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4 key ingredients to make a successful loyalty program

We give you tips on how to design a great loyalty program

With more than 50 years of combined experience, we have seen many different loyalty programs, so we know what success and failure look like. The good news is that designing a loyalty program for success is not rocket science and if you follow some basic rules you should have no problem creating one that your customers and your pocket will love.

We have listed below 4 key ingredients to help you design a successful loyalty program.

Your product:

First things first, we have yet to see a successful loyalty program built on top of a bad product/service. No matter what offer you give, no matter how much you promote it, nothing will work until you have an amazing product and service. So, unless you already have some customers that love your product (your mom does not count!) we suggest to first focus on that. Collect feedback and start improving your product/service. You can find some creative ideas that will help you collect feedback on our blog post “5 original ways to collect feedback“.

If, on the other hand, you already have some customers that love your business, then creating a loyalty solution can boost your business.

The reward:

It should not come as a surprise that the reward is one of the most critical elements of successful loyalty programs. Try to follow as many points as you can from the CLEVER rule: a reward should be significant, simple, diverse, exclusive, sentimental and sharable. You don’t have to tick all of the boxes but the more you tick the better. The order however is important; so don’t sacrifice simplicity for shareability for example.

So, what does each of them really mean?

Significant: When you decide what the reward will be, remember that most customers register to a loyalty program to save money. The actual value of the reward varies significantly between the business sector and profit margins. Having said that, a general rule of thumb is that the reward value should be upwards of 10% of the value spent. We would even suggest to be closer to 20% if you can afford it.

Simple: The most successful loyalty programs have rewards that everyone can understand. Avoid at all costs complicated rules; users should be able to understand what is in it for them very quickly.

Diverse: If you can create multiple rewards (e.g. Yollty Point System model) you should create a variety of rewards that will satisfy even the most demanding customers. On the other hand, if you use a system that allows you to have one or two rewards (e.g. Yollty Stamp Card model) then make sure the rewards are generic enough that will be appreciated by all your customers.

Exclusive: People love rewards that make them feel special. Exclusivity combined with diversity is a good way to create different tiers of rewards. Create a reward that any of your customers could get but make sure that your top customers are treated accordingly. For example, every customer can get a free coffee, but the top customers get a specially branded mug to take home. Some other examples of exclusive rewards include VIP access tickets, early access to discounts, etc.

Sentimental: If your rewards can trigger some emotion on top of saving money then you are on the right path. One of the ways to trigger emotions is with exclusivity but there are other ways too. For example, allowing them to use their collected points towards a donation. Studies have shown that the vast majority of customers are ready to spend more for the same product from a company that they believe is making a positive difference in the world.

Sharable: You should give your customers an easy way to share their reward with their friends. This not only will make your customers happy, but it will incentivize them to bring a friend with them, introducing you to a potential new customer.

Reward engagement not just spending:

When you reward your customers only for spending it can create a connection with your brand that is very transactional. Studies have shown that creating an emotional connection with your customers can increase spending and loyalty. Thus, we strongly suggest that you reward your customers for other types of engagement that promote your brand.

One good way to start this is by rewarding them for just joining your loyalty program, this has a double effect. On one hand, it creates the instant gratification that people are looking for when joining your program and on the other it creates an emotional connection by showing that you value and appreciate their involvement.

Some other actions that you should consider to reward are:

  • When a customer writes a feedback
  • When a customer joins your social media pages
  • When a customer refers your business to a friend
  • Any other activity that helps your business get publicity or new customers.

However, as you can imagine, the above have the inherent risk of abuse. You should always keep a close eye on cases where someone tries to take advantage of your rewards. With Yollty this happens automatically, as we have cutting-edge technologies that detect and stop any attempt to abuse your program before they cause any real problem in your business.

Onboarding simplicity:

We have already mentioned the importance of simplicity in the section about the rewards. Simplicity though is important for other areas of your loyalty program as well.

Many businesses, try to ask a myriad of information at the sign-up step. Although this might make sense at first, as the info is really valuable for targeting the customer, in practice, it is counterproductive. Many customers will not even sign up for a program that requires a lot of personal information at the onboarding process because we haven’t yet established a trust relationship with the them.

At Yollty we have taken a different approach and we have seen an increase of more than 20% in the adoption of our programs. We let the customer start using the loyalty program without the need to provide any information. All they have to do is to simply download the app and they can start collecting their rewards. Once we have built that trust relationship, we incentivize them to give us more details. For example, we ask them to let us know their birthday and gender to receive extra rewards from our partners on their special day. In this way not only do we receive the wanted demographics but we also remove any friction at the onboarding process.

This blog post was made to help you design your new loyalty program. Click on the link below to find out what comes next.

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