How to Create a Loyalty Program – Rewards Program Ideas for Your Business
So, you want to create a customer loyalty program for your business. Where do you start? There’s a lot to consider, like goals, budget, rewards prizes, generating awareness for your loyalty program, and much more. So, let’s take it from the top.
What is a Loyalty Program?
A loyalty program is essentially a strategy that incentivizes customers to keep buying from or doing business with your company by giving them something that they want, like discounts and free merchandise. The goal of most loyalty programs is to improve customer retention and engagement.
Types of Customer Loyalty Rewards Programs
There’s more to loyalty programs that your standard punch card that gets you a free meatball sub after your tenth order. Here are a few ways you can structure your loyalty program:
Account-Based Loyalty Program
If you run an ecommerce business this is probably the best format for you. Customers are instructed to create an account before purchasing online and can view their rewards points balance within their account. This format is popular with airlines, credit card companies, and companies with B2B models.
App-Based Loyalty Program
You simply download an app on your phone or tablet, and you earn rewards points by making purchases through the app or presenting a QR code within the app for an employee to scan. This loyalty program format is especially popular with restaurants and is less ideal for B2B businesses.
Swipe Card Loyalty Program
Just like it sounds, you provide customers with a card that they swipe before a purchase to earn rewards or apply discounts. These are especially popular with gas stations, grocery stores, and retail stores with lots of locations and lots of competition. This rewards program format is obviously only ideal for brick and mortar stores over ecommerce businesses.
Steps to Creating a Loyalty Program
This is why you’re here, isn’t it? Every loyalty program is unique to the company running it, but here’s a roadmap you can use to make a customer loyalty program that’s ideal for your business.
Decide Your Goal Action
Why are you creating a customer loyalty program anyways? What actions are you trying to get your customers to engage in? Possible goal actions of a loyalty program could include the following:
- Spend more money per order or visit
- Purchase a specific product for inventory or pricing purposes
- Visit your business or place an order on your website more frequently
- Refer potential future customers to your business
- Follow your social media accounts or share your content
Once you determine the goal actions for your loyalty program it will be much easier for you to determine your budget, program name, and rewards prizes.
Establish a Budget
Kicking off a customer loyalty program isn't free, so unless you've got tons of money to burn, you should determine a budget for your program. Here's some expenses associated with starting a loyalty program to consider:
- Cost of promoting and building awareness for your rewards program.
- Cost of developing mobile application or website functionality for your program.
- Cost of swipe cards or punch cards (B2C only).
- Cost of custom branded merchandise to use as rewards prizes.
- Reduced profits from discounted orders if you choose to give discounts rather than merchandise.
Set Goals for Your Loyalty Program
Now that you've got the budget nailed down its time to determine some overall goals for your loyalty program. An initial goal to consider is simply the number of customers that you want to participate in the program within a certain amount of time. Afterall, the main goal of a loyalty program is customer retention and that can't be accomplished without participation! After that, come up with some more detailed goals associated with orders, added revenue, and other metrics specific to your business.
Name Your Rewards Program
Come up with a memorable name for your loyalty program that captures the spirit of the program. Some examples? Delta SkyMiles, Target REDcard, Amazon Prime, and Merchology MerchPerks.
Create a Points System
You can set up your loyalty program in a simple way, whereas you must spend a certain amount of money to qualify for various rewards prizes or discounts. For example, many airlines rewards programs will offer you 5 free miles towards your next flight for every dollar spent on your ticket.
Another, more complex way to structure your loyalty program is to reward a variety of actions with points. Obviously, spending money with your business should earn the most rewards points, but you could also give customers points for things like:
- Signing up for your email newsletter
- Following your social media accounts
- Referring a friend to your business
- Signing up for a re-occurring order
Rewarding online engagement is a fantastic way to connect with your customers on a deeper level while improving both customer loyalty and retention!
Offer Added Benefits in Addition to Prizes
Everyone loves free and discounted merch, but it’s a good idea to create a deeper meaning for your loyalty program than simply saving money. For example, you could offer members of your rewards program free expedited shipping or early access to limited sales and promotions!
