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How a Loyalty Program Can Help You and Your Customers

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How a Loyalty Program Can Help You and Your Customers

Loyalty programs are structured marketing strategies developed by merchants to encourage frequent customers to continue buying their products or services. There are several forms of cards issued in a loyalty program. These are loyalty cards, rewards or points card, discount card or club card. These cards typically are embedded with barcode, magstripe or chip that can be scanned at the store to properly identify the customer of their registration to the said program. Some of the incentives that may be included in the loyalty program are early access to new products, additional discounts and even free merchandise. In order for customers to register to this program, they must provide personal information to get a unique identifier or e membership number that they can use when making their purchase.

The two basic functions provided by the loyalty program are :

  • A reward for frequent customers for their brand loyalty.
  • The merchant acquires consumer information in return which they can use to evaluate customer purchases.

Types of Customer Loyalty Programs

a. Points-based loyalty programs – This is a widely accepted type of loyalty program where customers earn points for making purchases and the earned points can be converted to cash that can only be used in the store. This encourages the customer to buy more because more purchases mean they will earn more points.

b. Tier-based customer loyalty program – This offer different incentive or reward depending on the tier the customer is in. The level is determined by the number of purchases of the customer and is measured by pre-set milestones. The incentive and reward progress as the tier increases.

c. Social Media – Nowadays some reward programs take social media approach by awarding points to the customers who engage most often on the company’s Facebook page or Facebook post including likes, shares, and comments.

d. Paid Programs – There are customer loyalty programs that require customers to pay for a membership fee whether it be a recurring or a onetime payment.

What benefits does a loyalty program have for your customers?

Loyalty programs are effective to make the customers repeat their purchases. How do customers benefit from it?

  • Rewards – The loyalty program must offer tangible rewards for the customer and not just pretend to do so. This actual reward can be in a form of points to be converted into cash and not just the buy 1 get less on the second product promo.
  • Easy to understand and easy to avail loyalty programs – Customers don’t want complex loyalty programs that are very hard to comprehend. They want instant access to the rewards being offered to them.
  • Superb Customer Service – Live and real-time customer service either via phone, chat or e-mail is always a plus.

The Benefits of Customer Loyalty Programs for the Retailer

Loyalty programs develop brand loyalty and also encourages repeat transactions and allow businesses to collect data information from the loyalty program members. The program provides vital information that helps the merchants to understand customers better and get insights on their purchasing behavior that they can use as the basis for their future marketing initiatives.

  • Customer retention – This is the key to keep the business grow because it costs less for businesses to maintain and retain customers than acquire new ones.
  • Increase customer spending – Because customers want to earn more rewards thus they will increase their purchases to get more of these rewards.
  • Draws more traffic to the company’s website – Loyalty programs can generate traffic to the company’s website when customers enroll their membership card online or when they check their points balance and view and review rewards available for them.
  • Gain insights from the customers – This is a good way to know the information of the customers with their frequency of visits, total money spent on purchases and other data that are needed for marketing reports and to anticipate sales trends.
  • Positive word of mouth – The best advertising is a positive review and referral from an existing customer to make the business grow.

It is of utmost importance to decide on the type of loyalty program a business will create for its customers. Trying various incentives and rewards scheme can be done to determine the program that generates the most activity. Track metrics can be established to be used to measure as to how a loyalty program impact sales, social media mentions, and website traffic.

Procedures on How to Create a Customer Loyalty Program

1. Research – This the first step that a merchant should do is do some research before planning to develop a loyalty program. This is to find out what the customers want as rewards, how much they are willing to spend on their purchases, their motivator to make a purchase and what brands they buy and use. Getting the demographics of the customers and the pattern of their purchases can guide a merchant to devise an effective marketing strategy.
2. Plan & develop the program – Once the merchant has the information and insights he needs, he can then develop a strategic plan with clear and measurable goals to determine the success of the program model chosen.
3. Market the program – a loyalty program must be marketed for people to know about it. This can be done by giving the program an identity and by creating a dedicated landing page of the said program in the company’s website, educate sales staff regarding in-store tactics and have a program awareness campaign.

Measuring the Success of Customer Loyalty Programs

Tracking the success is the most important part of the program by identifying KPIs and essential metrics such as social media insights, customer surveys, and CRM tools.

The following information can be used to track and analyze success.

  • Repeat usage of the loyalty card issued which can relate to repeat purchase transactions.
  • The total of sales, transactions, and frequency of buys generated by members vs purchases by non-members.
  • Transaction pattern before and after membership.
  • Referrals made by existing members.
  • Members’ engagement on social media and other activities.
  • Membership enrollment and activation.
  • Cost of the program vs. profitability or the ability to generate sales.
  • The rate of customer retention
  • Customer lifetime value
  • Customer purchases on a monthly, quarterly and yearly basis

The said data must be analyzed regularly to identify if the loyalty program is working or not and to identify which part of the program must be improved.

To find out more about loyalty program and MOTO Merchant Account Solution . Give us a call at +44 800 776 5988 or get in touch with us through our website. Even if you’re not a customer of ours, we want to help you understand the process so you can make the best decisions for your business. We believe transparency and proactive education is the best policy.