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.