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Create a Loyalty Program in 5 Easy Steps

Create a Loyalty Program in 5 Easy StepsFor many small businesses, customer acquisition is top priority. By attracting a steady stream of new users, companies in this category are guaranteed to continue generating profits.  

They’re not wrong, but it’s actually much easier to convert existing users than it is to find new ones. According to a recent Bain & Company analysis, a 5 percent increase in customer retention rates translates to a 95 percent boost in profits.

Converting older users is also significantly cheaper. Harvard Business Review explains that, 

“(A)cquiring a new customer is anywhere from five to 25 times   
more expensive than retaining an existing one.” 

It’s not difficult to understand why these numbers pan out. Existing customers already know and trust you. Thus, they don’t need as much convincing. 

As an added benefit, current users are also likely to spend more than newer users — up to 31 percent more. 

However, none of these benefits are automatic. 

Even with unparalleled service and high-quality products, you still need to incentivize users to keep coming back. One of the best ways to do this is through a customer loyalty program that allows you to engage, nudge and track all of your existing users. 

Better still, getting started is a lot easier than you realize. This is true even if you’re a sole proprietor with very limited time and money. 

Read Why Customers Are Your Best Source for New Customers

How to Set up a Customer Loyalty Program

For an ultra-minimalistic approach, all you really need is a simple spreadsheet of customer names and email addresses. As long as you send the occasional message or holiday greeting, some of your users will come back. 

For more consistent results, here are some easy tips you can start implementing today. 

1. Pick a Branded Name

The first step involves choosing an official name for your customer reward program. 

You could get away with something as simple as “Our Loyalty Program,” but you have an opportunity to create something that’s truly unique. At the very least, your program should include your company’s brand. However, don’t be afraid to use alliterations, puns or clever names. 

This branding serves two important purposes: 

  • Your customer rewards program becomes more memorable.
  • It’ll also rank better on search engines such as Google and Bing.

2. Offer Real Value

There’s no secret — shoppers know that after providing you with their details, you’ll eventually reach out to them. In fact, this is why many users are so reluctant to join customer loyalty programs. 

They hate spam. 

But if you add the right perks, it’s possible to overcome this resistance. 

Discounts can and do work. However, there are many different types of customer rewards you could offer instead, including: 

  • Free subscriptions to ancillary services
  • Cashback rewards and other monetary incentives
  • Accumulated points that lead to a free item or service
  • Free tickets to local concerts, games or events 

Don’t underestimate the value of charitable donations (given in the customer’s name), either. This is a powerful approach that taps into our deep-seated desire to help others. In fact, roughly 66 percent of respondents in a Sprout Social survey indicated they prefer patronizing businesses that are actively involved in political and social issues.

3. Make Enrollment Easy

Enrolling in your customer reward program should be as easy as possible. If you run an e-commerce site, this step is practically automatic since you capture each user’s contact details the moment they buy something online. 

If you run a brick-and-mortar shop, getting folks to sign up takes a little more effort. However, you can maximize registrations if you ensure every checkout counter has the necessary applications and signage. Keep all enrollment forms as simple as possible, too — the less information you request, the higher your conversion rate will be.

4. Leverage the Endowed Progress Effect

In a landmark study, researchers discovered that creating “artificial advancement” could help significantly boost customer loyalty program enrollments. Here’s what that looks like in practice. 

Imagine two cafés that each gives their customers promotion cards. Every time users buy a cup of coffee, they receive a stamp. Once their cards are full, customers get a free coffee. 

  • The first café hands out cards with eight empty slots. 
  • The second café hands out cards with 10 slots, two of which are already 

In both examples, customers need to buy eight coffees to qualify for a free cup. But patrons of the second café actually feel closer to that goal since they’ve already received two stamps on their cards. As a result, they’re more likely to keep coming back; they can practically taste that free cup of coffee. 

This behavioral tic is known as the “endowed progress effect.” You can use variations of this approach to increase sign-ups with your customer reward program.

5. Use a CRM Platform

All of the above may seem like a lot to manage (and if you only use a spreadsheet, it will be). 

However, there are countless customer relationship management (CRM) tools that can help you easily track your loyalty program, and you don’t have to be a computer whiz to use these CRM suites effectively. Many mesh seamlessly with your existing workflow so that every time you acquire a new customer, his or her details are automatically collected. 

Some of the better CRM tools also come with useful analytics that can help you visualize things such as shopping frequencies, purchasing habits and the lifetime value of each customer in your database. 

The best part is, many CRM platforms are free for small business owners. Therefore, you can get a customer reward program up and running without spending a dime. 

The ROI of Customer Loyalty Programs Is Too High to Ignore

Running a successful business isn’t easy. There are so many things to juggle, and every day it seems like you’re putting out one new fire after another. 

This is why many small business owners don’t bother with customer rewards. They simply don’t have the bandwidth. But implementing a loyalty program is actually quite easy, especially if you use the strategies outlined above. 

Moreover, it costs a fraction of what you currently spend on traditional customer acquisition. Given that existing users are easier to convert (and spend more), the ROI of your loyalty program investment can be huge. 

Topics: Small Business Tips

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