Loyalty Program Basics: Selecting a Program That Works for Your Brand
Updated: Aug 26, 2019
It's no secret that developing customer loyalty is a continuous moving target based off of consumer trends and demands. One thing is for sure—customer loyalty requires more than simply consumer awareness and successful transactions. In order to create true brand loyalty, retailers need to create repeated positive experiences and clearly show that their customers they are truly valued.
There are a number of ways brands can accomplish this, but it's not simply about offering any type of loyalty program. The key to program success is to select a loyalty strategy that makes sense for your brand and customer base. Selecting a strategy that is right for your brand can be overwhelming, but we've broken down three of the most basic types of loyalty programs and when each may be right choice to make the path clearer.
Punch Card
A punch card program is the most quintessential type of loyalty program. In its most basic form, it’s a way that both brands and their customers keep track of their number of visits or purchases.
Once the consumer reaches a specific number of trips or amount spent, they receive some sort of incentive such as a free food item or discount. This type of program works great for in-store shopping and can help drive foot traffic as well as increase consumer frequency. Historically this was done using tried and true physical cards but the physical element made it easy for customers to lose or forget the cards and for fraudsters to create counterfeits.
Thankfully, technology makes this sort of program management much easier. Digital punch cards allow small businesses to connect with and incentivize a highly digital consumer base. Additionally, the ubiquitousness of this strategy means it’s very easy for consumers to understand, therefore reducing possible hesitancy to sign up for something they may deem confusing.
Further, by offering a digital version of a punch card, the small business is still able to track individual customer behavior and spending patterns. Commonly used payment processors like Square and Clover have integrated capabilities to make this style of program easily accessible.
This type of program may be right for your brand if:
Your main program goal is to increase foot traffic
You want a simple option with low barriers to entry
You have limited capabilities with your point of sale system
This may not be the best option for your brand if:
You are interested in deep customer analytics
You have a wide range of customer spending behaviors you want to reward
You have significant or growing eCommerce sales
Points
Points programs are another classic loyalty strategy but this time instead of only incentivizing the number of visits, these incentivize either increased or directed spend. Therefore, this type of program is often implemented by businesses who want to directly influence spending behavior.
This particular type of program can be very simple with a basic 1:1 strategy—for every dollar spent the customer receives a point then at 10/100/1,000 points receive their reward such as a store credit or free product.
Additionally, brands can get more creative with their points strategy and make it work for their goals. For example, if a coffee shop notices that Tuesday afternoons are the slowest times, they may offer double points on baked goods from 3pm-7pm to not only increase foot traffic but also help move a perishable product. Another example is that eCommerce based merchants can develop points programs to drive sales towards easy to ship, higher margin items.
If the points system remains relatively basic, consumers easily understand the program’s value proposition and how to interact with it. However, depending on the scheme built, it may take additional time for consumers to receive a reward and therefore may opt-out due to perceived lack of value. Further, high thresholds can make it harder for consumers to keep track of their progress. Having the program integrated into an online customer account can help mitigate this and prompt customers to spend more in order to close the gap to receive their reward.
This type of program may be right for your brand if:
You want more flexibility in offers and rewards than a punch card style of program
Analytics and insights into spending trends are important
You want to tier customer spending and reward different levels
This may not be the best option for your brand if:
You don’t have the time or resources to test different strategies
Your eCommerce platform and in-store Point of Sale System cannot share data
Premium
A premium loyalty program is any sort of program where the customer pays upfront for added benefits of shopping with the merchant during a specified amount of time, most often in monthly and annual increments. This style of program is one of the newest trends for brands to attract customers.
Amazon Prime is a classic example of this that has stood the test of time but more and more brands are capitalizing on the idea of dedicated consumer spend. Other examples of premium loyalty programs include Restoration Hardware, ClubO from overstock.com, and Beyond Plus from Bed Bath and Beyond. These type of programs entice customer spending because the customer pays up front for an enhanced experience and it is assumed that they will shop at that particular brand more often in order to make the fee worth it to them.
Another take on the premium loyalty program are subscription plans by retailers. Brands like Fabletics and Shoedazzle offer customers the opportunity to pay a monthly fee in order to receive a brand credit as well as exclusive offers and merchandise. This strategy helps the consumer feel like they’re getting a deal while also creating the feeling as though they’re part of an exclusive club.
This type of program may be right for your brand if:
You have a focus on creating an enhanced customer experience either online or in store
Your brand offers a fast-changing product line
You have a highly engaged customer base that don’t want to wait to be rewarded
This may not be the best option for your brand if:
Your customers are price sensitive
There is additional difficulty in creating a unique experience
Which type is right for your brand?
These are just three types of the numerous styles of loyalty programs. Additionally, with the multitude of point of sale systems and integrations, developing a fully customized loyalty program is easier than ever before. The key to developing a program is to know what the brand goals are and what your customers want. Connection to larger goals and success metrics is essential. If your brand currently does not have a loyalty program, you’re missing out on sales and spending unnecessary money to keep up with new customer acquisition rather than fueling customer retention. Schedule a Connection Call today to learn which type of loyalty program is best for your brand and what you need to do to get it up and running, so your customers have even more reason to keep coming back. For more insights about loyalty programs and branded currency, check out The Flourish in a Flash Podcast.