What is a Loyalty Rewards Program? Companies offer a rewards program to customers who make regular purchases at their establishment. The loyalty program may provide customers with free merchandise, coupons, advance-release of new products, or other rewards.

The Loyalty Report 2017, in collaboration with VISA, studied the behaviors of over 28,000 North American consumers and found that the average consumer joins around 14 loyalty programs. However, in half of these programs, they simply join and then ignore the company, letting their membership card get lost in the stack of cards in their wallet. Meanwhile, companies waste time and money on a customer that could have been truly loyal, but just isn’t.

So how can a business ensure that they are in the other half of loyalty programs – the ones with which consumers regularly engage? Below are eight tips for building an effective loyalty rewards program that offers actual value for your customers.

One: Point System Loyalty Programs

Most companies simply use the point system program, since it’s easy to implement and easy to use. Customers receive points for purchases, which can be used for rewards. Rewards vary and can include a discount, a free product, or special treatment, for example. Plus, there are typical different levels, like 100 points earn customers one reward, but they can get a much better reward for 500 points.

Many companies lose customers by making the point system method too complicated. The system is so complex that customers don’t understand the relationship between earning points and receiving tangible rewards. If you do opt for the points system, keep it simple and make the conversions obvious.

Point system loyalty rewards programs don’t work for every type of business. It’s best for companies with frequent, short-term purchases, like grocery stores or gas stations.

Two: Tier System Loyalty Rewards

Some companies have trouble designing a loyalty program which offers a balance for consumers between rewards that they can attain and those they desire. A tiered system is an effective solution to this problem. It rewards a customer’s initial loyalty while encouraging future purchases.

In a tier system, new members enter the program on what is considered the baseline. They will immediately receive small rewards as a “thank you” for joining and an encouragement to continue in the program. As they continue to make purchases, these loyalty rewards members will move up to higher levels in the program, with each level offering more valuable rewards.

Sometimes loyalty members forget about their points and never actually redeem them. This often occurs when there is too long of a time between making purchases and receiving the rewards. Typically, this does not occur in a tier system loyalty program.

Tiered programs work best in high commitment, higher price-point businesses, such as airlines, hospitality businesses, and insurance companies.

Three: Savings Card Discount Program

A unique and relatively new loyalty rewards program is to offer your customers a savings card. With a customer appreciation card, you can reward the customers you select with the ability to save money throughout the year with a variety of discounts.

Discounts could include savings such as:

  • Buy one get one free dining deals
  • Up to 50% off at name brand stores
  • Discounts on hotels and car rentals
  • Free appetizers at major restaurants
  • Buy one get one free movie and game rentals

These customer appreciation cards feature your company logo, allowing you to share your brand as you express your gratitude. Each card is active for a year, so your customers will have plenty of time to access discounts to restaurants, stores, and businesses. Many of the discounts are for locations that they visit regularly anyway. Customers have access to both local and national locales, both online and off.

Savings card discount programs are beneficial because they allow you to offer a long-term token of appreciation to customers that you feel are truly loyal to your company. The rewards are numerous and extend across a variety of mediums, giving your customers the option of choosing which reward is best for them. Customers can use the card once a month or every day, making your business a constant reminder in their wallet.

This type of loyalty program is effective for small business owners, property managers, realtors, insurance agents, and accounting firms.

Four: VIP Benefits for an Upfront Fee

Loyalty rewards programs are meant to be a gift to customers in appreciation of their service. If this is the case, then why would you charge them to be in the program? Some loyalty rewards programs actually work best with a one-time (or sometimes an annual) fee, which allow customers to bypass certain barriers.

If you can uncover reasons that customers leave, you can prevent future instances through a fee-based program which addresses those obstacles. For instance, Amazon noticed that consumers were abandoning items in their shopping cart, typically after beginning the checkout process. They uncovered that this was most likely a result of consumers being unhappy with taxes and shipping prices. However, by using a loyalty program with an upfront fee, they were able to address this issue and develop a large following of loyal repeat consumers.

A VIP program with an upfront fee works best for organizations whose customers make frequent, repeat purchases. The fee offers VIP status, which can remove inconveniences such as shipping costs, long delivery times, or other problems. While Amazon has perfected this model in an ecommerce platform, it can effectively be applied for storefront businesses.

Five: Non-Monetary Programs

A company that has a good understanding of its customer base can make a huge difference while drawing in loyal customers. The idea of sharing the same values as a company can improve a customer’s interest in that organization.

The Harvard Business Review published a study by a Corporate executive Board (CeB) of 7000 consumers across the United States, United Kingdom, and Australia, stating that “Of those consumers who said that they had a strong brand relationship, 64% cited shared values as the primary reason.”

This type of loyalty program doesn’t work for all types of businesses, but in some cases, your customers may find more value in non-monetary programs. A company that can provide a program to the customer which projects specific, shared values can be successful. These customers typically respond best to receiving benefits other than those that come in dollars or discounts.

Six: Partner With Another Company

Companies often overlook the under-utilized, but highly effective option of strategic partnerships. You can’t just join forces with another company at random, but should research various other organizations in a variety of industries in addition to developing a deeper understanding of your customers.

For instance, a pizza place might partner with a video store or a local coffee shop might join forces with a book store. The idea is to offer co-branded discounts that mutually benefit both businesses as well as your customer. This type of marketing method shows that you are considering your customer’s needs and that you care about them.

As an added bonus, your brand will be exposed to new customers who shop at the company you partnered with. You will grow your network and increase loyalty among these new customers and your own regular consumers.

Seven: A Fun, Engaging Game

Turning your loyalty program into a game is a great way to interact with your customers while influencing both engagement and buying patterns. A gaming-style loyalty program, if well designed, can also solidify your brand’s image.

Some customers may perceive your game as a tease or a fake method of trying to gain business, like some other sweepstakes or contests. To prevent this, go over the top to ensure that your customers don’t feel like you’re trying to swindle them. Discuss your options with your company’s legal department and create attainable purchase requirements and odds.

Ideal execution is essential for this loyalty program option to be effective. Gaming rewards can be utilized by a whole range of companies and brands. If your customer base enjoys having fun and makes frequent purchases, then this type of loyalty program can improve engagement and increase buying activity.

Eight: Be Generous

Some customer loyalty programs are simply a scheme to encourage customers to buy more and more. Programs like these will eventually fail. However, if you are genuinely generous and actually reward your loyal customers, they will not only stay, but they will also spread the word to others.

Your customers shouldn’t have to spend a lot in order to receive cheap rewards or small discounts. Instead, wow your customers with rewards that they aren’t even expecting at purchase levels that are surprisingly close together. Show your appreciation in a tangible way and impress consumers with a loyalty program that they will want to join.

Conclusion

Building a loyalty rewards program can be done in a variety of ways. Regardless of which type of program you select, it is essential that you represent your brand in a positive manner and show your appreciation to your loyal consumers in a concrete way. Be careful not to appear as if you are conning customers in an attempt to get them to buy more. Instead, truly offer rewards in an honest and upfront manner to maintain your loyal clientele and earn the loyalty of even more consumers.