How to Build a Loyalty Programme

I'm excited to share my knowledge on how to build a loyalty programme that drives customer retention and engagement. In this guide, I'll walk you through the essential strategies and best practices we use at Propello. Together, we'll explore the key components of a successful loyalty programme and how you can implement them in your business.

Whether you're starting from scratch or looking to revamp an existing loyalty programme, I'm here to provide you with the insights and tools you need to create a loyalty programme that truly that boosts customer retention and engagement.

In this comprehensive guide, I'll provide actionable tips including:

• Tailoring a programme to your business goals.

• compelling rewards to cultivate customer engagement. 

• Leveraging technology for omnichannel integration. 

• Use data analytics to optimise programme performance, and more

By the end of this blog, you’ll know all the basic factors you need to cover, when designing a customer loyalty programme. 

Contents:

• Key Takeaways

• What is a Loyalty Programme?

• Why Have a Loyalty Programme?

  • Benefits of loyalty programmes for businesses

• How to Build a Successful Loyalty Programme

  • Set goals and KPIs for your rewards programme

  • Leverage data insights to understand customers

  • Choose a relevant programme structure

  • Create compelling reward offers

  • Make joining easy

  • Promote across channels

  • Loyalty analytics to track and optimise programmes

• Success is in the Design

• FAQs

Key Takeaways
 

• Loyalty programmes provide significant business benefits like increased customer lifetime value, higher retention, additional revenue, and richer insights.
  
  

• To design an effective programme, set specific goals and metrics, understand customers via data, choose a fitting structure, create compelling rewards, simplify enrolment, promote across channels, and continuously optimise.
  
  

• Goals and KPIs should be precise to accurately track performance over time.
  
  

• Leverage customer data and feedback to uncover motivations, behaviours, and preferences for personalisation. Develop customer personas.
  
  

• Evaluate programme types to determine best fit based on business model, target demographics, goals and customer preferences for ideal resonance.
  
  

• Promote the programme consistently across all channels - email, website, mobile, in-store to boost awareness and drive participation through omnichannel messaging.
  
  

• Continuously track KPIs to identify opportunities for improvements. Survey members for direct input. Test changes before full rollout.
  
  

• Well-designed programmes boost enduring engagement and satisfaction. Despite requiring upfront investment, the long-term loyalty gains make this a valuable strategy. In-house programmes typically cost a lot more than an outsourced, specialist solution.
  
  

What is a Loyalty Programme? 

Loyalty programmes are more than just a marketing strategy; they are a powerful tool for businesses to create lasting connections with their customers. By offering rewards and incentives, these structured initiatives aim to not only encourage repeat purchases but also foster a sense of loyalty towards the brand.

Visit this blog for loyalty programme examples 

Customers who feel appreciated and valued are more likely to engage with the brand on a consistent basis, leading to increased customer retention and long-term relationships. Loyalty programmes play a crucial role in building trust and loyalty among consumers.

• 65% of businesses leverage their loyalty programs to attract new customers.

• 57% of businesses prioritise building stronger emotional connections with customers as their main objective.

• 50% utilise their loyalty programmes to gather valuable insights and data about their customers.

• 49% focus on increasing word-of-mouth referrals through their loyalty programs.

• 42% of companies use their customer loyalty programs for cross-selling products and services.

• 31% of loyalty programs aim to enhance customer spending and drive more traffic to e-commerce sites.

• 23% of businesses re-engage customers through their loyalty programs.

• 17% find their loyalty programs to be more cost-effective than traditional marketing strategies.

Harvard Business Review: Beyond Rewards - Raising the Bar on Customer Loyalty

For further information read the benefits of loyalty programmes

Types of Loyalty Programme? 

Points-based programmes 

Customers earn loyalty points based on specific behaviours e.g., spending. Points can be redeemed for rewards like discounts and free products. Many airlines and hotels use this model.

Tiered programmes

Members move up tiers by accumulating points or fulfilling other criteria to gain access to better rewards. SaaS companies often use tiered systems.

Paid Programmes

Customers pay a fee to access special offers, perks and deals. Amazon Prime is a leading example.

Partner Programmes

Partnered brands combine forces to deliver shared loyalty benefits. Businesses across all sectors pair up to offer their respective customer bases unique co-created offers. 

Card-linked Programmes 

Customers gain customised benefits or exclusive offers when they use their credit or debit cards at selected stores. Grocery stores commonly use this loyalty programme type.

The Role of Loyalty Programmes

Loyalty programmes have transitioned from just being viewed as transactional to becoming core customer relationship management tools. Their ever-evolving innovations continue to cause digital disruption. Especially when considering the adaptability of loyalty programmes. 

Mobile app integration, gamification and streamlined omnichannel experiences, prove that loyalty programmes still play a vital role for modern businesses to manage the customer experience and relationships. 

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How to Build a Successful Loyalty Programme

Designing a successful loyalty programme requires several main steps that you should always include. I've listed steps below that will ensure your programme is designed for success. Let's get started.

