How to Build Retail Loyalty Programs for Your Store

Loyal customers are an asset to your retail business, and thus, loyalty programs are a powerful tool to build your repeat customer base and drive recurring revenue. The lion’s share of your revenue comes from your existing customers; thus, retaining these loyal customers should be your priority. Here, we’ll uncover how you can build effective customer loyalty programs for your store.

Retaining your existing customers yields much better returns and recurring revenue for your retail business than the cost of acquiring new customers. Here, a well-strategized customer loyalty program can be a powerful tool for building lasting relationships with your customers based on trust and meaningful engagement. However, leveraging loyalty program marketing goes beyond offering vouchers, discounts, or other freebies.

Loyalty programs impact brand advocacy, retention, and spending. A report says that increasing retention by 5% can boost revenue by a massive 25% to 95%. However, leveraging loyalty program marketing goes beyond offering vouchers, discounts, or other freebies. It is about creating meaningful connections with your customers, delivering value, and rewarding their trust and loyalty to keep them engaged with your brand. After all, as Gartner Group says, 80% of your future revenue will come from 20% of your existing customers.

Let’s understand loyalty programs in more detail and discover effective retail loyalty program strategies.

How Loyalty Programs Work

As the name suggests, a customer loyalty program aims to reward customers for their trust and loyalty with something they would want, such as a discount on one of the popular products or a food voucher for some popular joint. Moreover, it should be easy for the customers to achieve it to keep them interested and engaged.

So, how does a loyalty program work? Usually, when customers purchase at your store, they earn points or measurable units each time they visit it. After they collect a specified number of units, they can redeem that to receive an award. It has a surprise element, and everyone loves to get something nice unexpectedly.

Benefits of Loyalty Programs

Retail points-based programs offer multiple benefits for regular and walk-in customers. It is an excellent way to incentivize customers for their support and show appreciation for making your brand successful. Here are some of the benefits of implementing a reward system:

• Retaining existing customers is much more cost-effective than customer acquisition. A robust loyalty program can help you turn some walk-ins into regulars.
• These programs of rewarding customers often provide a better understanding of customers. Gathering data on how the customers redeem their points gives you insights into their preferences and interests.

So, leverage reward programs to offer personalized rewards for shoppers to build long-lasting relationships with customers and turn them into your brand advocates.

Steps to Develop a Customer Loyalty Program

Stakes for developing an effective loyalty program are high when acquiring a new customer costs 5 to 25X more than retaining an existing customer. Here are some proven steps to develop an effective customer loyalty program:

Know your customer – This is the first crucial step for building an effective loyalty program. Ask the following questions about your customers –

• How much does a specific customer buy in a year?
• What type of products do they purchase, and what is their purchase frequency?
• Since when have they become your brand’s customer?
• Can you draw their interest toward other products?
• Do you know if they use other suppliers? If yes, then those supplier details?
• What is the profit margin from their purchase?
• How quickly do they make payment?
• What is their satisfaction level with your brand?
• What can you do to enhance your relationship?

Make preparations to launch the loyalty program – You must be prepared well before launching your loyalty program. Review customers’ satisfaction levels through surveys and interviews. Identify resources in your team who will be good at handling the program and available. Also, target customers who buy more frequently because offering such a program won’t be a good business decision if the purchase frequency is long.

Define clear goals and objectives – Define the program’s objectives to provide clarity to your team on the metrics they should be monitoring and evaluating. Ensure that the goals are realistic and measurable. For example, if the customers targeted purchase 4 times a year, you should aim for 4.5 times.

Budget allocation – Allocate a budget for customer retention and loyalty programs, which should be separate from the cost of customer acquisition. Discuss with your marketing and sales departments if you want steep growth.

Identify customers to target – Based on customer data, group your customers and select the target customers based on your goals and objectives. The following are some criteria for evaluation –

• Purchase volume
• Purchasing power to spend on more products
• Payment momentum
• Loyalty over a while

Determine methods to encourage loyalty – Select the loyalty-improving methods based on customers’ purchases and their relationship with your brand. Adapt your strategies and tactics based on the type of customer, for example, depending on whether your brand is B2C or B2B.

Conclusion

So, the point is that increasing repeat customers is not only about offering loyalty benefits or discounts. It is about building trust and nurturing a long and meaningful business relationship with your customers. When executed effectively, it can be a game changer for your retail business, driving customers to your store time and time again.

Delve into your customer demographics and understand their preferences and what works for them, be it a personalized recommendation or a VIP treatment at the store, and build a program that answers those desires. Focus on providing real value and meaningful engagement to make your customers repeat their purchases.