Most small businesses take the time to think about creating some type of customer loyalty program. However, very few put together an actual plan to create and maintain the profitability of their program.
Creating a loyalty program with the power to keep customers coming back is a great way to drive profits. However, if it’s not done correctly, it may just be a hassle you’d rather forget about.
What’s the Value of a Customer Loyalty Program?
Every business focuses on two major points with customers: attracting new customers and retaining current customers. Even though finding new customers may seem like a pressing need, retaining current customers should be the most important goal of every business.
Most businesses spend a significant amount of money to obtain a new customer compared to getting an existing customer to make another purchase. In addition, current customers are more likely to spend more money than a new customer. Focusing on keeping current customers happy may be the fastest way to grow your company’s profits.
With the right type of customer loyalty program, you can not only keep your existing customers happy, but also get them to spend more money with you. Setting up a solid program with a good plan will help encourage repeat purchases now and over the long term of your business.
6 Tips to Help You Create an Effective Loyalty Program
According to the Colloquy Census from 2015, an average family in the United States is a member of 29 different customer loyalty programs and active in about 12 of them. Most customer loyalty programs are not doing enough to keep these consumers engaged, which is simply a waste of money and time.
Keeping your customers engaged in your loyalty program doesn’t have to be difficult. Here are a few ways you can create and maintain an engaging customer loyalty program for your small business.
Keep the Program Simple
If your program is hard to understand, customers won’t participate. The best loyalty programs use a simple point system assigning a certain amount of points for every dollar or every $100 spent. This is the easiest way to show the rewards your customers can enjoy.
Clearly outline the point system including how points are earned and how they may be redeemed. Something as simple as a system giving customers one point for every dollar they spend may be all you need. Then, explain how these points can be redeemed, such as for every 500 points the customer receives a $25 gift certificate.
Make your Program Elite
Not all businesses will be able to provide an elite program, but if your industry supports it, you can use this to your advantage. You can charge an upfront fee to enhance the quality and get your customers to be more active in the program. If they pay even a small fee upfront, they are more likely to use the program because they are invested.
A good example of this is a movie theater rewards program offering 1 point for every dollar spent. It costs $12 to join for a year and gives members benefits, such as $5 movie tickets on Tuesdays, upgrades at the concession stand and a $10 gift certificate for every 100 points earned. Since there is an upfront fee, members are more likely to use the program to earn back their $12 and more.
Set Clear Goals
Of course, any new program needs clear goals set for it to succeed. If you want to use your customer loyalty program effectively, you need to set company-specific goals for the program. This will benefit you and your customers as you strive to reach the goals.
Seek Input from Different Departments
Often, companies set up loyalty programs without considering what other departments may think about the program. Getting input from the customer service team, advertising, sales, marketing, accounting and all other departments may help you see what you really need to offer. Get everybody involved and you will be able to create a better program.
Measure and Track Your Success
When you launch a new customer loyalty program make sure to put a system in place for measuring the success of the program. If you cannot see how well it’s performing, how are you supposed to make adjustments?
Use the right analytics to make sure your customers are using the program and to measure the customer retention rate. You should also measure the number of repeat purchases and the activity your loyalty program generates.
Communication is Key
Strong communication will help make your loyalty program great. Providing regular messages to your customers will have them actively thinking about using the program. You can even hold special sales or events just for your loyalty members, which gives you a reason to contact them.
Creating a customer loyalty program is a great way to generate repeat purchases and reward customers. You will spend less money and time getting a current customer to make a repeat purchase compared to finding a new customer to buy from you. However, if you don’t have a good loyalty program in place, you may struggle to retain customers and entice them to buy from you again.