Here are the recommended steps:

1) Set Goals and KPIs for Your Rewards Programme

Align goals to your core priorities. Consider overarching goals like driving revenue, boosting retention or acquiring new customers. Regardless of what the main goal is, set specific, quantified targets instead of relying on vague goals. For example, define numerical targets like “increase repeat purchases by 15% in 1 year”. 

Similarly, choose relevant KPIs or useful metrics that are relevant to your short, medium and long term loyalty goals. Your efforts of boosting retention over a set period of time for example, can be tracked using customer churn rate. Just remember to establish incremental timeframes. This way, you can accurately track the progression of your loyalty programme towards your goals. 

2) Leverage Data Insights to Understand Customers

Customer insights are invaluable for designing loyalty programmes that truly engage your audience. Leveraging data to understand customer motivations, behaviours and preferences enables brands to tailor targeted initiatives. 

Customer data informs the design of your loyalty programme in several ways. For instance, segmenting customers into tiers or cohorts with common attributes, allows for personalised programmes, tailored specifically to high-value groups. 

Another example involves identifying peak purchase times and seasons. In other words, programmes that align rewards and offers to specific behaviours. From this data, you can draw up an accurate representation of the person behind the customer.

Developing customer personas provides a pretty clear representation of individual needs and motivations in your audience. This allows you to build a loyalty programme that addresses specific pain points, fulfil certain expectations, and offer rewards that resonate with customers. 

It also fosters a sense of reassurance with your customers, as they will feel like your brand “gets them”. That’s important for 56% of customers to stay loyal.  

Use a CRM and feedback forms to collect data and understand customer sentiments. The latter will tell you the type of rewards customers want from your new loyalty programme. A CRM system will provide you with a clearer picture of your customers’ behaviours. Structure your loyalty programme around this information. 

3) Choose a Relevant Programme Structure

Choosing the main programme structure and model is one of the key decisions when designing a loyalty initiative. We’ve already touched on the different types of loyalty programmes above. So, you’ll already know there’s several options to consider. The question is, which one do you choose? 

Your goals, KPIs and thorough understanding of your customers will inform your decision. Customer data and goals will vary from business to business. I'd definitely recommend at this stage you should learn to understand the strengths of each type of loyalty programme, in respect to how well they serve your goals and resonate with your audience. 

Bear in mind that your business model and various demographics within your existing audience, are also important factors you should consider. My team has produced a guide to choosing the right loyalty programme, based on a range of criteria.

4) Create Compelling Reward Offers 

The types of rewards offered are critical for driving engagement in loyalty programmes. Crafting compelling rewards tailored to your audience is key for high resonance. Without rewards that resonate, your customers will never be motivated to participate in your loyalty programme. 

All types of rewards work. But not all businesses pick the right rewards. This results in low appeal disinterest and a failed loyalty programme. The art is picking the reward that works for you. Or perhaps more accurately, resonates with your customers’ expectations. 

The most effective rewards align with your goals but most importantly resonate with your audience. The only way to find out what they’ll enjoy is to ask them. Remember, you can offer more than one reward type too. 

Whichever you choose, just remember, all rewards must:

• Provide clear value.

• Align with customer preferences.

• Incentivise long term engagement. 

• Remain creative and adaptable for future development. 

Compelling rewards are the beating heart of impactful loyalty programmes. So, make sure to keep them healthy. Continually optimise them based on data around redemption rates and customer input and they will resonate forever. 

5) Make Joining Easy

To drive widespread participation in a loyalty programme, focus on simplifying your enrolment process. Minimising friction during sign-up encourages participation, gets customers engaged sooner and sets the right tone.

That’s exactly why 63% of consumers consider onboarding a deciding factor for subscriptions.

Best practices for streamlining enrollment enhance convenience, choice and clarity. Therefore, places enrollment options across all your channels, in-store, online and on mobile apps. Omnichannel options remove barriers. 

In addition, keep forms short with only essential information required, such as email address and name. Avoid overcomplicating the process. The sign up process should be convenient and clear. Add an instant offer for enrolment after purchases, as this accelerates conversions during checkout. Just make sure it’s optional!

Lastly, set the tone right from the start. Give the customers an incentive to join. That purchase they’re about to make could be discounted. Instant gratification boosts conversion even further and gives them a glimpse of what to expect. 

6) Promote Across Channels 

Effective marketing across all customer touchpoints is vital for maximising awareness and engagement with loyalty programmes. Brands should leverage various channels to promote the programme and highlight its ongoing value.

Emails 

Send targeted emails announcing the programme launch to drive enrolment.
Share update emails about new benefits, reward options, and status upgrades.
Use behavioural data to trigger emails in response to specific customer actions. 

Social media

Run social ads that showcase your rewards and community. Promotional material for your rewards could pivot around specific holidays or industry events. As for your community, share member testimonials and user-generated social content. Social proof adds a layer of trust to your promotions. 

Website

Your programme should feature prominently throughout your website. Particularly if your website features customer accounts. Whenever your customers login to make purchases or manage their accounts, make sure your loyalty programme is featured. Tailor messaging and benefits to the account holder. 

