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How To Build A Customer Loyalty Program


Loyalty goes a long way in defining and building relationships between people. Be it our personal relationships or even the relationship we have with the customers. For a business organization, having a loyal customer base is essential for success. Why? Because:

  • Keeping an existing customer costs up to five times less than winning a new one
  • Increasing customer retention by just 5% boosts your profits by 25-95%
  • 20% of customers are typically responsible for 80% of a company’s revenue

# How to Cultivate Customer Loyalty

The primary purpose of a customer loyalty program is to leverage the current customers into promoting the brand and retaining new customers.

The question arises as to what approach should a business take to cultivate brand loyalty among its customers. Here’s what you can do:

Provide Omnichannel Support

You can’t cultivate brand loyalty without being in tune with the needs and wants of your customers. For this, you need to have a presence everywhere your customers are present – be it social media, review sites, or anywhere else. Having omnichannel support is the best way to accomplish this. In the long run, this helps you increase customer interaction as help is available to them at all times.

When your customers can reach out to you for help at any time, that’s when they know you are committed to ensuring they have a delightful experience.

For this, you can use tools like helpdesk software, live chat, chatbots, and social listening software to help provide an omnichannel support experience.

Share Customer Experiences

Word of mouth publicity is one of the strongest influencing factors for customers. As a customer, you are more likely to choose a store about which you have heard references than a store you have never been to before. Right? As a service provider, what is the point of providing excellent customer service if you can’t leverage it to attract new customers?

One thing you can be absolutely sure of when sharing positive customer experiences is that promoters attract other promoters. Sharing positive experiences of your customers will not only encourage other customers to share their experiences but will also attract new customers towards your business.

But how can you do this?

Simple. Get a survey maker software that helps you create free online surveys to collect such data. Make use of customer feedback forms and online questionnaires to collect and organize such positive customer experiences for your website. You can even add a testimonial page on your website dedicated to sharing the feedback you receive from your customers.

Go the Extra Mile

Customers love it when a brand takes the extra step towards maintaining a relationship with them. This is more important when it comes to a B2B service provider. Go the extra mile to show that you care for your customers. Send them tickets to the next basketball game, tickets to a concert, it doesn’t have to pertain to business. While on the whole this looks like a pointless exercise, but to the customer, it is a sign of your willingness to ensure the best customer service. What is important though is to make such gestures at the right time. The most appropriate time for such a gesture would be if you’ve completed a milestone ahead of the promised date.

Reward Customer Loyalty

It’s fair to say that whenever we enter into a long term relationship with anyone, we do so with certain expectations. The same applies even in the business environment. When customers regularly transact with you, after a certain period of time, they expect to gain some additional value from their continued association with your brand, be it in the form of special vouchers, discounts, or limited time offers.

There’s an argument that offering incentives to a customer to stay is a counterproductive practice that is not cost efficient. If you look at only individual transactions, that might be true. But in the long run, these programs are beneficial when you consider more than just one or two purchases.

Not convinced yet? Keep reading to find out about all the things your business could miss out on if you don’t start building a customer loyalty program right away!

Why Build a Customer Loyalty Program

More than 60% of customers go out of their way to buy from a brand towards which they feel loyal. If that doesn’t convince you of the need to build a customer loyalty program, I’m sure the following points will.

It Helps Reduce Customer Churn

Customers are spoilt for choice these days, for every single product they have multiple competing brands. Gone are the days where customers made their decision just based on the price of the product. A whole lot of factors are taken into consideration before making a purchase, their engagement being one. Customer loyalty programs help keep potential & existing customers engaged and result in reduced customer churn. Remember: An engaged customer is a regular customer.

It is Cost Effective

As I mentioned at the beginning of the article, acquiring a new customer is 5-25 times more expensive than retaining an existing customer. As a business, it is more cost effective to focus on retaining existing customers.

It Provides Customer Referrals

This is something that you may or may not have experienced personally as well. When you’re a part of a loyalty program that offers you great rewards, you tell your friends and family about it! And that is exactly what a customer loyalty program aims to achieve. And what really strikes the nail on the head is that 83% people still trust recommendations from their friends and family. 

