How to implement an effective loyalty program

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Date: 24 July 2020

An attractive woman uses her loyalty card when she goes shopping

In the ultra-competitive world of modern business, getting an edge over the competition – no matter how slight – can prove the difference between success and failure. And it's not just about the product or service that an organisation offers. The importance of marketing cannot be understated, and an effective strategy should not only seek to drive growth but also improve customer retention.

That's where customer loyalty programs have an integral role to play in an organisation's commercial performance. Without them, companies are missing out on a huge opportunity to build on their existing database and diversify their revenue streams. And the numbers back that up: research shows that when a customer joins a loyalty program, the chances of them making a second purchase are 68% higher than for consumers who don't sign up.

For businesses who are yet to implement an effective loyalty program, there are a few key issues to consider.

What type of loyalty program will it be?

The answer to this is likely to depend on a number of factors, such as your product range and your target audience. For example, earn and burn loyalty programs work on a conventional basis. Consumers earn points by making purchases, and those points can then be redeemed at a later date. There are also perks programs, where a company might offer a service such as free shipping to members, or tiered programs, which encourage users to spend more to reach higher tiers and receive greater benefits.

What are your goals?

Typically, the overall business goal is to drive revenue. But, there are many different ways in which this can be done and a loyalty program may only target one specific deliverable. For example, your business may wish to increase the purchase frequency of a certain set of customers. Alternatively, the objective could be to increase the average basket value, with the baskets of loyalty members typically 39% higher than those who have not signed up to the program.

Who will you target with your loyalty program?

This is where information gained through your marketing campaigns can add significant value. It's important for businesses to establish exactly who their customers are, what they need, their purchasing habits and which reward schemes are going to interest them. By compiling and analysing all of this data, you can start to create tailored communications and build personal relationships with your consumers, who will feel valued and more inclined to return as a result.

Which platform will you use?

Building your own platform for a loyalty program can prove tricky, stressful and expensive – drawbacks you can ill-afford, especially if the competition are already up and running and seeing encouraging results. Instead, it may prove beneficial to use a loyalty management platform, which can help to deliver a ready-made solution while you retain ultimate control of the process.

Can you keep the loyalty scheme simple?

Making your loyalty program easy to use should also be a primary consideration. If the system is too complicated or confusing, customers are unlikely to return to make more purchases and claim their rewards. If that happens, you're at risk of losing their business to your competitors.

Copyright 2020. Article was made possible by site supporter Craig Harbour

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