Customer Service Management

Should You Create a Customer Loyalty Program?

Do you have a customer base that returns again and again? A customer loyalty program might be a good fit for your company.

Plenty of businesses these days utilize customer loyalty programs to reward their most active customers. There are few retail stores that don’t enthusiastically offer shoppers membership cards as they check out. Could a customer loyalty program be a good fit for your business?

The Upside: On the one hand, loyalty programs appear to be revenue boosters. According to Annex Cloud, loyalty programs increase overall revenue by 5–10% and loyalty members spend 5–20% more than nonmembers on average. Retaining your customers and helping them buy more are certainly pros of loyalty programs. Loyalty cards are also a great way to thank your customers for being frequent shoppers—after all, if they spend quite a bit of money at your store, it makes sense to give them a bonus or freebie now and then. It’ll foster a connection between you and your client and keep them coming back for more. Customers can also use loyalty programs as a way to choose which brand they’re going to shop from, helping you to stand out from the crowd.

The Downside: However, there are also downsides to loyalty cards. Discounts or perks to customers can feel like a dent in your bottom line, and in order to make the loyalty perk worthwhile for the customer, it’s going to need to be somewhat significant. It’s a difficult balance between making sure your perks are actually rewarding customers but not giving too much away. Another roadblock to look at is whether your company has enough repeat customers to make a loyalty program meaningful. For instance, if you’re a service-based business or sell luxury products, you may not have as many repeat shoppers. Also, if one of your goals is the above-mentioned brand differentiation, you’ll have to make your loyalty program pack a heavy punch—so many companies offer loyalty programs that they’re starting to lose their luster and seem more obnoxious than beneficial.

To decide if it’s time to open up a customer loyalty program, consider these steps:

  1. Look at your existing customer base. Do you have quite a few clients who return again and again?
  2. Brainstorm what perk or freebie you could give customers that would benefit them greatly without having too huge of an impact on your bottom line.
  3. Start a “beta” loyalty program with a handful of your most active customers, and get their feedback. At the end of the day, you can’t know if a loyalty program will work until you properly test it.