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Implementing Customer Loyalty Programs

Implementing Customer Loyalty Programs

It costs a lot less to keep existing customers than to earn new ones. One of the best ways to keep customers coming back for more is by establishing an effective loyalty or rewards program in your retail store. The most successful programs are carefully developed to appeal to a company’s best customers, so it’s crucial to put plenty of thought and planning into the process.


Understanding the Benefits of Loyalty Programs

Before kick-starting a new loyalty program, familiarize yourself with the most compelling benefits of putting one into action. Well-executed rewards programs can encourage loyal customers to spend more, and they can attract new customers with exciting and valuable rewards. They can even bring back profitable customers who have defected to other brands. Such programs provide indispensable insights into customers’ spending habits, and this information can be used to fine-tune your marketing strategy.


Phase One: Planning Your Loyalty Program

The success of your loyalty program hinges on how well you plan it out. The steps you’ll need to take may vary depending on your business, but will typically include:

  • Establish Goals: What are your motivations for developing a loyalty program? If you have a large pool of loyal and profitable customers, your primary goal may be to make transactions with them even more profitable. If you’ve lost previously loyal customers to competitors, your main goal may be to lure them back with targeted rewards. Then again, you might just want to reap the considerable benefits of tracking customers’ purchases and transactions on a more detailed level.
  • Identify Key Customers: Identify who your best customers are. Profitability is what counts here. Just because a customer buys from you regularly doesn’t mean you’re making much off those transactions. The easiest way to identify your most loyal and profitable customers is through a CRM system. This system will also come in handy as you implement and manage your loyalty program.
  • Determine What Customers Like About Your Products: By understanding what your most loyal customers like about your products, you will be able to develop rewards that actually appeal to them. It is crucial to the ongoing success of your loyalty program. While you’re at it, try to figure out which products are typically purchased together. Such insights can help you develop compelling rewards that keep your customers coming back for more.
  • Choose a Program Type: Consider your customers’ spending habits to figure out a loyalty program that best suits their needs. While your loyalty program can and should help you gain important insights, it must be user-centric above everything else. Will your program be available to all customers, or will it be by invitation only? Will customers accumulate points that can be redeemed for special offers? It’s generally best to choose a program that allows you to mix and match various aspects based on customers’ preferences.
  • Decide How You Will Track Participation: What will you do with the information that you gain through your loyalty program? CRM (customer relationship management) software can be used to make sense of it all quickly and accurately. Figure out how you will gauge the success of your program to ensure that you don’t waste time and money for nothing.

Phase Two: Developing Your Loyalty Program

It is where your careful planning will pay off. During the development phase, you will work out the finer details of your program. A few things to consider as you develop it include:

  • Rules: Your loyalty program should include clear, straightforward rules. All employees should be made aware of them. They should also be easy for customers to understand.
  • Reward Currency: How will you reward your customers for participating in your loyalty program? Many companies use gift cards; others have rewards and coupons printed onto receipts. Still, others use electronic coupons or give customers the option of printing out certificates and coupons from home. Choose a currency that is easy to manage. As always, keep your customers’ habits in mind. If they’re not particularly tech-savvy, for instance, it’s probably best to stick with tangible things like gift cards and paper coupons.
  • Communication: Use what you know about your most loyal customers to establish an effective and efficient means of communicating information about the loyalty program to them. These days, many retailers allow customers to create online accounts that can be used to track rewards. If you want to be on the cutting edge, though, consider developing a mobile strategy for your rewards program. It opens up new options such as check-ins and mobile coupons as well. And allows your customer to use his or her favorite device to shop. 

Phase Three: Testing Your Loyalty Program

Even if you’ve planned and developed your loyalty program with extreme care, things can and will go awry in the early stages. Therefore, extensive testing should be performed. Otherwise, you run the risk of never recouping the money you’ve spent, damaging your brand, facing legal trouble or even losing the goodwill of your best customers.

  • Start With a Pilot Program: Start your loyalty program on a small scale by making it available to a limited number of people at first. This pilot program should be offered to your best and most profitable customers to ensure that it’s on the right track.
  • Fix the Bugs: One thing’s for sure: There will be bugs with your loyalty program at first. Work them out before making the program available to a wider audience.
  • Go Live: After testing your rewards program and working out whatever issues you discovered, you’ll be as ready as possible. In the days and weeks leading up to the debut of your program, market it extensively. Have employees promote it to people at checkout, and make sure they continue to do so once it’s gone live.

Phase Four: Managing and Improving Your Loyalty Program

There is no finish line when it comes to loyalty programs. The most successful and useful programs are continually monitored and improved over time. As you gain new information about your customers through their activities with the program, you’ll be able to develop new ways to engage with them to encourage more profitable transactions.

  • Put the Data You Collect to Good Use: The data you gather can be used in seemingly limitless ways. Use it to keep track of which customers respond the most favorably to specific offers. Identify items that are purchased together and use that information to promote cross-purchasing. Create new spend levels and develop rewards that encourage customers to move into them. Develop personalized rewards based on individual customers’ spending habits. There’s no end to the possibilities when it comes to using this in-depth information.
  • Measure Your Results: Never rest on your laurels after implementing an effective loyalty program. Ensure that customers start earning rewards as soon as they enroll. It will give you a better idea of how well your program is working. How engaged are your customers? Are they becoming more loyal, less loyal or staying about the same?
  • Make Improvements and Adjustments as Necessary: With any loyalty program, some rewards and offers will succeed, and others will fall flat. As you measure and monitor your results, adjust and improve your program as necessary to ensure that it keeps delivering benefits for your business.

There’s a lot more to developing an effective loyalty program than initially meets the eye. However, all of the legwork will be well worth it when you’re able to retain your most loyal customers, attract new ones and bring back those who have left. With a well-developed loyalty program, everybody wins: You gain invaluable insights that help you enhance your marketing strategy, and your customers have a terrific reason to remain loyal to your business.


Chris Allen is a leading authority on POS systems and delivering customized value to retail businesses through software. Chris serves as the BePoz Chief Executive Officer, a custom point of sale software provider.