Shaping a Strategy in Your Business Plan to Ensure Customer Loyalty

By Steven D. Peterson, Peter E. Jaret, Barbara Findlay Schenck

Reeling in new customers keeps your business growing, but you need to retain those customers in order to leverage marketing costs and build a solid customer base. Providing a great product or service at the right price is crucial. So is individualized and outstanding customer service. Those are fundamentals. Without them, loyalty will never be achieved. But as part of your business plan, consider outlining a formal customer loyalty program.

Most loyalty programs follow one of these formats:

  • Buy-ahead discounts provide an immediate reward with discounts on future purchases.
  • Purchase-level rewards offer gifts, discounts, or services when spending levels are reached.
  • Rebates against accumulated purchases reward for purchases made, usually in the form of a year-end check.
  • VIP member offers reward customers who join a loyalty club or program, usually by paying a fee. Benefits range from free shipping on all orders to redeemable points for travel or other purchases.
  • Shared-value programs develop loyalty by supporting issues of value to customers. For example, a children’s clothing manufacturer can offer discounts to purchasers who return used clothes for distribution to those in need.
  • Gamification programs employ game actions (for example, stars, badges, leaderboards) to motivate customers with rewards for purchases, referrals, customer-to-business engagement, or other desired activities.
  • Upgrades and special treatments offer customers something beyond the specific product or service being sold. That something could be as simple as a “happy birthday” gift, or a spontaneous “this one’s on us” surprise.

Whatever form they take, loyalty programs aim to increase customer commitment and inspire future purchases. Most programs also collect customer information, which assists in refining knowledge of customer buying patterns. Even businesses without a formal loyalty program need to plan efforts to cement loyalty through repeat-purchase offers or loyalty-building events.

Consider the example of an art supply company in northern California that struggled to compete against big online suppliers, which can offer deeper discounts because of economies of scale. The staff and management got together to brainstorm about what they, as a small business, could offer that the big guys couldn’t. Their answer: expert advice and inspiration.

To win customer loyalty, the art supply company offered weekend classes, run by local artists and artisans. Customers who bought $50 or more in supplies got a free coupon to attend a class of their choice. Customers who attended classes got discounts on supplies specific to that class (watercolor paints, for instance, or printmaking inks). The store mounted artwork from various classes on the walls, encouraging more customers to participate. Artists loved it. The buzz brought in new customers. Before long the store had waiting lists for most of its classes. And sales boomed.

If customer loyalty will be key to your business success, include details about the strategies you expect to use in your business plan.