Different Ways to Structure a Successful Loyalty Program

Below are the most common loyalty program models:

Get personal - Most importantly for small business is to show your personal side, offer meaningful rewards by capitalizing on more intimate interaction with your customers. If you have regular customers that always purchase a specific item/service, offer that favourite item as a free reward as a ‘thank you’ for their loyalty. You can also collect customer’s birthdate dates and offer a small free gift when the special day arrives. It shows to your customers that their business is truly appreciated and that you are about their experience and building a relationship. Make your customers feel important and valued by asking for feedback on product or service – make sure to thank them for their time and acknowledge their suggestions. Another excellent way to make your customers feel valued is to offer exclusive new product trials before the official release or offering them the opportunity to purchase new items at a lower price.

Offer a free item after a customer purchased a certain amount of product. This loyalty reward type is easiest to implement when customers maker repeat regular purchase of the same item (i.e. a cup of coffee). Simple and easily understood, this loyalty program gives consumers a good reason to use your business over another – a guaranteed free product. 

Points – based loyalty – allowing customers to collect points for each dollar spent and offering items to redeem these points for. If you are a small business, you don’t need to have an extensive catalogue of rewards – offering your best seller items as redemptions prizes is an excellent way to induce trial, reduce cost and offer customer value. Be clear and simple with point allocation – for example, offer 1 point per 1 cent spent. Offer random limited time discounts on certain reward items (such as 25% off the regal point value) to create additional incentives to cash in the points and induce customers to start collecting again. Give customers a status-symbol by creating levels based on how many points they have collected.

Stamp-based loyalty – stamps are similar to points but work in increments, allowing you to set a minimum spent threshold required to earn rewards - e.g. for each $10 spent customer receives a stamp. After 10 stamps a customer can choose a free item or keep collecting until the next milestone of 20 stamps to cash in for a higher ticket value. This structure is simple, easy for customers to remember and creates inceptives for customers to continue purchasing. In addition, it provides incentives to increase basket size to at least $10 to get a stamp.

Celebrate milestones – this program structure is very simple and because of it can be very effective. Set a certain milestone (e.g. $50) after which a consumer can chose any free item. This program works best if all products in your store are relatively similarly priced. Allowing a customer to choose any product is very attractive because of the freedom it offers, creating a strong incentive to repurchase and achieve another milestone.

Offer skill improvement and educational programs - run complementary workshops to your loyalty program members. This is a great way to offer added value, create a stronger connection with customers and allow them to grow and develop professionally or personally. Not only is this a great way to make your customers feel exclusive, this is also an amazing way to help them grow and enhancing their lifestyle by helping them improve at something of great personal interest to them.

Form a strategic partnership with another company and offer exclusive benefits. This is a great way to show that you not only care about consumers purchasing from your store, but also would like to offer value beyond just your business. Understanding the nature of your consumers’ needs will help you determine which business will be the best fit for the alliance. 

Subside shipping – when selling online, shipping can be a considerable deterrent for some customers. Subsidizing or even waving shipping cost for your loyalty program members can be a very effective measure to combat shopping cart abandonment (whose rates are currently at a staggering 72%[1]) and increase purchase rates. You may wish to charge a one-time loyalty membership registration free to recover the cost of shipping subsidies – many consumers will see the value and be willing to pay for the benefit. 

[1] HubspotBlog. 2012