Loyalty programs: How to Attract and Retain Customers Through an Automated Loyalty System
Attracting a new customer always comes at a higher cost compared to retaining an existing one, while loyal customers have a higher average order value than newcomers. For this reason, businesses develop loyalty programs to increase customer retention and engagement. Find more detailed information about them in the article "What are Loyalty Programs, Their Role, and Benefits for Business." However, it is not enough to simply create and implement such a system. It is crucial to make it effective. In this article, we will share our experience in implementing a customer loyalty program for FreshTech's client and discuss global successful case studies.
Algorithm for building a loyalty system for a business
A well-designed loyalty program helps increase the customer's lifetime value (LTV), loyalty index (NPS), and cultivate brand advocates who actively refer new customers. Through a bonus system, the company tracks customer behavior, establishes, and maintains strong long-term relationships with them. As a result, the business increases the average order value and overall sales. Typically, the development algorithm for a loyalty system consists of 6 stages:
- Target audience analysis. Analyzing your customer database will provide you with a clear understanding of why people join loyalty programs, what motivates them, and why specific rewards will be valuable to them.
- Selecting the right reward and program type. Free products, samples, or services, discounts, special offers, the opportunity to win prizes, surprises, and other incentives can motivate people. Depending on the type of reward, loyalty programs can be accumulative, multi-level, paid (VIP club), non-commercial (charitable), partnership-based, hybrid, and more.
- Setting up a business model. The profitability calculation reveals the financial viability of implementing the chosen program type. Typically, experts calculate financial results using three scenarios: positive, neutral, and negative. The system should demonstrate effectiveness even in the worst-case scenario.
- Creating the interaction scheme. involves developing the logic of actions that users need to take to receive a bonus. It is necessary to provide a detailed breakdown of each step to understand the required technical solutions and equipment for the program implementation. These can be physical loyalty cards, an additional scanner at the cash desk, the development of an application and software for card management, and so on.
- Launch and promotion. To make your customers aware of your program, it needs to be promoted like any other product. For example, you can suggest signing up for a loyalty program through the cashiers' script or promote it with a banner on the website homepage.
- Analyzing the results of the loyalty program and adjusting it. The business collects information on user interactions with the program, and customer feedback, and calculates important metrics such as retention rate, customer churn rate, loyalty index, customer effort score, and others. If the loyalty program is successful, more and more people join it, and their retention rate increases. If the numbers are not satisfying, it is necessary to make changes.
A loyalty program is an effective but complex marketing tool. However, with a team of specialists who understand all the components involved, you will inevitably achieve the desired result.
Examples of bonus programs boosting sales
Customer loyalty can be achieved through various methods. A lot of companies use discounts to attract attention and encourage customer retention. However, this is not the only tool. Let's have a look at the systems developed by well-known Ukrainian and international companies that help them make their loyalty programs successful and grow their businesses.
Silpo is the largest supermarket chain in Ukraine, with 296 stores in 60+ cities across the country. The company has a loyalty program called "Vlasny Rakhunok" (My Account), which allows customers to accumulate small amounts of money for future purchases. For every hryvnia spent at Silpo, customers earn one loyalty point, and if the item is promotional, they earn two loyalty points. The retailer is constantly working on special offers, and one of the most well-known promotions was the Stikeez toys that could be obtained with a purchase of 99 hryvnias or more.
The Body Shop, a British cosmetics brand established in 1976, builds its loyalty program around its values. The company opposes animal testing and supports wildlife protection efforts. Customers earn points and rewards and also can visit exclusive club events and parties. And most importantly, customers have the option to donate their loyalty rewards to environmental charities. Incorporating such values into a loyalty program effortlessly establishes a strong emotional connection with customers for the long term.
Starbucks Rewards is an example of a non-material loyalty system. It involves giving presents upon meeting certain conditions or accumulating bonus points that can be exchanged for prizes. Accumulated Starbucks bonuses can be exchanged for a food item or beverage from the menu.
The Amazon Prime loyalty program, priced at $139 per year, offers customers free shipping regardless of the order amount. Additionally, participants of the program get extra discounts and gain access to Prime Video streaming service and the electronic library. Interestingly, the subscription fee does not include the expenses associated with shipping. However, Amazon does not lag behind because Prime members, on average, spend $1500 per year, while non-Prime users only spend $625. They order more frequently because they want to get the maximum value for their money invested.
The FreshTech team has developed a unique loyalty system for the Smart Remarket marketplace, catering to the orders of the Kazakhstani investment and construction holding company, BI Group. The platform offers products and services for renovation purposes. The cashback-based loyalty program allows customers to fully or partially pay for new orders using the accumulated bonuses from each purchase. In their account, users can track the status of their bonus account, access detailed information on cashback earnings and withdrawals, and filter the data based on specific periods.
The Beauty Insider program of the cosmetic brand Sephora includes loyalty cards, gifts, and points. But the main highlight is that all participants become members of an exclusive online community. They share tips, support each other, and enjoy privileges such as access to beauty classes, seasonal promotions, and exclusive product testing opportunities. The community helps to build a brand advocates army and provides the company with consumer insights that aid in product development.
The loyalty program of Marriott International's hotel network encompasses over 30 partner brands, enabling travelers to enjoy more positive emotions from their journeys and save on expenses. Bonus points can be earned through hotel stays, ordering hotel services, renting cars, and more. These points can be used for various benefits, such as paying for airfares, upgrading room categories, and acquiring tickets for events collectively known as "Marriott Moments." Moreover, all participants get free Wi-Fi in the hotels.
How do I automate customer loyalty programs?
To achieve business goals, the functionality of a modern customer loyalty program has to be fully automated. Instant rewards accrual (bonuses, points, levels), a mobile application, automatic notifications, and program-generated personalized offers make business processes convenient, straightforward, and efficient. Additionally, it enhances the customer experience, attracts new customers, encourages repeat purchases, boosts sales, and increases brand recommendations
FreshTech leverages the low-code platform fdForge to automate customer loyalty programs. It is a multifunctional and flexible system that has enabled us to create numerous pre-built solutions for optimizing business processes. These tools can be easily and quickly adjusted to the specific needs of an individual enterprise. Our experience in implementing fdForge and other modern technologies in numerous projects empowers us to automate unique and complex solutions, as well as enhance the efficiency of current loyalty programs.
If you aspire to take your company and customer interactions to the next level, minimize faults, and reduce costs, leave your contact details for a free consultation. We will analyze your internal processes, ideas and goals, and provide you with tailored solutions for automating your customer loyalty program that align with your specific business needs.