Customer loyalty is the willingness of a customer to choose your brand over your competitors, time and time again. Fostering customer loyalty is an ongoing process that needs to improve in order for businesses to thrive.
One easy method of fostering customer loyalty is through customer loyalty programs. There are several types of loyalty programs to choose from, which allows businesses to create a program that suits their business model.
What Are Customer Loyalty Programs?
Also simply called loyalty programs, customer loyalty programs are sponsored by retailers and other businesses, they offer rewards, discounts, and other special incentives as a way to attract and retain customers.
These programs are usually based around similar models but are always customized for the business using them. They all are designed to get repeat customers by offering some sort of reward in exchange for business. Generally speaking, the more you spend or the more often you spend, the better the rewards are.
First-Time Purchase Discounts
In order to get new customers, many companies will offer a first-time purchase discount. This type of rewards program aims to get people to try a product or service.
If the quality of the product or service meets or exceeds the expectations of the customers, the chances of them returning as a customer go up. This style of customer loyalty has a win-win situation for the business.
Customers who like the service or product will become loyal customers, while the people who only bought to try it would still have given you their money.
While this program mainly caters to product-based businesses, there are still services where this reward program works incredibly well. Streaming services are a good example of this as HBO Max, Spotify, Amazon Prime, and Netflix all have some sort of “first” promotion. Whether it’s a discounted rate for the first month or a sign-up discount, the goal is to get you to try it.
Point-Based Rewards System
Another type of customer loyalty program would be the points system. This system works by rewarding points, which are usually cleverly named, to customers who perform certain actions. Different values are given based on the actions taken by the customer.
Points can be given for actions such as following the brand on social media platforms, purchasing a product or a service, leaving a review after purchasing something, and some companies even give points to people on their birthdays.
The points accumulate and can be traded in for rewards. These rewards could range from tangible items such as free branded merchandise like clothing and accessories or intangible items such as discounts on your next purchase or early access to new products or services. The whole idea of the point-based system is to give your customers a feeling of exclusivity, essentially rewarding them for doing business with you.
Referral Rewards Program
Referral programs help harness customer loyalty by turning those loyal to your brand into business-generating assets in exchange for rewards. Unlike other rewards programs, the only rewarded action for this is to refer other people as a way to entice them to do business with you.
The rewards can range from cash, store credit, big discounts, and products or services. Generally, referral programs harvest customer loyalty by having different tiers of rewards based on the number of people referred. The more you refer, the better the rewards.
At the height of Tesla’s referral program, owners who referred enough people were given a free Roadster. If you intend to create a referral program, make sure you can sustain it, as Tesla had to cut the free cars from its program due to the high cost of the reward.
Referrals are important as they are the most trusted source of advertisement a business can get. The Nielsen Company took a survey that resulted in 92% of its participants saying they trust recommendations from people they knew. This is a significant increase in percentage from the runner, which was online reviews coming in at 70% of people saying they trust these reviews.
Free Trials/Trial Periods
Everyone loves free samples. From the free samples in malls to the free food samples inside of Costcos, getting a taste of something before you fully commit to buying it allows you to gauge whether or not it’s for you. This type of customer loyalty program works for high-value products or services.
Amazon has a trial period of their Prime subscription service, which allows for free, priority, one-day, and even same-day delivery on your orders. In addition, they coupled their Prime service with their online streaming service called Prime Video, meaning when you start your Prime free trial, you are also given access to Prime Video.
This may seem like a loss of revenue, but once their customers get a taste of the convenience and value of the services, a high percentage of people convert to paid customers.
Discounts/Freebies For Repeat Customers
Discounts or freebies foster customer loyalty by giving more benefits to repeat customers. These rewards are generally different from the rewards given during a trial period, as they come in the form of big discounts or a more impactful free item.
Many boba shops have a rewards program that gives customers a free drink after a certain amount of drinks have been bought. In Asia, there is an online eCommerce shop called Zalora that rewards repeat customers with access to a number of other services that have partnered with them. These benefits include getting a discount at any of the affiliate shops, access to certain credit cards, medical services, and much more.
This type of customer loyalty program is mostly seen in businesses that sell a product as opposed to a service. It is easier to give and track rewards for product-based businesses due to the frequency that products can be bought, while services usually have subscriptions that last at least a month.
The Wrap Up
Customer loyalty programs help businesses grow by incentivizing customers to choose your business over others. Giving something back to your customers creates a sense of community and trust, which may translate into referrals even if you don’t have a referral program in place yet.
It is important to match your business type and culture to a rewards program, as having a point or rewards-based program for a service may not yield the same results as a product-based business doing the same thing. There’s a customer loyalty program that fits all businesses, you just have to find the right one for you.