Tips on Creating Successful Loyalty / Rewards Programs

Here are a handful of tips on how a customer rewards program can work in your business.

1. Start by Building a Database

Every good retention program begins with a database of your customers who share information with you during enrollment. By compiling customer data throughout the life of your program you can tailor your offers based on their past preferences and purchase histories. If your original database contains a large number of lapsed customers, offering an instant reward on activation (when they make their first purchase) is a great way to bring them back.

Another concept that can be used to quickly build your database with Rewards members can come from artificial advancement. This technique gives your customers the illusion of a head start in the rewards program. Instead of buying 8 items to get their first freebie, require 10 purchases and give them a 2 purchase head start. The customer will still have to purchase 8 items but will get the impression they are automatically closer to the goal.

Also, decide what minimum pieces of information will be needed for your customers to sign up. The more information you can get from your customers, the more you will be able to analyze and market to the customer later via channels like mail, email, telephone, etc.

2. Issuing a Customer Loyalty/Member Card

You will need a way to quickly identify the customer at the point of sale so that reward points can be assigned to the customer who has signed up for your rewards program. Although it is not absolutely necessary to provide a physical ID card to identify the rewards member, it is more important than you think.

Providing your customers with some type of membership card becomes a constant reminder to them of your business in their wallets. It also makes the rewards program feel more meaningful to your customers and lets them know they belong to something special.

It is very important that these customer loyalty/member cards be stamped in some manner with a unique Id number. Even better would be an Id number which is printed on the card as a bar code. This will help tremendously at the point-of-sale.

We personally recommend you consider making the small investment to order pre-printed plastic loyalty cards versus cheaper paper business Id cards. But the choice is yours.

Just remember that these loyalty cards represent a Customer Id that they can keep in their wallet and hand to you at the point of sale for collecting their reward points. This is where it all starts after all.

3. Raise Customer Expectations

The best programs build excitement by letting customers know exactly what rewards they can expect and how to earn them. For example, suppose you were shopping online and one site promised future savings if you signed up for a rewards program but didn’t convey exactly what you might earn, while a second site offered a gift with purchase at enrollment or a bonus after the third buy. Wouldn’t you find the site with the clear rewards more enticing?

4. Offer Graduated Rewards and Soft Rewards

To stimulate maximum participation in your program, make your rewards readily obtainable – and graduate them so that you transform a higher percentage of your customers from low-value to high-value customers. This will avoid the pitfalls of programs that reward primarily on enrollment, which tend to attract low-value price switchers who join to take advantage of first-time buyer rewards.

However, don’t make the mistake of making the reward too far reaching. If it takes way too many purchases for the buyer to see the reward benefits, they will quickly lose interest.

It is also important that you think outside the box when it comes to reward offerings. It’s not always about giving a free product or heavy discount that will bring customers back. Offering Soft Rewards (i.e., psychological or emotional benefits) can also be a great way to reward your best customers too. For example, you may open the store one hour early for your customers who have reached a certain reward point total. On your busy days, you might provide a VIP quick service checkout lane for your best customers.

5. Provide Rewards that Drive Business Back to You

Suppose you owned a neighborhood music store. Which would compel customers who earned rewards to come back and buy from you (rather than the superstore around the corner) – two free movie tickets or a 20 percent bonus on their next CD purchase in your store?

The bonus on their next CD would bring them back to make a subsequent purchase and make the program itself more memorable because the reward would be associated directly with your product. Best of all, the 20 percent bonus would represent real value from the customer’s perspective while your cost would be minimal.

Rewards that send a customer elsewhere or send them something in the mail are usually not the kind of rewards that help promote traffic to your business. Consider your rewards carefully for maximum benefit to your establishment.

6. Plan Out Your Reward Program Carefully

Before you begin work on a loyalty program, determine what motivates your customers. Consider the income level of the group you are trying to target. Are you trying to shift an occasional shopper into a higher-value category, or are you simply trying to hold on to your mid- to high-volume customers? This will help you determine your plan.

To best uncover what motivates your customers, try the obvious: Ask them in a simple e-mail survey. Listen to what they tell you.

Plan out how a customer will receive reward points that lead to your soft/hard bonuses. The reward points will act as your measuring stick for how much business a customer is doing with you. You can either provide points based on dollars spent or points based on specific products they purchase.

Each business will vary with how points are issued, so there is no right or wrong strategy here. However, make sure you don’t come up with a rewards program that you cannot easily change later.

If you change your rewards program too often due to poor planning, you may be forced to wipe out existing members accumulated reward points and start over each time. This might undermine your rewards program and create some degree of negative reaction from enrolled members.

Best practices are often 1 point to one dollar spent concepts or 1 point per quantity of a specific priced item.

7. Create an Ongoing Dialogue

Use your rewards program to send follow-up mailings after each purchase. You can communicate frequently to introduce new perks and special offers thanks to the affordability and quick implementation of email campaigns. You can enroll customers at checkout then communicate about rewards via email or direct mail. Since customers are actively interested in news about their rewards, they’re receptive to maintaining ongoing interaction – which ultimately leads to more sales.

8. Develop Reward Programs Tailored to your Customers

In order to be effective, a loyalty program’s structure, reward offerings, and communications must be relevant and specific to your targeted audience, based upon their attitudes, behaviors, and demographics. Catering a rewards program that provides unique benefits to your best clients will not only build strong loyalty, but will also provide incentives for your other customers to want to shop more often with you to reach a higher status with your establishment.

For example, you might want to setup two types of reward memberships– call it “Silver” and “Gold” membership. Customers who reach a certain number of total reward points during the year can be automatically elevated to a Gold membership status (in ManageMore, this could be accomplished by changing the customer class code). This elevated status can provide deeper discounts on certain items you sell and/or provide a better bonus offer when the customer reaches their reward goal.

Customers love to brag about reaching special membership status that provides them incentives that only few are eligible for. This form of self-accomplishment ultimately brings you repeat business and more referrals in the long run.

9. Testing the program

Before you undertake a widespread implementation of your customer loyalty program, it’s often a good idea to test it with a select number of existing customers and/or focus groups. The test phase allows you to test your introduction method, reward mix, and payout structure. This can be an invaluable tool to providing much needed feedback, helping you tweak the program to meet the needs of your most valuable customers and rewarding their best behaviors.