Starting a Successful Loyalty Program for Your Business
26 July 2023
Georgette Mikhael

In today’s competitive business landscape, loyalty programs have become a powerful tool for attracting and retaining customers. Implementing a loyalty program not only helps businesses drive repeat purchases but also fosters a sense of brand loyalty and customer satisfaction. Many businesses will fall into a cycle of perfecting and over-perfecting and second-guessing their program design instead of simply getting something launched that can be tweaked. The delay results in customers continuing to receive minimal recognition and reward for their patronage.

Getting Started: Every Business Can Benefit

Regardless of the industry or size of your business, implementing a loyalty program can yield significant benefits. Many businesses mistakenly believe that loyalty programs are only suitable for certain industries, but the truth is that virtually any business can benefit from rewarding customer loyalty. Whether you operate a retail store, a restaurant, an e-commerce platform, or a service-based business, a well-designed loyalty program can help you foster customer engagement, increase customer lifetime value, and differentiate yourself from competitors.

Exploring Program Design Options

While most people are familiar with popular loyalty program designs involving points, tiers, credits, and vouchers, it’s essential to understand that many more design options are available (for a full list of all loyalty frameworks, check out Loyalty Programs: The Complete Guide). When creating your loyalty program, consider elements such as exclusivity, experiential rewards, referral programs, gamification, surprise rewards, and more. Tailor the program design to align with your business objectives, target audience, and brand personality.

Program Visibility: Covert or Overt?

Whether your loyalty program should be covert (behind the scenes) or overt (known to customers) depends on your specific business goals and customer preferences. Covert programs work well when you want to collect customer data discreetly, while overt programs create transparency and allow customers to engage with the program actively. Consider your target audience, the level of personalisation you desire, and the data collection needs to determine the program’s visibility.

Leveraging Customer Data

Customer data is crucial in informing and optimising your loyalty program design. If you already have substantial customer data, leverage it to understand their preferences, purchase behaviour, and demographics. However, if you lack sufficient data, conduct market research using in-store surveys, online questionnaires, or subscription lists to gather valuable insights. The more you know about your customers, the better you can tailor the program to their needs and preferences.

Assess Commercial Viability

Before launching a loyalty program, thoroughly evaluating its commercial viability through key metrics is essential for its success and impact on the business. To start, conducting a comprehensive market analysis is crucial. This involves assessing the target audience’s size and demographics, understanding their purchasing behaviours, and identifying potential competitors and their loyalty offerings. Additionally, calculating the Customer Lifetime Value (CLV) and Customer Acquisition Cost (CAC) helps determine if the program’s potential revenue from loyal customers outweighs the costs of acquiring and retaining them.

Furthermore, businesses should estimate the Return on Investment (ROI) by considering the projected increase in sales and repeat purchases resulting from the loyalty program. By setting clear objectives and defining success metrics like customer retention rates and average order value, it becomes easier to track the program’s impact and adjust strategies if needed.

The program’s implementation cost is another critical factor. Balancing the expenses of designing and running the loyalty program with its expected benefits ensures that it remains financially sustainable in the long run. Additionally, assessing the technology required to support and integrate the program seamlessly with existing systems contributes to its efficient functioning.

Lastly, collecting feedback from potential program participants through surveys or focus groups can provide valuable insights into their expectations and preferences. This data helps fine-tune the loyalty program to cater precisely to the target audience’s needs and desires.

By thoroughly analysing these key metrics, businesses can confidently launch a loyalty program that proves to be commercially viable, fostering customer loyalty, and driving significant returns on investment.

Pitfalls to Avoid

  1. To ensure the success of your loyalty program, it’s important to be aware of common pitfalls and take proactive measures to avoid them. These pitfalls include:

a) Lack of customer understanding: Conduct thorough research to understand your customers’ needs, motivations, and preferences before designing the program. Progressive personalisation is key.

b) Lack of differentiation: Avoid copying your competitors’ loyalty programs. Differentiate your program by offering unique rewards and experiences that align with your brand.

c) Inadequate communication: Clearly communicate the benefits and value of your loyalty program to customers through various channels, including in-store signage, email newsletters, and social media.

d) Ineffective rewards: Ensure your program offers enticing rewards that drive incremental sales and encourage repeat business. Rewards should be achievable, valuable, and aligned with your target audience’s desires.

e) Complexity: Keep the program simple and easy to understand. Avoid overwhelming customers with intricate rules or convoluted reward structures.

f) Unsustainable rewards: Strike a balance between offering enticing rewards and maintaining profitability. Avoid creating rewards that are too costly or detrimental to your bottom line.

g) Discounting cycles: Be cautious not to condition your member base to only purchase during discounting cycles. Encourage full-price purchases and offer rewards that go beyond discounts.

h) Don’t launch and move on: Often a program is launched as the right program for the time, however the success and maintenance of the program is not prioritised and eventually as customer needs evolve, the program loses relevancy. There needs to be a plan beyond launch to ensure the program continues to become a living organism thriving on customer data and serving the needs of the business.

Just get it launched

Starting a loyalty program for your business can be a game-changer in terms of customer engagement and retention. By getting started and avoiding common pitfalls, you can create a successful loyalty program that drives customer loyalty, enhances the customer experience, and boosts your bottom line. Begin with a simple Minimum Viable Product (MVP) to capture customer information, and gradually add complexity to deliver personalised content and rewards. With a well-designed loyalty program, your business can thrive in today’s competitive marketplace.

Are you ready to evolve or design your loyalty program? Talk to us today at Loyalty & Reward Co.

<a href="" target="_self">Georgette Mikhael</a>

Georgette Mikhael

Georgette Mikhael is a Senior Strategy Consultant at Loyalty & Reward Co, the leading loyalty consultancy. Loyalty & Reward Co design the world’s best loyalty programs for the world’s best brands. She has worked in the loyalty and member benefits space for over ten years with brands across the financial services, legal, travel, retail, automotive, hospitality, philanthropy and technology industries with brands such as Mastercard and the Westpac Group. Georgette has particular interest and expertise in commercial sales, strategic partnerships, business development and customer engagement successfully conceptualising, implementing and overseeing innovative strategies & campaigns for account and business growth.

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