Ideas for Creating a Customer Loyalty Program

Customers are the bread and butter of any small business, and winning people's long-term loyalty can really pay off for you and your business.

It is well documented that the majority of a firm's sales come from a small proportion of repeat customers. Experts also estimate it costs between two and 10 times more to win a new customer than to retain an existing one. Targeting these loyal customers can help boost your sales and gather more names in your customer management software for future marketing efforts.

Why set up a loyalty program?

According to Jupiter Research, approximately 75 percent of consumers have at least one loyalty card. When implemented well, these programs can benefit both customers and businesses alike.

Shows customers they are valued. It is one thing for a business to say "thank you" at the bottom of every invoice or receipt and another thing to communicate that feeling by giving a customer special offers and perks. Make people feel special for doing business with you.

Encourages return business. When people have a number of options to choose from, sometimes the mere knowledge they may earn a reward from a particular retailer is enough to influence their choice. If you place particular limits on your program - such as an expiration date - you may also be able to encourage people to shop sooner rather than later.

Helps you gather information. You can collect information from the members of your loyalty program to learn more about your customer base. For example, some programs offer you the opportuntity to track customer spending habits with your customer management software and gather data on demographics. Members of your loyalty program may also be more likely to return a customer survey and provide useful feedback.

Low-cost advertising. If customers see your name on a membership card whenever they open their wallet or on an email when they check their inbox, you are taking advantage of low-cost advertising. Additionally, the information gathered from these programs can help you plan out your marketing budget by identifying who is more likely to spend.

Setting up a loyalty program

Let people opt in. If you want high participation in your program, let people opt in. On your website or at your cash register, give customers the option of filling out a form to join your loyalty program, with the promise of receiving regular or occasional special offers form your business. Keep track of these email addresses with your customer management software.

Keep it elite. If you want to limit participation to those customers who spend the most, you could consider offering invitations to a select few.

Issue membership cards or numbers. Create a real or virtual membership card that customers can use to track their purchases and work their way up to a discount. Membership cards can be a major influence on customers' behavior. After all, if they know it will take just three more purchases at your business to earn their reward, why would they go anywhere else?

Send regular emails. Set up an email newsletter to communicate with loyalty program members so they feel like they're part of an elite group. These emails can be filled with useful content, descriptions of new products and special offers.

For example, if you sell body care products, your email newsletter might contain tips on how to deal with dry winter skin, an explanation of the ingredients in your newest body wash and a coupon for 5 percent off of the customer's next order.

How to structure rewards?

Buy nine, get one free. This is the method used by a number of coffee shops, which give visitors their 10th drink free. You can use this as a model and tailor the specifics to your business.

Discounts. Particularly if you run a service-based business, it may make sense to offer a discount on future orders to customers who spend above a certain amount. For example, award a 10 percent-off coupon for every $100 customers spend in a single order.

Clubs. Most supermarkets offer a club-style rewards program, which tracks their purchases and permits certain advertised deals only to those who are a member. This method may work well for businesses that are keen on targeted advertising.

Rewards for paying upfront. Small business owners can offer their regular customers an incentive to pay ahead. This can also help with cash flow management.

Contests. You could hold regular contests to write reviews for products, come up with ideas for the regular email newsletter - or simply hold a raffle for all customers who spend more than a set amount in a given month.

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