How to Build an Effective Customer Loyalty Program

See also: Customer Service Skills

Patronage should be one of the main goals of any operating business. When you have groups or even just individuals who are loyal to your product and brand, it represents a certain profit and reflects your business' good standing.

Of course, solid customer retention is not built overnight. It rests on your shoulders to reach out to customers, provide what they want, and ensure that they are happy and satisfied enough with your services for them to keep coming back.

This is where an effective rewards and recognition program comes in. People are naturally keen to receive awards, gifts or any symbol of recognition, as it stems from our need to be appreciated. The same goes for your customers. Since they're already paying for your products and services, wouldn't they be happier if they get something more out of it?

One of the best ways to give your customers that added value is to employ a customer loyalty program. It's a common tactic to retain frequent customers and encourage new ones to become repeat customers.

However, it takes more than just a reward points system to create an effective loyalty program. If done haphazardly, you risk losing valuable time and resources in developing a rewards program that doesn’t inspire the customer loyalty you want.

Guidelines to Develop an Effective Customer Loyalty Program

1. Do Your Research

Before planning your customer loyalty program, get to know your customers and competition first. The idea of such program is to capture what appeals to their clients and obtain their patronage.

It then makes sense to find out first what your customers like, what they don't like, and what aspects of your business keeps them coming back. The easiest way to do this is through customer surveys.

What more would they like to receive from the business? Is it discounts, freebies, or new product offers? The answers to these questions will provide ideas on how best to devise an effective customer loyalty program.

Likewise, take note of the programs that your competitors already have. Perhaps you're losing customers to them because people find their loyalty programs more rewarding than yours.

2. Aim to Incentivize Customers

Discounts are the most common form of reward for loyal customers. While this tactic is still effective in inspiring casual customers to become frequent ones, there are better ways to convince customers to keep coming back.

One idea is to provide exclusive incentives such as perks and rewards. For example, give free gifts when customers reach a certain number of purchases. This way, you're offering customers an added value to the acquisition they've already made, and not just a discount for the same product or service.

Even better, try to solve pain points through your loyalty program. Set up preferred customer lines for frequent customers so they don't need to go through the hassle of waiting too long. Offer expedited shipping for regular customers so they get their products fast.

Addressing pain points through your program enables you to incentivize loyal customers and solve a common issue they're facing—it’s like killing two birds with one stone.

3. Infuse Gamification in Your Loyalty Programs

Games bring out our competitive nature. So, what better way to capture your customers' interests than by “gamifying” your loyalty programs?

Create a program where customers can keep scores and race with others to “win” the incentive. There is excitement in building up scores akin to inching one's way towards a high score when playing a video game.

Infuse that experience within your rewards and recognition program to engage customers better. A simple sticker- or point-collecting system can go a long way.

Another advantage of this approach is that customers themselves can share the excitement of the program among friends. They can compare points, outdo each other, or help each other out. Not only are you engaging loyal customers, but you allow them to share the experience with potential new customers as well.

4. Give Customers a Head Start to Pique Their Interests

Once your loyalty program is in motion, it's time to get people excited and thrilled about the idea of participating in it.

That can be tough, though, considering that some customers may think such programs are simply not worth their time and effort. The best way to pique their interests is to give them a head start. After all, it's more appealing to play a game when you're already a bit ahead compared to starting from scratch.

If you're using a point-collecting system, for instance, give out starting points for old purchases so long as they can bring receipts. This way, customers will be enticed to go on with your program instead of trying it out but then abandoning it later.

5. Analyze Your Loyalty Program’s Progress and Results

The program doesn't end once a customer finally claims that gift for proving their loyalty to the business. For you, that's just when the real work begins.

Analyze the effectiveness of the program by taking into account the overall experience of the customer. Were customers enthusiastic about your offerings? How many have participated in your loyalty program within the month? Do they have comments or suggestions on how to make the program better?

These questions will help improve your customer loyalty program and prevent you from spending money and time on a program that isn't effective. Thus, the next time you think of a way to reward your loyal customers, you'll know what it is they really want.

6. Great Customer Service

Customer loyalty is not fostered by loyalty programs alone.

Employee satisfaction has a direct correlation to customer loyalty because each individual in your company becomes a brand advocate. When you feel that your 9-5 grind isn’t merely about earning money, rather you belong in a community and believe in a company that is passionate about what they do, you go the extra mile for your customers. Invest in your employees’ career development and well-being so they see their job has a purpose, and is not just a means to pay bills.

Further Reading from Skills You Need

The Skills You Need Guide to Leadership

The Skills You Need Guide to Leadership eBooks

Learn more about the skills you need to be an effective leader.

Our eBooks are ideal for new and experienced leaders and are full of easy-to-follow practical information to help you to develop your leadership skills.

Today, customers are used to instant gratification. Brands need to adjust their business models to accommodate digital needs. It’s not enough give loyalty cards anymore, you need to build a community, engage customers and personalize your services.

About the Author

Apple Pineda has served a number of clients as a content marketing specialist for three years.

She’s a wanderlust in the making, often seeking adventures to live life to the fullest. She’s a writer for, a company that specializes in digitizing rewards programs for your employees or customers.