Did you know it is 5 to 25 times more expensive to acquire new customers than it is to retain existing ones? On top of that, a 5 percent increase in customer retention enhances profits by 25% to 95%. In light of these findings, small businesses must consider what they’re doing to keep their existing customers interested in their business.
Enter a customer loyalty program.
Simply put, a customer loyalty program is used to engage and reward existing customers to boost their experience with a company, and encourage repeat purchases. It usually involves giving repeat customers special offers, discounts, coupons, rebates or freebies. When executed properly, a customer loyalty program can be a significant driver of sales.
A checklist to create an effective customer loyalty program
To create a successful customer loyalty program, incorporate the following factors into your strategy:
1. Research and planning
The first step in developing a customer loyalty program includes research and planning. Explore the habits of your existing customers, what inspires them, and what they love about your business. This information can be gathered through a variety of tactics, from conducting online surveys to analyzing their purchase history. Once you’ve gathered those valuable insights, you’ll be in a better position to identify your most valuable customers, whom you can reach out to with an appropriate loyalty program.
2. Choosing a type of loyalty program
Because loyalty programs take several forms, you can set up a cost-effective, easy-to-manage customer loyalty program that engages your existing clientele. Here are a few options:
- Sign-up rewards program: You can display a sign-up form on your website and product pages. In exchange for customers’ emails, you’ll promise to send regular newsletters and rewards only redeemable by loyal customers.
- Punch card freebies program: The old-fashioned punch card works well for businesses like beauty salons and eateries. Customers can use it as a token to earn rewards after they’ve shopped from your store a certain number of times.
- Social media engagement program: A loyalty program doesn’t have to be based on actual shopping. Businesses can utilize social media, letting customers earn points for engagement, which can be measured by the number of shares and comments. You can then reward those who earn the most points (most loyal fans) with benefits that matter to them.
- A tier-based program: This type of program tracks purchases as a measure of loyalty. Customers are rewarded for their initial purchase and their rewards include as they move up the loyalty ladder. People are placed into different levels based on the number of purchases they’ve made, and each level receives different rewards. This type of program incentivizes more and frequent purchases.
The behavior of your customers should dictate the type of customer loyalty program you implement and the sort of rewards you offer. Select the one that most closely aligns with your business values so that regular customers will be interested.
3. Rules that protect your business
Define rules for your customer loyalty program in order to protect your business. It’s best to specify a few, simple rules and not make it confusing for the customer. For instance, you can state that rewards are non-transferrable or that points can only be redeemed for products (not cash). Be transparent by letting people know about these rules before they join your loyalty program.
4. Promotion of the program
Don’t just announce the loyalty program and disappear! Inform your customers about your rewards program and ask for their feedback. For instance, you can promote your loyalty program through email marketing by advertising it in your newsletter. Leverage all offline and online channels at your disposal. If you haven’t created a Facebook Page for your business, your customer loyalty program is a great reason to get started.
With the right steps, a loyalty program could be a powerful customer retention tool for your business. Try out different rewards and programs to see what’s best for your business. And don’t forget to listen to your customers – their feedback will allow you to tailor your loyalty program for maximum engagement and long-term retention.