to engage more often with your brands – in different ways.

Here are some actions that you could reward with points:

  • Watching a video
  • Clicking on a link
  • Posting a link on social media
  • Entering contact information
  • Chatting with customer support
  • Making a purchase

Of course, you don’t want to be overly generous with points and perks as you might end up giving away more rewards than your business is able to handle. But be creative and strike the right balance and you’ll find that participation in your loyalty program will increase greatly!

Creative rewards and benefits of worth

Like we mentioned in the previous point, you don’t want your rewards system to become a grind. And what can make it a grind are bad rewards.

“50 points to take $2 off? Ridiculous!”. You never want to hear your customers say this! Making sure your program offers customers something worth their time and effort is very important. Offering otherwise will not only detract participants from your loyalty program but it’ll also make your brand look cheap and unfair.

And don’t limit your rewards to just discounts either. Other valuable rewards you can offer include free tickets to events, free subscriptions, product demos and more. Creative rewards are also a great way for current participants to encourage others to sign up to your program!

IKEA offers rewards such as free returns and exclusive furnishing workshops.

Get your customer loyalty program up and running today!

Customer loyalty is so important today, and as a business owner it’s something you should be actively trying to grow! With this guide, you’ll be able to build your own and start fostering loyalty today.

Want more articles that give you tips to help your business grow – like loyalty programs? Check out the ZipZipe blog where our articles are written by our own digital marketing experts, all to help you achieve your business goals. Head on over now!