How to Create a Successful Loyalty Program for Your Business

When you think of sport, what companies come to mind? If you want to buy electronics, what store do you visit? If you thought of a specific business, you likely have some brand loyalty. 

Consumers and businesses both know the importance of customer loyalty. Buyers want to shop at stores that offer fair prices and make them feel valued. Sellers want to grow their base of repeat customers. Aligning these goals creates a mutually beneficial situation for both parties. 

Learning how to create a loyalty program is an excellent way for a business to satisfy customers and increase its revenue.

What is a loyalty program?

A loyalty program rewards customers who frequently make purchases from a company. A loyalty platform may give customers free merchandise, rewards, coupons, or even advance access to product releases. Ultimately, loyalty programs must provide enough incentives to prevent consumers from choosing to shop elsewhere.

Which businesses use loyalty programs?

Almost any type of retail or hospitality business can create customer loyalty programs. Here are a handful of industry leaders with notable customer loyalty rewards.

• Starbucks: The coffee company reels in customers via its rewards program that offers free products after spending a certain amount, discount happy hours, and free refills
• Panera Bread: Diners build up redeemable points, a free treat on their birthday, and have access to invitations to exclusive events
• CVS: Known for offering incredibly long receipts, CVS has mastered remarketing by offering discounts for future purchases based on consumer shopping habits^[1]
• Sephora: Cosmetics can be expensive, and Sephora helps shoppers offset this cost by providing discounts, free items, and beauty classes for its members

What results do loyalty programs produce? 

According to Vision Critical, 42% of Americans will stop shopping with a brand that they are loyal to after two bad experiences.

Consumers are not the only ones who benefit from customer loyalty programs. While businesses must pay for the perks they offer customers, they can earn many times more thanks to the increased business. 

Increase revenue and decreased costs

Vision Critical also reports that retaining only 5% of customers through loyalty platforms can increase revenue by 25% to 95%. Moreover, data shows that repeat customers spend more over time. Compared to the value of their first few purchases, these customers spend 67% more after 31 months^[2]. Lastly, it costs businesses 5x more to attract new customers than retain existing customers, so catering to your current base will reduce expenses^[3].

Boost customer sentiment 

A HelloWorld survey found that 61% of consumers see a surprise offer or gift as the most important way a brand could interact with them. Better yet, 79% of consumers will not make a purchase unless companies can show that they understand and care about the shopper^[4]. Implementing a loyalty program will check off both these boxes.

How to create a loyalty program

By now, you should see the value of retaining customers and making them feel wanted. We’ve outlined some steps you should take as you look into how to set up a loyalty program for your business. 

Identify your customers’ needs

Your business offers something unique, so your reward program should as well. You should be looking into how to create a loyalty program that matches your customers’ goals. 

Think about what draws in shoppers or diners. What do they want most? Consumers should not only save money, but they should feel like they are receiving something that few other people can get.

Hospitality businesses may want to offer:

• Discounted or free meals
• Invite-only dining events
• Monthly treats like wine clubs

Retail businesses can offer:

• Expedited shipping for members
• Weekly emails tailored to shopping habits
• A dual pricing model that gives members discounts but requires non-members to pay full price

Determine which rewards structure to use

As you look at how to create a customer loyalty scheme, you will likely choose between the following options. 

Use a simple point system

Most businesses use this type of loyalty program. It is adaptable, easily understood, and can match many business models. 

How it works: Frequent customers earn points, which translate into some type of reward. Whether it’s a discount, a free item, or special customer treatment, customers work toward a certain amount of points to redeem their reward.

However, many companies make mistakes when employing this method. They make the relationship between points and tangible rewards too complex and confusing. A consumer needs to understand how many points they need to redeem a reward. If you opt for a points-based loyalty program, keep the conversions simple and intuitive.

Although a points system is perhaps the most common form of loyalty programs, it works best for businesses that encourage frequent, short-term purchases. 

Charge an upfront fee for VIP benefits

Loyalty programs are meant to break down barriers between customers and your business, so wouldn’t charging an upfront fee be counterintuitive? 

In some circumstances, a one-time or annual fee that lets customers bypass common purchase barriers is actually quite beneficial for both the business and customer. By identifying the factors that may cause customers to leave you can customize a fee-based loyalty platform to address those specific obstacles.

How it works: Businesses implement programs that have different tiers for members. For example, instead of treating everyone as equal, customers are ranked as Bronze, Silver, Gold, and Black members. The business will charge customers different prices for each level with each offering better discounts and earlier access to promotions.

Case Study: Amazon Prime

For an annual fee, Amazon Prime users get free, next-day shipping on millions of products with no minimum purchase, as well as other benefits like access to Prime music & video streaming services.

Why is Amazon a great example? Because it provides enough value to frequent shoppers for them to justify spending more.  Data shows that Prime members spend twice as much per year as non-Prime members^[5]. Amazon gets its customers to become loyal to the brand by providing a perceived economic benefit of shopping with them. 

Use powerful loyalty program software

After deciding which loyalty program model to use, you need to use software to manage your system. Think about what offers you want to provide, the size of your business, and how you may want to adapt your program over time. 

Enhance your customer retention with LoyalZoo 

You can find LoyalZoo on the Epos Now App Store and fully integrate it with your POS. It only takes three minutes to create and launch your program!

With LoyalZoo, you can:

• Create customer loyalty cards
• Send SMS, email, and push notifications
• Personalize your interactions with shoppers

While providing all the benefits we mentioned a few sections above, LoyalZoo reports they have increased customer retention by up to 20% in cases. 

Get customers to sign up

Now that you built your loyalty program, you need customers to join and make use of the perks. Many consumers are skeptical about signing up for new platforms, so you need to incentivize them. 

One method to capture sign-ups is to provide a discount on their purchase in return for joining your loyalty program. This tactic works best at checkout when you can easily input the customer data into your POS.

Tips on making your scheme work

• Target with relevant offers: Once a customer joins your loyalty program, you can send recurring and targeted deals
• Keep rewards achievable: Customers should understand how to reach each goal, and points should not expire too quickly
• Send offers sparingly: Marketing to your loyal customers is excellent, but make sure you do not spam your members. Typically, send more emails than SMS messages, and use push notifications for urgent offers to capitalize on the fear of missing out

Take your business to the next level

Loyalty programs work, but it takes more than only printing a loyalty card. A business must use its reward program to make customers feel valued. Even more, it needs to leverage data to ensure customers only receive relevant offers.

With the Epos Now system and LoyalZoo integration, you can reward frequent shoppers and improve your customer retention. 

Call our sales representatives to see how to create a loyalty program that leverages the power of Epos Now.