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6 Tips for Employing a Customer Loyalty Program That Works

By: Grant King, IndustrySearch Writer
24 August, 2015

If all our customers had the sort of loyalty a dog has for his master we'd have nothing to worry about. Unfortunately customer loyalty is as fickle as fashion and as reliable as the weather.

Consumers now wheel their virtual shopping carts merrily through the aisles of cyberspace without great allegiance to any brand or business. And with less ability to build goodwill through a plain old in-store smile and 'Can I help you?' we're now scratching our heads for new ways to keep customers ringing the tills. Here are six suggestions.

Use a points system, plain and simple

And that means no convoluted loyalty program with percentages and pie charts and 55 levels of rewards. Just use points on purchases which ultimately add up to some kind of reward, be it a free purchase, discount or something equally appealing such as a holiday. This simple points system works best for businesses wanting frequent purchases of non-durable items.

Charge for their loyalty

Say what? Make customers pay to be good, repeat customers? Yes, it sounds entirely stupid, but companies such as Amazon are now doing exactly that. They discovered that huge numbers of customers were marching in rage at tax and shipping charges added onto their book purchases.

Amazon responded by offering loyal customers free shipping and no minimum purchase for $99 per year. The customer then does their sums, works out their likely purchases, and buys in to the idea if they perceive a saving over the course of the year. Meanwhile, Amazon gains a guaranteed customer.

Run a contest

A contest or sweepstake can add real spice and excitement to the purchase process and give your business great publicity if done well. A few things to remember: keep the odds of winning realistic and no lower than 1 in 4 for your cheapest prizes.

And make the contest and prizes relevant to your core business to increase recall. i.e. If you sell running shoes, make the major prize a trip to the New York marathon.  

Build a ladder

In other words, build an incentive program customers can climb their way up rung by rung through purchases until they reach the top. This tiered reward system is more suited to larger purchases with rewards at each rung.

The higher your customer climbs, the bigger the rewards. One of the best things about this system is there are rewards along the way, whereas a points system can lose its whole point if the milestones are too far away and don't stay top of mind with customers.

Get a buddy business

In other words find yourself an attractive business roughly allied to what you do and offer rewards like a tag team. If you sell fishing equipment, team up with a fishing charter company. If you sell computer hardware, team up with a software company. Each of you can then offer relevant add-ons to your customers and bring each other business.

Forget loyalty programs altogether

Yes, you read correct. Go against the flow and offer no incentives, ladders, sweepstakes or buddy offers whatsoever. Instead build loyalty through old fashioned goodwill, good deals and reliable service. And yes, such outrageously quaint ideals generally went out with black and white televisions, but if your product has a unique point of difference you can still build loyalty based solely on your product.

Forget it if you're in a highly competitive market full of highly unfaithful consumers – they'll continue to buy from whoever is offering 2 for 1 or a luxury holiday they have little chance of winning. But if you have a unique product with ongoing sell-up potential through accessories and updates, lock them in with an attractive offer at the beginning and keep them by keeping ahead of your competitors.


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