Three steps to building a successful loyalty program

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With so many companies and brands out there, coming up with a unique product or service isn’t enough to keep customers loyal to your brand anymore. That’s why organizations all over the world are talking about the importance of customer loyalty and the effects it can have on a business’s success.

Maintaining or increasing customer loyalty isn’t an easy task, and companies need to come up with unique strategies to improve their customer retention rates. One of the most popular techniques is creating a loyalty program that will always motivate new and existing customers to come back.

Nevertheless, not every loyalty program achieves its goals, so building a high-quality and successful loyalty program is crucial. Here’s how to do it in three easy steps.

What is customer loyalty, and how can you measure it?

Customer loyalty can be defined as an ongoing emotional relationship between companies and their customers. This emotional relationship ultimately decides how willing a customer is to repeatedly engage with or purchase from a business compared to the competitors.

Essentially, customer loyalty works as a byproduct of the positive experience among customers. A string of positive experiences leads to an emotional tie and customer loyalty. Simply put, happy customers will continue to buy from trusted brands and companies instead of going over to their competitors.

Companies with loyal customers can count on them to:

  • Repeatedly purchase products or services;
  • Use what they purchase;
  • Interact with their brand;
  • Recommend the business to others;
  • Provide proactive feedback;
  • Be more forgiving of errors and issues;
  • Be less likely to purchase from competitors.

Considering that the customer-centric culture is becoming increasingly popular among brands, more businesses are beginning to understand the importance of measuring customer loyalty. There are several ways to do that.

1. Net Promoter Score (NPS)

The NPS metric can be done by a simple 1–10 score survey. Here companies can gain insight into the likelihood of customers recommending their business to others.

2. Repeat Purchase Rate (RPR)

The RPR metric measures how often customers return to the same company. The RPR can be calculated by dividing the number of customers who made repeat purchases by the total number of customers during a specific period of time.

3. Customer Engagement Score (CES)

A CES metric determines the level of engagement customers experience with a brand. Companies can use different inputs to measure customer engagement. By combining these inputs, companies can easily merge information from all inputs and receive a single number that’s easy to monitor. Naturally, more engagement means more success.

4. Customer Lifetime Value (CLV)

The CLV metric predicts the profit margins companies can earn throughout the relationship with an average customer. It helps companies gain better insight into how much customers buy from them during their relationship. CLV is calculated by multiplying the lifetime value by the profit margin.

5. Customer Loyalty Index (CLI)

CLI metric tracks the progress of customer loyalty over the desired period. Calculating CLI is pretty simple since customers just need to respond to three questions:

  • How likely are you to recommend the company to a friend?
  • How likely are you to buy from the company again?
  • How likely are you to try other products or services from the company?

CLI is the average of all three scores.

What is a loyalty program?

A loyalty program is a special program many companies create to encourage customers to engage with their brand, purchase their products, or use their services. Businesses do so by introducing all kinds of rewards and other benefits to their loyal customers.

After customers spend the desired amount of money or complete some kind of interaction with a brand, the company rewards them with special points or gifts for their loyalty.

Regardless of the loyalty program’s specifics, this program acts as an up-front deal with customers. Namely, customers need to engage with the brand, and the business gives them something in return. Popular loyalty program rewards include discount codes, vouchers, exclusive products, free delivery, better pricing options, freebies, and much more.

This is an excellent customer retention strategy as most of your customers these days are more frugal with their purchases. By offering gifts, limited-edition products, and other benefits, you keep customers happy and save them money.

It’s safe to say that loyalty programs are an outstanding customer retention strategy because they seamlessly help companies build loyalty and motivate customers to come back.

The purpose of all loyalty programs is to:

  • Attract customers and retain them;
  • Collect customer data to strengthen professional relationships.

What are the types of loyalty programs?

It is important to note that loyalty programs vary in type since they are an effective tool for customer retention strategies.

Each type comes with unique features, allowing all companies to find a loyalty program type that fits their business and needs.

1. Tiered

Tiered loyalty programs consist of different levels of loyalty. Customers reach higher loyalty tiers as they accumulate points. A tiered rewards system rewards loyalty and encourages more interaction with the brand by providing greater rewards at higher levels.

2. Paid

Paid loyalty programs, also known as VIP programs, are member clubs customers must pay for if they wish to join. Paid loyalty programs usually come with a monthly or annual fee, giving VIP members access to special discounts, services, or opportunities. Considering paid loyalty programs request money from customers, they need to offer benefits that are exclusive to VIP customers.

3. Point-based

Point-based loyalty programs are the most common ones in the world of commerce because they’re simple to implement by companies and easy to understand by customers.
These loyalty programs reward customers with special points after their purchase. The more money they spend, the more points they’ll receive. Customers can later redeem these points and turn them into attractive rewards, such as discounts or gifts.

4. Value-based

Value-based loyalty programs are more complex to implement, but they can often be why some customers return to specific companies. Value-based loyalty programs aren’t about rewarding customers. Instead, they’re focused on what customers value. Companies must determine what all their customers value in order to accomplish that.

For instance, a company that sells eco-friendly and reusable bottles can start a loyalty program in which they donate €5 to a green initiative every time a customer spends €50 or more. Considering that all customers purchasing from such a company care about the planet, they will support businesses aligned with their values.

Three steps to building a successful loyalty program

Creating a loyalty program might require some brainstorming, time, and resources, but the process can be much simpler than you think. Here are the three key steps to creating a successful loyalty program for your customer base.

1. Identify a gap that you can fill

With so many companies offering various loyalty programs, creating any kind of loyalty program just isn’t enough anymore. Instead, businesses should study the market and identify gaps that they can fill with a unique loyalty program.

2. Make your rewards attractive to customers

Whether your customers would like a gift with every purchase or access to a limited-edition product, a special offer can attract many people to a business. Rewards that come with loyalty programs are a way for companies to show customer appreciation, which is why they should make these rewards attractive to users.

3. Stay in touch with your members

Staying in touch with the loyalty program members is essential for keeping the special rewards program up and running. Members of these programs will extend their memberships only if they see brands see them, value them, and interact with them.

How can customer loyalty programs benefit your business?

A strong loyalty program can secure many benefits for a business. With a successful loyalty program, companies can:

1. Retain existing customers

Existing customers will spend more money on a business than new ones and are less likely to turn to the competition. That’s why retaining existing customers is extremely important.

2. Build personal relationships

Studies show that customers are more compelled to buy from companies they have built a relationship with than new companies. Maintaining these relationships can also lead to better brand awareness and referred customers.

3. Create brand advocates

Customers don’t only spend money — they also generate it. Satisfied loyalty program members are more than happy to recommend and introduce a business to a broader circle of people.


Even though you can find loyalty programs anywhere right now, companies can still find ways to make these special customer retention strategies successful. A well-designed loyalty program can secure numerous benefits for customers, and now your business can build it in three easy steps.

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