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How to Retain Customers through Loyalty Programs

Loyalty programs inspire customers to increase use of your business's products or services. A loyalty program rewards your business's customers for making repeat purchases with discounts or added-value offers.

Your loyalty program should have one of the following goals:

  • To maintain customer spending habits in an effort to reverse the natural decline in buying activity that otherwise tends to occur over time.

  • To increase sales by enhancing a feeling of inclusion and loyalty to your business.

  • To show customer appreciation by providing rewards for past purchases, which tends to inspire additional buying activity.

  • To collect information on customer buying patterns and preferences.

The next step is to design your program, using one of the following loyalty program formats:

  • Buy-ahead discounts: This kind of program aims to lock in loyalty at the time of a first purchase with a card that entitles the buyer to an immediate bonus along with discounts on future purchases.

  • Purchase-level rewards or discounts: These programs offer customers a free gift or discount when they pass a certain spending level. For instance, a clothing retailer might offer customers a discount when sales in a single year reach $500.

  • Rebates against spending levels: Instead of providing a discount upon achievement of a spending level, this program tallies up a year’s worth of spending and provides a year-end rebate.

  • Upgrades and special treatments: This program relies on the value of surprise rewards.

Avoid programs that look more like promotions than rewards or that provide incentives with too many strings attached.

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