A Simple Guide to Customer Loyalty Programs

As businesses, one of our goals is to increase our number of customers, right? As this number grows, retention also becomes a point of concern.

How do you strike the balance between gaining new customers and encouraging repeat customers? One common method is a loyalty program. If done well, these are win-win situations that encourage people coming back to your business time and time again.

Dandelion with seeds blowing away in the wind across a clear blue sky with copy space

Implementing a loyalty program can seem complicated but it honestly isn’t. It just requires thinking about how you’d like to reward your customers and deciding on how to deploy the idea in your business. Here’s a few examples to get you thinking in the loyalty direction:

Loyalty = Current Customers Getting First Dibs

An easy thing that all businesses can do- when you launch a new product or service, offer it to your already loyal customers first (it’s like a “right of first refusal”). You can even take it a step further and offer it to them at a discounted price (usually the discount price has an expiration date). This isn’t so much a “program” as a “best practice” to show appreciation for the people who already support you.

Loyalty = Rewarding (Financially) Frequent Purchasers

Probably the most common type of loyalty program is some type of number system, like a punch card. A person has to come into your store a set number of times before receiving the reward. A common example is a punch card, like a “Buy 10 get the 11th free” deal. Service-based businesses can also use this type of reward system (i.e. get five haircuts at this salon and get a free manicure). It works because customers view the reward as either something they would purchase anyway, or something of value that they are interested in but haven’t purchased for themselves.



Loyalty = Letting Frequent Purchasers Play A Game

Games are another way to reward (or create) loyalty. McDonalds is a pro at encouraging repeat customers through games. One prime example is their Monopoly game. The contest only runs for a couple months out of the year. To play, you just have to buy food at McDonalds (I think it has to be a certain size in order to get stickers). Customers are encouraged to play for the bigger prizes (which require more stickers/purchases), but there are also smaller scale prizes as an incentive (like a free Double Cheeseburger). Irving had a similar contest a few summers ago involving Monopoly (I think the prize was a lifetime supply of fuel). I won a lot of free soda that year.

Loyalty = Giving A Freebie (Bonus Points If Unexpected)

Another easy way to reward loyalty is giving your customers something they already want. Sometimes when you go grocery shopping, you get some coupons with your receipt. Frustratingly, these are usually items that you’ve just purchased. That’s because you’re not getting these coupons at random. The machines assume you purchase the items on a regular basis (which may or may not necessarily be the case), and offer an incentive to return to the same store to purchase those items again.

Online stores have a unique advantage here- they can keep track of purchases and send follow up emails to encourage customers to “buy it again.” There’s a risk of appearing intrusive if you consistently offer specific rewards- there’s actually an entire episode in the last season of Parks & Recreation involving the ethics of data mining (all the citizens in Pawnee received unique gifts that were eerily specific and pointed back to information on their phones). In other words, your loyal customers want to feel like you know them, but not like you’re spying on them.



Loyalty = Letting Customers Purchase Membership For VIP Treatment

Some of the more successful customer loyalty programs actually require a membership fee. It seems a bit counter-intuitive to make people pay to be loyal customers, but in practice it makes sense. Amazon Prime is a great example of this- customers pay an annual fee, and as a result, they get certain products free or discounted, automatic 2-day shipping, and audio/video streaming. Another example is Dunkin Donuts Perks program. This past football season, whenever the Pats won a game, DD Perks members would receive a free medium coffee the next day (I almost signed up for that very reason).

In terms of services offering memberships, at some airports, you can even purchase a pass to the “Admiral’s Club”, a lounge where you can wait in the relative abundance of electrical outlets and free snacks (and relative quiet).

Customer Loyalty Programs not only give your current customers a reason to keep coming back- they can provide incentive for new customers to jump on board.  Think about rewarding the one you’re with and you may find your customers are even more loyal than you realized.



Kassandra Strout
Kassie is a distance runner and a distance reader really. She lives in Ellsworth Maine and, while she might be quiet when you meet her, will throw out something witty when you least expect it.

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