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3 steps to an effective customer loyalty program

3 steps to an effective customer loyalty program

When many people open their wallets, they're faced with a collection of rewards cards – a handful of which they don't use. According to Inc. magazine, the average American household possesses 14 different loyalty cards. In today's highly populated retail landscape, low prices aren't valuable enough to win customers over. Instead, stores use incentive strategies to lure shoppers back.

The next time you have a staff meeting or gather up to rearrange store fixtures, kick off a brainstorming session for an improved customer loyalty program.

1. Leverage available data
Before you dive into the formation of a loyalty system, you should consider how important repeat business is to your store, how other businesses in your industry are acknowledging faithful customers and which of your products encourage future shopping trips. The logistics of loyalty programs can differ greatly, even between stores with similar merchandise. Use various channels to gather information about your customer base, including social media platforms, purchase history and frequency of visits.

"Determine the top 10 percent of patrons…"

By reviewing sales information, you can determine the top 10 percent patrons of your store. Figure out how much customers typically buy each time they come in, as well as how often they shop there. You should dig deeper into the information for more clues because some of your most loyal customers might make a high number of small purchases or only end up buying products that are conducive to repeat business.

Once you've given this research process its due attention, apply it to your store's specific rewards program. Consider how you can increase the value of your dedicated customers' average shopping trips, whether it's through a personalized customer experience from sales associates or VIP emails about forthcoming merchandise. You may want to find out what your competitors are doing for a loyalty program and either mimic it with improvements or create a strategy that differentiates your business. With a quality rewards system in place, you'll be able to glean even more data from your most steadfast customers.

2. Prioritize past and present customers
Many stores try to use loyalty programs to entice patrons into becoming repeat shoppers. While this can theoretically build your consumer base for the future, it's not as profitable as targeting the people who have already proven their allegiance to your brand. You probably know that hiring a new employee is much more costly than maintaining relationships with staff members who have already been trained. The same goes for loyal customers – it's more profitable to reward repeat shoppers than attempt to lure fresh faces into the store. That being said, don't eliminate aspects of your program that are aimed at future patrons entirely. Rather, make sure your program has perks for both customer segments.

Helpful and informed employees can add value that encouraged customer loyalty.Helpful and informed employees can add value that encouraged customer loyalty.

3. Combine simplicity and value
The biggest flaw with lackluster loyalty programs is that they don't seem worth the shoppers' time and energy. Redeeming rewards shouldn't be a complicated process, and it's important to demonstrate why customers should partake in a loyalty system by offering points or perks soon after people sign up. When you boil it down, you're trying to incentivize them to return, even if they don't necessarily need to patronize your business again. 

If your business isn't prone to frequent shopping, a points program may not be the way to go. Complementary promotional products or small items that can be used in conjunction with merchandise customers have purchased in the past are more realistic rewards for these businesses. Be sure to explain why the customers are receiving their perks to encourage even more patronage.

Make it easy for shoppers to understand the program through technology, including email blasts and social media updates, as well as employees that are well-versed in its benefits.