If you do not give your customers a reason to keep buying from you, you may lose them to your competitors. This is why it is important to encourage new customers to repeatedly pay for your product.
Customer Loyalty Programs can help you achieve this. A study reported that 40% of customers are likely to make repeat purchases from brands that reward loyalty.
In this article, we'll explain some ways that you can use a customer loyalty program to retain your best customers. We've also included some examples of loyalty programs to inspire you as you build a strategy for your business.
Table of contents
- What is a customer loyalty program?
- Types of customer loyalty programs
- How to retain customers with loyalty programs
- Wrapping up
What is a customer loyalty program?
A customer loyalty program is a system that's centered on offering rewards to loyal customers who make repeated purchases. From a business standpoint, it's a strategy to retain existing customers and encourage them to repeatedly pay for your product rather than going to your competitors.
Using this strategy is a great way to build trust between a customer and a business. According to a customer trust report by Salesforce, 95% of customers say that trusting a company builds their loyalty.
Customer loyalty programs are no longer an option, they are crucial to retaining your best customers and driving more income. In the next section, we'll go through 5 types of customer loyalty programs and some examples for inspiration.
Types of customer loyalty programs
1. Points redemption program
In the points redemption program, loyal customers earn points that can be used as rewards like a discount code, coupons, or any other type of special offer. The best way to use this strategy is to make it simple and intuitive. Don't offer a points redemption system that can confuse customers, making it difficult for them to participate in the program.
Evernote shows an example of a points-based loyalty rewards program.
The cloud-based collaboration tool has a three-step referral program:
- You send an invite to a friend to sign up for the tool. If the person accepts the invitation, then you both earn 10 points.
- The points earned can be used to sign up for a premium plan — 10 points translates to 3 months of a premium plan.
- If the person you have invited upgrades to a premium plan, you get 5 points.
As you can see, this point-based referral program is simple and intuitive. No complicated process for customers.
2. Mission-driven Customer loyalty programs
Love to be part of a positive cause? If yes, then you will love this customer loyalty program. This strategy is centered on making your loyal customers feel like their consistent payment for your product helps to make a positive impact in the world.
Whereby shows a great example of this type of customer loyalty program. The video meeting software has committed to promoting a climate positive lifestyle by planting a tree for every video meeting that happens on its platform. The company made this possible by partnering with an organization called Brynk to plant trees on its behalf.
There's no doubt that the company’s efforts to support this positive movement have truly paid off. So far, Whereby has reached its goal of planting 1 million trees!
Customers who are advocates for positive climate change can easily relate to this strategy and be incentivized to participate. As customers use more of the product, it creates a positive impact by making customers feel like they are part of a good cause.
3. Refer a friend
Referral programs are arguably the most common type of customer loyalty program. This type of rewards system focuses on rewarding customers for referring their friends and family members. This way, you can turn loyal customers into your brand advocates.
Dropbox shows an example of using a great referral program. It rewards customers by offering an extra 500MB of storage for every person that they invite.
A customer can get up to 36 GB of additional storage and each person that accepts the invitation will receive up to 500 MB of storage. There's no doubt that this strategy works. Dropbox's referral program has resulted in 3900% growth in 3 years.
4. Influencer programs
The influencer programs are similar to referrals, but with a twist — the rewards cover unique gifts and products instead of discounts.
Drift shows an example of a great influencer program.
The platform gives exclusive prices like Adidas jackets, free lunch with its founders, and a sticker pack to its influencers according to the number of referrals that they have.
This type of referral program may not be ideal for every business. So, consider testing this strategy to figure out if it will work for your brand and customers.
5. Community programs
This type of customer loyalty program is different from the rest — there are no discounts, freebies, or branded gifts. It focuses on connecting like-minded customers to interact with and learn from each other. This is a great way of showing your loyal customers that you value them and you're focused on helping them to succeed.
This community program can help customers share product feedback, ideas, and insights on market trends. Customers wouldn't hesitate to join a community that adds value to their lives and business. So, ensure you build a community that's unique and valuable.
How to retain customers with loyalty programs
1 . Know your business goals
Before you begin a loyalty program, you need to set clear goals and expectations on what you want to achieve for your business. Create a detailed list of your company's objectives, highlighting customer expectations, behaviors, and current market conditions.
When choosing a goal, make it specific. Do you want to run customer loyalty programs to increase income? Or incentive repeat purchases? Ensure that you have a clear idea of your business objectives throughout the loyalty programs.
2. Understand your customers
Your loyalty programs will be less effective if you don't understand your customer's unique needs and preferences. You need to dig through your customer data to uncover key details about your most loyal customers and what would entice them to keep buying from you.
With this information, you can implement a successful customer loyalty program that reflects what your customers would be interested in.
3. Provide value for your customers
One mistake you can make when running a loyalty program is to focus solely on your business goals. This kind of mindset can prevent you from providing value to your customers.
Besides, customers are smart buyers and will easily detect a deal that is driven purely by a selfish motive. The best way is to make customers feel like they are getting something valuable. For example, you can offer bonus points each time a customer makes a particular purchase.
This is a type of reward customers can use for other purchase purposes.
4. Offer an incentive
At the beginning of your customer loyalty programs, customers may need an incentive to participate. Consider offering a welcome discount or a freebie to encourage customers to participate in the loyalty program.
5. Become data-centric
Customer data is a key element that can completely transform the entire trajectory of your customer loyalty program. Don't choose random tactics that may not be valuable to your customers and business.
Instead, let your decision be backed up by data that reveals the result of your marketing efforts. For example, you can analyze sales data. Take note of how many sales increased because of a particular coupon that was used. Weigh this information against the result that you would have gained if the coupon was never used in the first place.
6. Use technology for an improved experience
The use of technology can ensure a seamless experience in your loyalty program. What matters is that you choose the right marketing tools that will help you to improve the customer experience.
For example, you can incorporate an SMS feature in your loyalty program so customers can be notified of rewards sent directly to their phones. Or you can use in-app notifications to deliver gifts and discounts to your customers as they use your product.
Engage's messaging features can help you to get started on this. With Engage, you can send SMS, in-app notifications, and email to deliver personalized messages for your loyalty programs.
Customer Loyalty Programs are a great way to improve your customer retention rates, improve customer service and encourage brand loyalty.
Use customer data to guide you as you build a strategy for your customer loyalty program. This way, your strategy will be driven by a genuine motive that reflects what your customers are interested in.
At Engage, we believe customer data is a gold mine you can tap into when driving retention with customer loyalty programs. By connecting your database through API or SDK, you get to send automated messages to segmented customers for your loyalty programs, through Email, SMS, Push Notifications, and In-App messages that help to grow and retain customers.