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The Beginner’s Guide to Building a Customer Loyalty Program

The cost of new customer acquisition is considerably high for most businesses. That’s why retaining existing customers has become such a major priority.

Repeat business makes up the bulk of most organisations’ revenue and ensuring that existing customers are happy and satisfied has become a major priority. So, how do businesses strive to retain customers? The answer lies in implementing customer loyalty schemes.

If you’re wondering how these work, why your business needs them, what types of loyalty programs you can choose from or you’re simply looking for examples of successfully implemented customer loyalty programs, this post is for you.

How customer loyalty programs work

The way in which a customer loyalty program works will differ from business to business. However, one commonality that can be found across customer loyalty programs is that a reward of some type is given to a customer for their patronage. 

These rewards can be varied. They may include free products, early/exclusive access to new products or events, point systems, awards, exclusive merch, insider perks, etc. However, the basic principle is as follows.

A customer will first engage with the company or make a purchase from them. After this, an already implemented customer loyalty program is offered to the customer to sign up for. 

The customer then does this through the steps in question and they’re on their way to receiving rewards and benefits for their purchases. These rewards or benefits can be points, discounts, subscriptions, or a combination of all of these. (We’ll cover this aspect in more detail below.) 

The benefits of loyalty schemes

We already mentioned that implementing a customer loyalty program can be great for business. But in which way exactly is this the case? Below, we outline just some of the benefits of loyalty programs that you should consider implementing in your business, if you haven’t already done so. 

  • Increases customer satisfaction
  • Boosts revenue and sales and encourages repeat business
  • Improves customer retention and lifetime value
  • Builds stronger customer relationships
  • Differentiates a brand from its competitors
  • Encourages word-of-mouth marketing and new customer referrals
  • Shows customers that you appreciate them
  • It’s more effective than new customer acquisition, and
  • It can encourage user-generated content and reviews where your customers become your brand ambassadors.

Common types of customer loyalty programs

Customer loyalty programs come in many shapes and sizes. The right one for your business will depend on your business goals and offerings as well as what fits well with your business structure. However, you have a lot of options to choose from, including some of the following:

1. Points programs

A highly popular and easily recognised way of boosting customer loyalty, a point program works by giving your customers points each time they purchase. Once a certain number of points has been collected, these can be used as credits towards their next purchase, they can go towards discounted services, or they may be part of a giveaway. Depending on what type of technological systems you have in place, your customers should be able to track their points either with a loyalty card or an online account or mobile app.

2. Tier-based programs

Think of this type of customer loyalty program as a hierarchy or as different levels. Once the first level of spending at a certain amount has been reached, a new level is unlocked, which gives the customer access to even more benefits. It’s a way of encouraging your customers to spend more while ensuring that they get access to higher tiers or levels to avail of the even better perks offered there.

3. Mission-based programs

In today’s customer-centric world, consumers are looking for brands on a mission to do good. If your business has aligned with a non-profit organisation or is part of a cause, you can try implementing a customer loyalty program that encourages your customers to get involved and get rewarded for their participation by donating to a charity as part of a purchase or something similar. 

4. Gamified programs

Adding an element of fun into making a purchase, you can encourage your customers to play a game in order to get a prize or a reward. This can include something like a discount on a purchase or getting a free item with an already purchased product or service. 

5. Subscription programs

Although in this program type, customers generally pay a subscription fee for a product/service, it enables them to earn rewards which can be redeemed and used toward future purchases.

6. Referral programs

This is when a customer is encouraged to refer someone they know to your business. By doing so, they are rewarded for their referral as a brand advocate.

7. Cashback programs

Here, customers are encouraged to spend at the business and they then earn cashback for their purchases, which can be used to spend again at the business. This is not only a great way to encourage repeat business but it makes the customer feel as though they are getting something in return for their patronage.

8. Free trials

Although free trials are generally considered as incentives for converting potential leads, they can be used in a reward program, too. An example of this is if you are about to launch a new product/service. You can release the free trial to the members of your loyalty program as a way of rewarding them for their commitment to your brand and to prime them for future sales. 

9. Partner programs

If your business has several partners, you can offer your customers access to your partner’s products or services at a discounted price or with some other perk in mind where joint resources are pooled together to ensure both the customer, your business and your partner benefit from the customer’s patronage and participation.

Examples of customer loyalty programs 

If you want to see how these programs work in practice, here are just a few selected customer loyalty program examples that you can take inspiration from. 

1. Designer Shoe Warehouse (DSW)

DSW uses a tier-based customer loyalty program to entice customers to purchase from them. The different tiers include Club, Gold and Elite. This is a VIP program that rewards customers with points for every purchase. The more they spend, the more tiers they will unlock and the more benefits they will be able to take advantage of. In addition, this program is said to run seamlessly because customers don’t have to remember any numbers or information themselves. Instead, DSW’s online system instantly recognises its loyal customers and makes access to the program that much easier. 

2. Grubhub

With Grubhub’s loyalty program, customers can earn 20 points for every dollar spent. As such, customers are able to redeem ongoing offers, while ensuring that their restaurant partners are promoted at the same time. All this is done through an app that encourages customers to earn more points towards discounted rewards.

3. Dollar Shave Club

Dollar Shave Club offers a subscription-based program, without membership fees. Customers become a member simply by making their first purchase. Members don’t need to spend more to earn more points. Instead, they automatically have access to exclusive savings, birthday gifts and rewards, first access to new and exclusive products, personalised product recommendations, member-only magazines, dedicated customer support and free shipping.

4. Freshly

Freshly’s customer loyalty program is of the referral type. An existing customer gets a $30 discount for every new customer they refer. Meanwhile, the newly-referred customer will receive 12 free meals with a dollar value of $120. This helps to encourage word-of-mouth marketing to spread the word about the business. 

5. Panera Bread

As the final example in this list, we chose Panera Bread for its free perks program. Customers can enjoy free items, free shipping and personalised rewards. All that needs to be done is to download the app, sign up, and subscribe to the newsletter. 

The ServiceOS solution

If your business hasn’t implemented a reward program for your customers, now is definitely the time to do so. However, you need to ensure that you have the right tools in place to help you manage and run your loyalty programs easily and effectively. That’s where ServiceOS shines.

With the Membership Loyalty & Subscription offering, you are well on your way to streamlining any type of customer loyalty program you may wish to implement. It’s cost-effective. It’s hassle-free. And it will help you retain loyal customers while boosting your bottom line.


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