Mobile App

Send push notifications directly to your customers. Mobile apps are a fantastic promotional channel because they can reach your customers pretty much anywhere. Your promotional material should notify recipients about reward redemption opportunities and new offers. Plus, the app experience makes accessing loyalty features frictionless. 

In-Store

A cohesive omnichannel strategy ensures customers engage with the loyalty programme whenever they interact with your brand. This means even in-store. Ensure your store has prominent visual merchandising – like signage and displays. Staff should also receive adequate training to educate your customers on the benefits of joining your loyalty programme. 

The more channels, the better

Continual reinforcement of joining your loyalty programme is key to its success. During the design phase, make sure your promotion strategy includes relevant channels. Ideally ones that are well established in your brand and familiar with your customer base. 

An existing following improves the chances of promotions about your programme receiving high engagement rates.

7) Loyalty Analytics to Track and Optimise Programmes

Your loyalty programme should come with track performance features. You could use a CRM, third party loyalty platform or design one in-house. As long as you can continuously track its performance, you can make data-driven optimisations, and maximise its impact for your business and customers. Plus, if your loyalty programme can be optimised, it makes it even more adaptable. Paving the way for future innovations, such as gamification and a referral programme. 

Monitoring key metrics and testing improvements fuels evolution. Therefore, track KPIs like enrolment rates, active users, reward redemption, customer spend and churn rates. Analyse for opportunities to improve too. Survey members, ask them how satisfied they are with rewards, and any improvements they would like to see. 

After you’ve gathered direct feedback, test out new rewards and offers. Build on your existing initiatives. Then analyse redemption rates and engagement. You can compare historical data with new datasets to gauge effectiveness. 

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Success is in the Design

An effective loyalty programme boosts customer retention and lifetime value. To succeed, align to business goals, offer compelling rewards, simplify enrolment and promote it across channels.

Continually optimise using data and customer feedback. A strategic, tailored programme evolves when it aligns with the expectations and needs of your customers. Which is why it will remain a robust core pillar of customer loyalty management. 

While designing and eventually launching a programme is an investment, the long-term benefits of increased loyalty will be worth tenfold the cost. With the right design prior to building your programme, you’ll drive growth through enhanced customer engagement and retention.

Need anymore information or advice? I'm more than happy to help. Just drop us a line on the contact page. Myself or a member of my team will contact you. 

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 FAQs 

What are the main benefits of loyalty programmes? 
Loyalty programmes deliver valuable business benefits including higher customer lifetime value achieved through repeat purchases over time, improved retention rates driven by greater brand satisfaction and affinity, additional revenue streams via enrolment fees or commissions, and deeper consumer insights revealed through engagement data analysis.

What types of data help inform programme design? 
Both behavioural data like past purchase history from CRM systems and data gathered through customer feedback forms, provide useful insights around interests, pain points and preferences to help tailor targeted, impactful loyalty programme design.

How do I determine the best programme structure? 
Analyse your business model, available resources and capabilities to shortlist structures that align operationally, then evaluate options that provide the best fit for resonating with your target demographics based on data-driven customer intelligence.

What makes an appealing reward?
Compelling loyalty programme rewards provide clear value in alignment with audience preferences. Utilise creativity in offers to drive sustained engagement over time through introducing novelty and exclusivity.

How can I drive awareness of my programme?
Employ consistent omnichannel promotion across all major customer touchpoints including email, website, mobile apps, social media channels and in-store displays to reinforce value and increase visibility of joining your loyalty programme. 

What metrics should I use to track performance?
Relevant key performance indicators for loyalty programmes include sign-ups, active user rates indicating engagement levels, repeat purchase rates and referral numbers showing value perception, and churn rates highlighting retention efforts.

How often should promotional offers refresh?
Balance novelty in promotional offers to maintain customer excitement with not overwhelming customers through excessive change frequency, considering quarterly or biannual updates.

When's the right time to introduce tiered levels?
Once the loyalty programme has gained a solid participating member base and sufficient reward variety exists for differentiation, tiered levels can be introduced to provide exclusive benefits in higher status levels to drive retention.

Can third-party tools integrate with my loyalty platform?
Integrations are offered through APIs and plugins by many loyalty platform vendors to allow expanded capabilities for connecting external third-party tools and applications that could enhance the programme's overall impact.

How can I continuously improve my programme?
Tracking and monitoring engagement data, frequently surveying participants to gather input, and running A/B tests on new reward offers prior to full implementation assist with continuous improvement through data-driven optimisation.

Author Bio, Written By: 

Mark Camp | CEO & Founder at PropelloCloud.com | LinkedIn

Mark is the Founder and CEO of Propello Cloud, an innovative SaaS platform for loyalty and customer engagement. With over 20 years of marketing experience, he is passionate about helping brands boost retention and acquisition with scalable loyalty solutions.

Mark is an expert in loyalty and engagement strategy, having worked with major enterprise clients across industries to drive growth through rewards programmes. He leads Propello Cloud's mission to deliver versatile platforms that help organisations attract, engage and retain customers.