12.3 Creating Customer Loyalty Programs

Customer loyalty programs are game-changers for businesses. They reward repeat customers, boost sales, and create brand advocates. From points systems to tiered rewards, these programs offer various ways to keep customers coming back for more.

Effective loyalty programs go beyond simple discounts. They use gamification, offer unique experiences, and provide exclusive perks. By personalizing communications and encouraging referrals, businesses can build stronger, longer-lasting relationships with their customers.

Loyalty Program Structures

Points-based Programs

Top images from around the web for Points-based Programs

• 

  Customer Loyalty - Tablet image View original

  Is this image relevant?

• 

  EatMedia - New Ideas For New Business Development: Your Picture - Your Map - Your Story View original

  Is this image relevant?

• 

  How Brand Image and Perceived Service Quality Affect Customer Loyalty through Customer Satisfaction View original

  Is this image relevant?

• 

  Customer Loyalty - Tablet image View original

  Is this image relevant?

• 

  EatMedia - New Ideas For New Business Development: Your Picture - Your Map - Your Story View original

  Is this image relevant?

1 of 3

Top images from around the web for Points-based Programs

• 

  Customer Loyalty - Tablet image View original

  Is this image relevant?

• 

  EatMedia - New Ideas For New Business Development: Your Picture - Your Map - Your Story View original

  Is this image relevant?

• 

  How Brand Image and Perceived Service Quality Affect Customer Loyalty through Customer Satisfaction View original

  Is this image relevant?

• 

  Customer Loyalty - Tablet image View original

  Is this image relevant?

• 

  EatMedia - New Ideas For New Business Development: Your Picture - Your Map - Your Story View original

  Is this image relevant?

1 of 3

• Points systems assign a certain number of points for each purchase or interaction with the company (spending $1 earns 10 points)
• Customers accumulate points over time and can redeem them for rewards such as discounts, free products, or special offers
• Points systems encourage repeat purchases and higher spending as customers work towards earning rewards
• Effective points programs have a clear and achievable path to rewards, with attainable milestones along the way (earn a $10 gift card after 1,000 points)

Tiered Loyalty Programs

• Tiered rewards programs offer increasing benefits as customers reach higher levels of loyalty or spending
• Common tiers include bronze, silver, gold, and platinum, with each tier offering more valuable rewards and perks
• Higher tiers may provide exclusive access to special events, personalized service, or faster earning potential (double points days for gold members)
• Tiered programs motivate customers to increase their engagement and spending to reach the next level of benefits
• Effective tiered programs have clear requirements for each level and communicate the value of progressing to higher tiers (free shipping for silver and above)

Gamification Elements

• Gamification applies game-like features to loyalty programs to make them more engaging and interactive
• Common gamification elements include challenges, badges, leaderboards, and social sharing
• Challenges encourage specific behaviors by rewarding customers for completing tasks (earn 500 bonus points for making 3 purchases this month)
• Badges serve as visual indicators of achievements and can be displayed on customer profiles or shared on social media (earned the "Adventurer" badge for trying 5 new products)
• Leaderboards foster competition by ranking customers based on their loyalty program performance
• Social sharing allows customers to share their achievements and rewards with friends, increasing brand exposure and referrals

Reward Types

Experiential Rewards

• Experiential rewards offer unique, memorable experiences beyond typical discounts or free products
• Examples include exclusive events, trips, or opportunities to meet with brand ambassadors or influencers
• Experiential rewards create stronger emotional connections between customers and the brand
• These rewards are often more appealing to younger generations who value experiences over material possessions
• Effective experiential rewards align with the brand's values and target audience (VIP access to a sponsored music festival for a youth-focused fashion brand)

Exclusivity Offers

• Exclusivity offers provide loyal customers with access to special products, services, or sales not available to the general public
• Examples include early access to new product launches, invitation-only sales, or limited-edition items
• Exclusivity offers make customers feel valued and appreciated for their loyalty
• These offers can create a sense of urgency and fear of missing out (FOMO), encouraging customers to remain engaged with the brand
• Effective exclusivity offers are tailored to the preferences and interests of the brand's most loyal customers (pre-sale access to a highly anticipated collaboration for a sneaker brand's top customers)

Customer Engagement Strategies

Personalized Communications

• Customer segmentation involves dividing customers into groups based on shared characteristics, behaviors, or preferences
• Segmentation allows brands to tailor their loyalty program communications, rewards, and offers to each group's specific interests
• Common segmentation criteria include purchase history, demographics, lifestyle, and communication preferences
• Personalized communications increase the relevance and effectiveness of loyalty program outreach
• Effective segmentation strikes a balance between granularity and practicality, ensuring segments are distinct yet large enough to be actionable (separate email campaigns for high-value customers who prefer eco-friendly products)

Referral Programs

• Referral programs incentivize existing customers to refer friends and family to the brand, helping to acquire new customers
• Customers typically receive rewards for successful referrals, such as points, discounts, or cash incentives
• Referral programs leverage the trust and credibility of personal recommendations, which can be more effective than traditional advertising
• These programs can create a viral effect, rapidly expanding the customer base through word-of-mouth marketing
• Effective referral programs offer attractive rewards for both the referrer and the referred customer, and make the referral process simple and easy to share (earn $10 for each friend who makes a purchase using your unique referral link)