It Helps You Stand out from Your Competitors

In this day and age, as a business organization, you are competing with at least five other companies that provide similar products and services. How exactly do you set yourself apart from them, what makes you special to your customers? This is a dilemma you’re loyalty program can help solve. A well planned and executed customer loyalty program can help you differentiate yourself from your competitors not only in terms of product but in terms of service as well. 

#How to Build a Customer Loyalty Program

Identify the Why

Customers already know why you have a loyalty program in place. To get them to make more purchases. But, you need to identify the reason a customer would associate with your loyalty program. Why would you sign up to a customer loyalty program? Because you get access to features you would otherwise miss. Research and identify the “WHY” which your customers are looking for.

Monetize Points

This is something banks and airlines do really well and can be replicated in your business as well. Offer your customers cash backs and other incentives to spend their money. Offer customers reward points for every purchase and assign a value for these points. Let your customers have a goal in mind which they want to get after reaching a certain number of reward points.

Reward Customer Engagement

Don’t make your loyalty program just about customer purchases. Make it about engagement too. Reward your customers for their engagement, because an engaged customer is still an active customer. Does this approach work? Well, can you guess what the most retweeted tweet is? It’s the tweet of a 16-year-old boy asking Wendy’s for free chicken nuggets for a year. Even though he didn’t reach the target set by Wendy’s they still gave him what he asked for and in exchange got more coverage than they ever needed.

Look for co-branding Partnerships

Customer interests are spread across various industries. Offering them co-branded loyalty programs that cover multiple interests is a good strategy to expose your brand to new customers. Look at how T-Mobile markets its partnership with Netflix. For the cost of one tax inclusive voice plan it offers a standard Netflix subscription free of cost!

Market Your Loyalty Program

Make use of every opportunity you can to let customers know about your loyalty program. Add push notifications on your site that notify the customer of the points they’ve earned by completing a certain action. Inform them of what to do next to earn more points, market your loyalty program across social media platforms, in short, use all means possible. If possible, gamify your loyalty program to make it more competitive and attractive to your customer base.

How to Check if Your Loyalty Program is Working

Like in any other program that you implement, you need a metric to measure the success of your loyalty program. Different businesses use different metrics to measure the success of their loyalty programs but these are the most commonly used metrics:

Net Promoter Score

It asks customers a simple question “How likely are you to recommend this product/service to a friend or colleague?” Customers give their answer on a scale ranging from 0-10. Based on the rating they provide, they are divided into three categories, these being promoters(9-10), detractors(0-6), and passives(7-8). The final score is calculated by subtracting the percentage of detractors from the percentage of promoters.

Apple is known for conducting frequent NPS surveys at all its stores to identify detractors. They get in touch with detractors within 24 hours and try to resolve their issues. Studies have shown that for every hour spent contacting detractors, Apple has earned an additional revenue or sale of $1000 from that customer.

Customer Effort Score

Customer Effort Score is measured by asking customers

“How much effort did you personally have to put forth to solve a problem with the company?”

The scale on which this is measured varies according to companies but is usually between 1-5.

Customer Retention Rate

Customer retention is a metric to see how long customers continue their association with you. If your customer loyalty program is successful, it should be reflected with an increase in this as well.

A common mistake made by young businesses is that they focus only on lead generation and customer acquisition. In this day and age, treating your existing customers like royalty is the key to ensuring that your business survives the cut-throat marketplace. Just take a look at Apple; their customers would not trade their devices for any other out of pure brand loyalty.

Related Read: 50+ Customer Retention Statistics You Should Know

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About the author

Emma David is a seasoned market research professional with 8+ years of experience. Having kick-started her journey in research, she has developed rich expertise in employee engagement, survey creation and administration, and data management. Emma believes in the power of data to shape business performance positively. She continues to help brands and businesses make strategic decisions and improve their market standing through her understanding of research methodologies.