Guide to Customer Loyalty Programs and Why you Need it

July 23, 2020

When your business finally starts off, you know how much effort you have put in to get your first set of customers. Now how many of them do you think will return for a second or third purchase?

If I cut the figures to less than half, then obviously you would be needing a fresh batch of buyers to keep your online business running. Now, do you think you have the time or resource to spend on a fresh search for fresh traffic?

This is where customer loyalty programs come to the rescue if applied strategically. In return for offers and perks, a customer remains loyal and engages in a repeated purchase.

However, customer loyalty programs are not just dishing out discounts. It is all about observing customer behavior and purchase history and then presenting them with relevant benefits.

And the happy customer comes back and brings a few more with him!

Statistics say that customer loyalty programs are extensively used by over 63% of high performing businesses. So let’s understand why and how you should use this marketing strategy for boosting your online business.


Source: The Muse
  1.     Keeping an old customer satisfied is 6 times cheaper than acquiring a new one.
  2.     An old and happy customer spends over 60% more than a new customer who is yet to trust your brand.
  3.     90% of consumers say that their trust in a company makes them likely to buy more frequently.
  4.     Most customers would shift to another competing brand if they offer a better value or experience. The only way to retain them is through loyalty.


1. Not just Discounts

Customer loyalty programs
Source: Moosend

As I said earlier, you will be wrong if you think that a shower of discounts will be enough to make them stick.

That will only make you compromise on your profit margin while you encourage a bunch of low-value customers. Over 75% of such transaction-based loyalty programs have been seen to collapse after the first year.

Your focus should be on acquiring the right customers who have a good net worth relationship and then try to retain this group.   

2. Select your Audience

Customer loyalty programs
Source: Sprout Social

Rather than embracing every customer into your loyalty program pool, you can think of being selective. You already have a list of subscribers who show interest in your emails and newsletters.

This will make an eager group of buyers who can appreciate your customer loyalty programs.

3. Make it smooth

Customer loyalty programs
Source: Entrepreneur

I have known many a prospective buyer who opts to stay out of such programs just to avoid the hassle which comes free.

Don’t be the seller who literally pokes his head into the customer’s life in the name of obtaining information. Keep the forms simple.

The name, age, and gender should be enough information for you. At most, you can ask for the birthday and anniversary details.

4. Keep it simple

Source: Sleeknote

Keep the rules simple for your customer loyalty program. Make easy to follow conditions like ‘Earn 1 point For every 100 rupees spent’, or ‘Free Shipping for a Star Member’.

Try not to confuse the customers with too many options. A dedicated page explaining the reward system must be in place.

5. Reward in tiers

Customer loyalty programs
Source: Veeqo

Most customer loyalty programs work in a tiered system with pre and post-purchase rewards.

What starts with a small reward for the initial purchase should escalate as the customer engages more with you.

If you are rewarding 5 bonus points to a new customer, the perk should go up to a free gift after a few transactions.

6. Collaborate

Source: Medium

Loyalty programs often work great in collaborations. When you join another entrepreneur in a similar niche, you end up winning some of his customers too!

For instance, if you are dealing with makeup supplies, it would be a good idea to latch your program with that of a hairstylist.

7. Build the atmosphere

Customer loyalty programs
Source: Help Scout

The success of a loyalty program depends on factors that start long before the program is initiated. Creating a customer-friendly atmosphere is the cornerstone of any business online or offline.

When you make an offer, let the customers feel that it is their benefit that you have in mind, and not your own profit.

8. Create the identity

Source: Bannersnack Blog

It helps to give a unique name to your customer loyalty program. Most businesses do that to make the programs stand out and add some value to enlisting customers.

After all, it does feel good to be a privileged member of an exclusive program!

Loyalty Programs

Customer loyalty programs
Source: blog of NextBee

Loyalty programs come in various sizes and shapes. Decide which program to offer depending on the type of audience you cater to.

A successful customer loyalty program should increase customer retention rates over time. So keep assessing where you stand to decide if you want to keep spending on your loyalty programs.

The customer retention rate indicates how long customers stay with you. In a successful loyalty program, this number should increase over time as the number of members grows.

Points Programs

Source: Boston Buyers Club

Over 70% of customer loyalty programs are points-based. Points can be earned through transactions, social sharing, references, or other actions that drive traffic to you.

The points can then be redeemed through value during a future purchase or can make them eligible for some special privilege.

Paid Programs

Customer loyalty programs
Source: Quora

This type of loyalty program calls for a small fee from the customer in the return for some special service or privileges given.

This is a good way of identifying your true patrons, ensuring that they continue the relationship and making them feel exclusive as they pay.

Paid programs are, however, not much good for new store visitors.    

Punch Programs

Source: Trident Information Systems Pvt. Ltd

The idea is to award punches for every purchase and after a few punches are collected, they can be exchanged for a product or service of equal or lesser value.

I recently came across a bed and breakfast service which gives 1 free night stay after 10 paid ones.

Referral program

Customer loyalty programs
Source: Business News Daily

Customer loyalty programs often reward the patrons for referring a friend and both the patron and the new lead receives a benefit. 

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