6 Tips for Creating a Customer Loyalty Program

by Ellen Lee on May 30, 2013
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Big companies like Marriott and Toys R Us for years have spent millions of dollars on customer loyalty programs, offering frequent buyers points with each purchase that can be cashed in later for rewards.

Now small businesses can provide similar perks through services like Belly, FiveStars, and Perkville. These startups are harnessing newer technologies (think cloud computing, tablets, and smartphones) to enable small enterprises to deploy customer loyalty programs easily — without paying exorbitant upfront costs.

Through these services, small businesses pay a monthly subscription — anywhere from $29 per month to more than $100 per month — to offer a loyalty program. They can then customize it, such as designating how customers can earn points. For instance, not only can customers rack up points by making a purchase, they can also receive points by posting a message about the business on Facebook or Twitter. Customers can even be gifted bonus points on their birthday.

Ready to trade those old-fashioned punch cards for a modern points system? Here are five tips for developing your new loyalty program.

1. Structure your rewards carefully. Seek a balance between making your rewards attainable for customers and creating a program that’s worthwhile for your business (such as requiring customers to spend a certain amount of money or make a certain number of visits).

2. Be creative (but not too creative). Your rewards don’t necessarily have to come at a high cost to you, but they should be enticing enough to provide an incentive to customers. Tpumps in Northern California, where it’s known for its tea and tapioca drinks (pictured), offers a free beverage and a stuffed panda bear after customers reach 150 points. (Customers earn a point for each drink they purchase through FiveStars). The plush toy has become a mascot of sorts for the business — and a coveted item among its regulars.

3. Promote the program. Familiarize your employees with how the program works and train them to mention it to customers. Make sure to advertise it in your email newsletter and on your social media pages, too.

4. Make it fun. Some businesses make earning points a game. At Mr. Green Bubble, another tea and tapioca shop in Oakland, Calif., there’s a small whiteboard near the cash register that acts as a leaderboard for keeping track of the customers who’ve earned the most points. For customers who thrive on competition, this is a fun way to keep them engaged. “Everyone is competitive at heart,” says Web Sun, who has collected more than 300 points at Tpumps and aims to be the beverage shop’s “No. 1 fan.”

Similarly, dedicated customers love the challenge of frequenting a place so often that they become the place’s “mayor” on Foursquare. Foursquare also recently introduced a new feature that lets people brag that they have “checked in” to a particular spot several times in a row.

4. Keep the program fresh. Update your rewards and specials regularly to keep your customers active, advises Perkville CEO Sunil Saha. For example, for one month, you could offer double points for customers who refer their friends to your business. The next month, you could offer double points for customers who promote your business on Facebook or Twitter.

 5. Consider partnering with other businesses. This will take some coordination, but one low-cost way to offer rewards is to partner with neighboring or complementary businesses. Your partners benefit because you help market and promote their offerings to your customers. You benefit because your customers are rewarded at little or no cost to you.

For instance, 02 Fitness, a small chain of fitness centers in North Carolina, teamed up with Massage Envy, Sun Tan City, and Custom Fit Meals. Customers at 02 Fitness can earn points by checking in at the gym and signing up for personal training sessions. Once they amass enough points, they can trade them in for a free spray tan or a free massage, among other rewards.

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