Inform Customers About Your Loyalty Program
There are a few different strategies you can take to inform your customers about your loyalty program, but you should first and foremost create a webpage explaining all the details of your rewards program that you can direct your customers to. Then you can tell customers about your loyalty program through email, social media, or at the time of sale either in person or on your checkout page.
Engage Your Customers
A loyalty program is only effective if your customers are actually engaging with it, so be sure to keep them updated without overdoing it! One way to accomplish this is to send them updates via email or with a push notification to their phone when they are getting close to hitting a rewards tier. You should also notify customers if their points are about to expire or if you make changes to the program.
Popular Loyalty Rewards Prizes
You can show your customers that you appreciate their business in a wide variety of ways. When it comes to loyalty rewards prizes, a common approach is to offer tiered prizes based on how much they spend and what other goal actions they engage in. Once you determine your point system and the tiered prize levels, you can fill those tiers with discounts on purchases, services, or custom merchandise with your company logo.
Discounts on Future Purchases
One form of loyalty rewards is accruing points that can be used to qualify for a discount on future purchases. This is the model that swipe cards and punch cards typically follow. This model can also be used for ecommerce companies as well, like saving up airline miles for a discounted flight.
Free or Discounted Service
If your company is in the business of providing services, like oil changes or haircuts, then it could be smart to offer a service instead of or in addition to custom merch. For example, you could set up an incentive program for your salon and spa business offering a free massage after 10 haircuts or 5 color services.
Custom Logo Merchandise
The most popular rewards for a loyalty program are complimentary gifts, usually with the company logo either custom printed or embroidered on the product. It just so happens that that's exactly what we do here at Merchology, so it's only fitting that we would use custom merch for our customer loyalty program too! Here's a look at some of the loyalty rewards that we offer to give you some ideas on what to use for your own program.
Note: the images seen here are from our loyalty program, your products would be decorated with your company logo or custom design.
Custom logo water bottles, tumbler cups, and coffee mugs make fantastic loyalty program rewards! Why is that? Well, literally everyone drinks water and you don't need to determine sizing beforehand. Plus, with Merchology you can get personalized drinkware from top brands like YETI, S'well, and Nalgene.
Here's a product category that's sure to be a hit for your loyalty program. Everyone loves new gadgets and tech and look how great custom printed logos look on custom bluetooth speakers, portable chargers, wireless headphones, and fitness trackers! Be sure to check out customizable electronics from Apple, Amazon, Google, Sony, Fitbit, Beats by Dre, JBL, and Bose!
Custom hats with your embroidered logo are an awesome low-tier rewards prize for you loyalty program. They're cheap, easy to decorate, and are a great way to promote your brand. Some of our most popular custom hat brands include Under Armour, Richardson, New Era, and Nike.
Who doesn't like some free swag? Custom branded clothing is a great addition to your loyalty program rewards prize collection because there so many options. You can easily sort various garments into prize tiers based on cost. Take it a step further by offering your customers apparel brands they know and love, like Patagonia, Nike, Under Armour, Carhartt, and The North Face.
There's so much more that we could list, but you could really include just about anything as a loyalty reward! Some of our most popular loyalty program products that aren't already listed include personalized notebooks, embroidered bags, and custom printed golf balls.
Benefits of a Customer Loyalty Program
So, now you've got the "how" covered, but what about "why"? Here are the main reasons why businesses decide to roll out a customer loyalty program.
Improved Customer Retention
Simply put, the cost of acquiring a new customer is typically much higher than retaining a current one, so businesses should do everything in their power to make their customers want to come back again and again.
Positive User Reviews
Potential customers almost always read reviews before making a decision to purchase your product or service. Also, consumers trust other consumers more than anyone else, and building a relationship with your customers will result in improved reviews. You can also incentivize customers to leave a review by offering rewards points for doing so.
Customer Referrals and Recommendations
This is a similar thought to the last point, happy customers that feel a connection to your brand will tell their friends, family, and co-workers about your company if they are in need of a product or service you offer. It's also a great idea to offer additional rewards points for referring a new customer that places an order. For instance, you could offer your customers one point for every dollar they spend, 20 points for referring a friend, 2 points for leaving a review, and 1 point for following your brand on each social media platform.