How to Create a Customer Loyalty Program

Keeping customers happy and motivated to make a future purchase is important for any business to succeed. You simply can’t rely only on new customers to keep your business growing. 

There are a number of ways to achieve customer retention and loyalty, but a common pathway is by having a loyalty rewards program. Customer loyalty programs are popular, particularly among younger buyers, but many other generations of buyers appreciate the availability of these incentives. According to a consumer study by Statista, nearly 80% of respondents said loyalty programs influenced their decision to make a purchase. 

Here’s everything you need to know about the benefits of a loyalty program, best practices, and tips to maximize success. 

What is a customer loyalty program?

A customer loyalty program is an offering from a business to customers that rewards them for making a purchase—and encourages future purchases. Rewards or incentives might include free products, samples, discounts, cash or store credit, and more. This is an appreciative gesture to customers for their continued business. 

A customer loyalty program can be nimble. You can offer different financial and non-financial incentives through loyalty tiers and gamification. The key to any great loyalty reward program is in its specificity to customers, along with consistent brand message and design, so customers know what they’re signing up for. 

Types of loyalty programs

A solid loyalty rewards program encourages customers to buy more or buy more often to get rewards or unlock a new level in the rewards system. There are four common customer loyalty program types, which businesses can offer on their own or mix-and-match. 

The four types of customer loyalty programs are:

1. Points: A points-based customer loyalty program provides customers with an opportunity to collect points and use them at a later date via dollars or a percentage off a purchase. These are sometimes combined with tiered programs.

2. Tiered: A tiered loyalty rewards program is one that offers customers more incentives the more they spend. Beauty stores offer a clear example of a tiered system, with programs offering certain (and sometimes exclusive) rewards as you move up the tiers. 

3. Subscription: With a subscription loyalty program, customers are asked to pay a certain recurring fee (often a monthly cadence) to get rewards, bonus content, or discounts. You might also offer different subscription tiers.

4. Value: A value-based loyalty program is a bit more nebulous because customers aren’t necessarily rewarded for making purchases. They may get discount codes, samples, or even referral discounts from sharing their experience on social media or leaving a review. 

Benefits of implementing a customer loyalty program

Loyalty programs can be relatively low-lift efforts for businesses, but they can yield a high positive impact—and not just on your bottom line. 

Loyalty programs can help you:

• Improve retention: Customers like to buy from brands that prioritize customer service and work to keep their loyalty. 

• Increase customer lifetime value (CLV): Loyalty programs will often increase customers’ average order value (AOV), which will increase their overall CLV because they are likely to make more purchases more often. A Loyalty One report noted that 60% of businesses with loyalty program members saw those members spend two to three times more than non-member customers. 

• Create community and brand affinity: Many customers like feeling part of something, and many find that connection through the brands they support. A loyalty program is a great way of making them feel involved in your brand and business successes. 

A step-by-step guide to creating a customer loyalty program

If you’ve never created a loyalty program before or if you’re interested in trying it another way, below is a helpful step-by-step guide to get you started. The basics are relatively straightforward, once you know what type of program and rewards you want to offer.

1. Choose what you want your loyalty program to be

From the outset, you need to decide what your loyalty program is going to look like. Decide if you want the program to be a points-based or tiered system, or perhaps a subscription with value-adds like rewards for customers posting purchases to social media. Remember that a loyalty program doesn’t have to be expansive or complex, it simply needs to be inviting, memorable, and provide something that your customers want.  

2. Set rewards and incentives

What do you want the rewards and incentives to be in your loyalty program? A key way to understand better why your customers stay could be to run a survey with a discount code offered after completion. 

Do they want samples? A percentage off every quarter? Early access to new products? Decide what works best for your business and your customers.

Consider the costs associated with the rewards you choose including, like how many bonus products you may need to create or buy versus how many customers will actually opt-in. You don’t want to cut into your earnings so much that your loyalty program loses you money long-term.

3. Share the program with customers

It’s very “if a tree falls in the forest, does anyone hear it?” if you launch a loyalty program without any marketing or communication about it. Create social posts, talk about it in-store, and send emails to customers on your mailing list, even if they’re one-time purchasers, to build awareness for your rewards program. 

Consider making information about your program a regular part of your customer communications. You can add details about it on its own page on your website, to your FAQ page, and link to information about it in your order confirmation emails or social media profile’s link in bio.

4. Explore partnerships 

Many businesses opt into partnerships with other brands as a way to offer products or services to their customers. It’s an interesting way to differentiate yourself from competitors while reaching out to a new customer-base. Partnerships could include offering samples from another brand or cross-promoting with discounts to each partner’s business. 

Partnering with another business also gives you an opportunity to build relationships with brands you respect or peers you can lean on for advice.

Best practices and tips for any customer loyalty program

Customer loyalty programs are a great idea to keep your customers engaged, coming back for more products and, most important, feeling valued. A customer loyalty program that authentically centers on the customer’s experience benefits not only them, but your own brand’s reputation. 

When you’re thinking about building out a customer loyalty program, consider the following best practices and tips to maximize your efforts. 

Make the program feel valuable 

Getting one sample in the mail every few months or once a year isn’t going to make customers feel all that special or be worth your time and effort. Work to create a program that meaningfully engages with customers by offering them incentives they feel excited about. That can look like offering samples of exclusive products, asking for customer feedback incentivized by an inside look into new products, or community gatherings. 

For example, a brick-and-mortar clothing store could run an in-person event through its customer loyalty program. This both promotes social engagement in-person and meeting other members of the program while offering a discount on purchases made during the event. Online, you could create a membership community to connect customers and share exclusive information and incentives.

Whatever it is you’re looking to offer your customers, make sure it’s related to why they’re with you in the first place. 

Keep your focus on the customer

When you’re running a business, it’s easy to slip into a competitor’s mindset. After all, working to differentiate from your competitors is a top priority. However, creating something exclusively for your customers means leaving your competition at the door. 

It can’t hurt to research to see what your competitors are offering to help yourself brainstorm. But ultimately, the success of a loyalty program means focusing on the details of a customer interaction and making every experience exceptional. This can be anything from the rewards and incentives you offer to the thank you emails you send and the in-store or personal customer service you offer along the way. Reward your customers by putting them first. 

Measure success of the program and adjust 

Not every loyalty program is going to be successful from the start. Keep key performance indicators (KPIs) and benchmark goals in mind as your loyalty program continues to grow. 

For example, say a business is offering a subscription-based loyalty program that includes monthly free product samples and wants 1,000 subscribers by the end of the year. But, it’s looking like they won’t make it. It would be useful to understand what’s going on and adjust from there. This brand may be lagging in traffic or might not be promoting the loyalty program enough, so more work may need to be done to promote brand awareness and perks.

Consider that your program needs to grow with your customers too. Customer needs change all of the time, and as they are more discerning than ever, it’s become important to remain on top of trends, forecasts, and  anecdotal evidence. Ask for customer feedback and reviews, and encourage conversation to get a better understanding of what your customers will need to feel valued.