Loyalty programs are a popular way to reward your customers and increase their retention. But how do you make sure your loyalty programs work? How do you design, implement, and measure them effectively? In this article, you will learn some best practices for creating and managing loyalty programs that deliver value to your customers and your business.
Before you launch a loyalty program, you need to define what you want to achieve with it. Do you want to increase repeat purchases, referrals, feedback, or engagement? Do you want to reduce churn, acquisition costs, or support requests? How will you measure your success and ROI? Having clear and specific goals will help you align your loyalty program with your overall customer experience strategy and avoid wasting time and resources on ineffective or irrelevant rewards.
An effective loyalty program connects with the underlying essence of the brand and closely harmonizes with its core mission. Chipotle's Rewards program is an example of this: Their program seamlessly aligns with the brand commitment to delivering fresh food from natural ingredients in an environmentally responsible manner by promoting sustainable products and facilitating charitable contributions to its farming partners. Also, a loyalty program should be aligned with the overall customer experience strategy, to ensure a seamless and consistent experience. Taking the time to define clear and specific goals ensures that your program's efforts are well-focused, impactful, and aligned with your broader business objectives.
Another key factor for a successful loyalty program is knowing your customers and what motivates them. You need to segment your customers based on their behavior, preferences, needs, and values. You also need to research what kind of rewards they want, how they want to redeem them, and how they want to interact with your program. For example, some customers may prefer points, coupons, or cashback, while others may value experiences, recognition, or social impact. Some customers may want to use a mobile app, a website, or a card, while others may prefer email, SMS, or chat. By understanding your customers, you can tailor your loyalty program to their expectations and preferences.
A good loyalty program should leverage data to craft personalised offers, incentives, and benefits to customers. Sephora's Beauty Insider program is a good example: it furnishes rewards structured around tiers and tailored advantages that empower members to choose their own rewards, such as complimentary samples, birthday gifts and more. This is based on customer's past behaviours and preferences which can only be known by harnessing customer insights and data. When designing a loyalty program think of which type of program best suits different customers and their needs.
A loyalty program that works is one that offers value and variety to your customers. Value means that your rewards are relevant, attractive, and easy to access. Variety means that your rewards are diverse, flexible, and personalized. You can offer value and variety by using different types of rewards, such as discounts, freebies, upgrades, access, or donations. You can also use different levels, tiers, or gamification elements to create excitement and challenge. Moreover, you can use data and feedback to customize your rewards based on your customers' behavior, preferences, and needs.
An effective loyalty program adds value to its customers. It places emphasis on offering a combination of both tangible benefits and intangible ones. The tangible ones can be high-value points, price reductions, gifts, early access to sales, complimentary services, etc. Intangible benefits encompass status, admiration, a sense of belonging, shared purpose, acknowledgment, pride etc. For example, Ben & Jerry's instills a sense of purpose and pride alongside with discounts and complimentary ice cream. The brand not only offers social justice-themed ice cream flavors but also contributes to charities that champion issues like racial justice, LGBTQ+ rights, and climate change and helps their customers do the same.
A loyalty program that works is one that communicates and educates your customers. Communication means that you inform your customers about your program, its benefits, its rules, and its updates. Education means that you teach your customers how to use your program, how to earn and redeem rewards, and how to get the most out of it. You can communicate and educate your customers through various channels, such as email, SMS, social media, or in-store. You can also use incentives, reminders, tips, or stories to encourage and inspire your customers to participate and engage with your program.
A loyalty program that works is one that tests and optimizes its performance. Testing means that you experiment with different aspects of your program, such as the rewards, the design, the mechanics, or the delivery. Optimization means that you analyze the results of your tests, identify what works and what doesn't, and make changes accordingly. You can test and optimize your loyalty program by using tools such as surveys, analytics, A/B testing, or user feedback. You can also use benchmarks, best practices, or case studies to compare and improve your program.
A/B testing is the holy grail of marketing. Most importantly make sure that the loyalty program is simple, frictionless, fun and with seamless integration across touchpoints. Starbucks is a great example: it provides a dedicated app through which customers can place their orders ahead of time, bypass waiting lines, facilitate payments, and promptly accrue and utilize rewards. Within the app, customers can access complimentary games and music, alongside personalised promotions and additional benefits.