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The quick guide to customer loyalty programmes

Feb 14, 2024

From frequent flyer points to free dog grooming, customer loyalty programmes have become a staple in many marketing strategies.

But implementing a successful loyalty programme that stands out from the crowd isn’t easy. Businesses need the right data, the right audience understanding, and the right incentives to really make an impact.

In this quick guide, we’ll explore the basics of customer loyalty programmes, their benefits, and how the experts are doing them. Whether you’re starting a new loyalty programme or revamping an existing one, this guide will provide you with the knowledge to hook your customers in and keep them loyal.

What is a customer loyalty programme, and how does it work?

Let’s begin with the basics; what actually is a customer loyalty programme?

Customer loyalty programmes are designed to incentivise customers to continue purchasing from a company by offering rewards, discounts, and exclusive benefits in return for their loyalty.

Typically, customers will earn loyalty points or rewards for making a purchase, recommending new customers, or engaging with the business through various channels. These rewards can then be redeemed for discounts, products, services, and other exclusive benefits.

What are the benefits of implementing a loyalty programme for a business?

Businesses that implement customer loyalty programmes can reap endless benefits, but to your appetite, here are our favourites:

Increased customer retention

The main benefit of any loyalty programme is retaining happy, loyal customers. These programmes encourage customers to continue purchasing, leading to improved customer retention and reliable, repeat business.

Increased revenue and profitability

Maintaining customers costs less than acquiring new ones. So by keeping customers loyal, businesses can benefit from repeat purchase and increased revenue and profitability through less budget-intensive marketing techniques.

Valuable customer insights

By tracking loyalty programme behaviour and preferences, businesses are able to gather invaluable data and insights that can be utilised to improve marketing strategies, and execute personalised marketing to individual customers.

Effective marketing

Loyalty programmes equal happy customers. And these customers are more likely to recommend the business to friends and family, as well as engage in marketing activity such as user generated content, contests, and surveys. All of which leads to effective word-of-mouth marketing to encourage new customers.

What are the best data sources  for customer loyalty programmes?

Data helps businesses to gain a fuller understanding of their customers, their preferences, and their behaviour. By collecting and analysing relevant data, businesses can identify patterns and trends that can inform the design and execution of loyalty programmes.

Demographic data

Demographic data includes basic information such as age, gender, income, and location. This information helps businesses understand their target audience, and create loyalty programmes that appeal to specific customer segments.

Transactional data

Data on the types of products that are most frequently purchased, and by who, will help businesses to identify the rewards and incentives that will be most coveted by their customers. And what types of incentives to promote to different customer segments.

Customer feedback

Customer feedback can be gathered through surveys, social media, and online reviews. It can provide insights into customers’ preferences, pain points, and satisfaction levels, which can inform loyalty programme design.

Competitive analysis

Understanding the competition alongside industry trends allows businesses to differentiate themselves from the crowd. Businesses can use this information to identify gaps in the market, and create loyalty programmes that offer something unique.

How can a business measure the success of their loyalty programme?

As with any marketing activity, measuring the success of customer loyalty programmes is crucial for businesses to evaluate whether the programme is performing, and identify any areas for improvement.

Programme participation

The obvious place to start is with how many customers are participating in the loyalty programme. By identifying this number alongside frequency of participation, businesses can determine if the programme is engaging customers, and whether the rewards are enticing enough.

Customer retention rate

A loyalty programme’s  success can be measured by the percentage of customers who come back to purchase from a business, time and time again. This can be compared to the retention rate prior to the loyalty programme being implemented, to identify whether there has been an improvement.

Average order value

Are your loyalty programme participants spending more? The average value of orders placed by loyalty programme participants can be compared to that of orders placed by other customers, to identify whether the programme successfully encourages customers to spend more.

Net promoter score

The loyalty programme’s impact on customer satisfaction and advocacy can be measured by sending regular Net Promoter Score (NPS) surveys. An NPS will then measure the likelihood of customers recommending the business to others, which can be tracked and compared on a regular basis.

Examples of customer loyalty programmes

By now we hope you’re as hooked on the idea of customer loyalty programmes as we are. To give you a little inspiration for your own loyalty programmes, here are some of our favourites:

Pets at Home

Key to a successful loyalty programme is understanding your customers, and Pets at Home’s VIP Club does just that.

Boasting over 10 million members, the programme offers perks such as discounts and birthday bonuses. But Pets at Home goes a step further in supporting animals, offering grooming services, a 24/7 VIP community to locate lost pets, and generating charitable donations to animal charities.

Rituals

Rituals go all out when it comes to their loyalty programme.

By becoming a member, customers benefit from the basics such as free delivery and exclusive content, through to more lavish events, free gifts, and their own dedicated app.

Their offering truly fits their brand, making customers feel pampered at every step.

AMEX

American Express (AMEX) boasts one of the most famous loyalty programmes to date. 

Featuring options that fit a variety of budgets and interests, cardholders can redeem points on various rewards, including travel, merchandise, gift cards, and hotel upgrades.

The beauty of this loyalty programme is how it encourages customers to spend. The more points a cardholder earns, the higher their membership level, and the more exclusive benefits they receive.

Starbucks

Sometimes simple is the most effective when it comes to loyalty programmes.

With nearly 20 million members, Starbucks Rewards is a hugely successful loyalty programme. In fact, in 2019 the programme accounted for 40% of the company’s sales

Starbucks knows its customer well and tailors its loyalty programme to their passion: coffee. With Starbucks Rewards offering “easy ordering, endless choices and – yes, free coffee”.

Final thoughts

​​There’s a lot of competition out there when it comes to loyalty programmes.

But when combined with solid audience understanding and a targeted marketing strategy, you can execute a loyalty programme that reflects your brand and is irresistible to your customers.

If you’re ready to get started, then we’d love to help. Simply contact us to hear how Deployteq and our team of experts can help with your customer loyalty programmes.

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