Attracting and Retaining Customers Through Customer Loyalty Programs

What is a customer loyalty program?

A customer loyalty program is a special type of offering where a business provides benefits to regular customers (such as discounts or free perks) in return for their continued business.

With nearly 68% of consumers reporting that they’d join a brand’s loyalty or VIP program and 56% stating they would spend more at a business they’re loyal to, there is a clear intersection between your business’s need to connect more deeply with customers and the types of experiences your customers want to have when interacting with your brand.

Importantly, recent data has shown that these programs are extremely effective in improving customer retention and increasing average revenue per customer.

For example, customers who participate in loyalty programs spend 60% more per transaction, purchase 90% more often, and are 5 times more likely to choose that brand in the future.

Additionally, nearly 70% of customers will shop at a retailer based on what they can receive from their rewards program, whether that’s a discount, points to spend on perks or even just a badge showing off their loyalty to your brand.

Key benefits of building a strong customer loyalty program

When customer acquisition can cost up to five times as much as customer retention, it’s easy to see why so many businesses are reaping the benefits of customer loyalty programs:

• Increased referrals and brand awareness—Customers who participate in well-executed loyalty programs will recommend a business to their friends and colleagues at a higher rate than those who don’t, improving your store’s net promoter score, driving referrals and increasing brand awareness.
• Stronger retention—Participants in your loyalty program are often more likely to come back to your store regularly, to the point that customers who participate in loyalty programs are 43% more likely to make weekly purchases at your business.
• Higher average order values—Customer loyalty programs have been proven to help maximize the lifetime value of the customer by offering incentives to spend more and buy more often, leading to greater overall revenue and better cash flow for your business.

What are some common types of customer loyalty programs?

While the specific benefits of joining a loyalty program can vary, most provide customers with some combination of discounts on purchases, free shipping, advance notice of new products, early access to sales, free merchandise and other similar membership perks.

The method of providing customers with these benefits, however, can vary based on the capabilities of your rewards system and the technology used to keep track of your rewards members.

Generally, most customer loyalty programs will fall under three main buckets:

• Customer loyalty points and rewards programs—Giving customers some form of digital “points” for their purchase is the most common type of loyalty program. In this program, customers receive benefits and discounts based on the number of points they collect and can trade these points in for various perks. Variations of this type of program could include rewards based on the number of purchases via a punch card system (“Buy 10 hats and get one free!”) or the amount they spend (“Spend $100 and get $10 off your next order!”).
• Subscription and membership programs—Signing your most loyal customers up for a subscription or membership loyalty program can be a great way of generating consistent cash flow month to month. Your customers win by getting a great deal on goods or services they would purchase anyway, while your business wins by gaining access to a consistent and predictable source of revenue each month (allowing for more accurate forecasting and planning).
• Refer-a-friend programs—If you want to focus more on awareness and getting new customers through the doors, another option would be to create a refer-a-friend program; where existing customers can gain discounts, perks or even cash rewards when they refer someone else to your business and that referral makes a purchase.

How to create a customer loyalty program for your small business

Depending on the type of loyalty program you choose, you may have to rely on a third-party solution to help you set up and manage customer data and any relevant marketing campaigns.

For example, while you may be able to run a customer referral program using a simple website form, setting up a customized points- or punch-based rewards system that matches your goals and customers’ tastes is a bit more complex.

Especially when it comes to special features like setting up automatic enrollment codes on receipts or integrating your customers’ information into a customer engagement suite, you may need to lean on a rewards program service provider to help you set up the functionality you need.

Often, the first place to look when considering different options for customer loyalty programs is your merchant services provider.

Since they already handle managing and processing transactions at your store, most will provide a solution for signing customers up for a loyalty program to help your business grow.

Other strategies for increasing customer retention

While the benefits of a customer loyalty program are highly valuable, they shouldn’t be your only strategy for increasing retention and building better customer experiences.

In fact, there are several powerful strategies for increasing customer retention that, when paired with a strong loyalty program, can make your customers feel valued and empowered in their buying decisions:

• Gift Cards—Customers typically spend more than the value of their gift cards when they redeem, and often give these cards to friends and family as a way of showing their appreciation. By offering gift cards to customers, you can improve your overall brand awareness and drive stronger sales throughout the year.
• Omnichannel Communications—Staying top of mind is critical for ensuring customers regularly visit your business. From email marketing campaigns to posts on social media and SMS messages, your business should take an omnichannel approach to marketing to ensure you’re visible in the spaces where your customers are most likely to resonate with your messaging.
• Customer Feedback—Customer feedback can help you identify and resolve issues, learn what people love about your business and navigate your way to higher customer satisfaction. By regularly soliciting feedback from engaged members of your audience (such as asking loyalty program members to fill out a survey for extra perks), you can keep a better pulse on the different perceptions people have of your brand in the broader marketplace.

Attract and retain high-value customers with a customer loyalty program

Communication is everything when it comes to customer engagement. By building a strong customer loyalty program, your business can more effectively reach your most valuable audiences, improve customer retention and drive stronger revenue.

However, you may not be able to do it alone.

Partnering with a customer loyalty program provider such as Clover, a close partner of Associated Bank’s merchant services division, is an effective strategy for getting your loyalty program up and running as quickly and easily as possible.

From customer engagement solutions to point of sale (POS) systems and real-time, actionable data and analytics, our merchant services team has the technology, payment and loyalty solutions you need to get paid faster, sell more and run your business better.

If you’d like to learn more about the different solutions we have available for starting a customer loyalty program today, or if you just want to talk shop about your small business, feel free to visit us at one of our local branches to speak with an experienced business banker about the strategies that are right for you.