The Beginner’s Playbook for Building a Customer Loyalty Program

May 19th, 2023
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As a business owner, one of your most important goals is to create a loyal customer base. A customer loyalty program can help you achieve this goal by rewarding customers for their loyalty and incentivizing them to keep coming back. However, building a customer loyalty program can be challenging, especially if you’re new to the process. This beginner’s playbook provides a step-by-step guide to creating a successful customer loyalty program that will drive customer engagement, retention, and growth.

1. Build a Program Timeline

To successfully implement a customer loyalty program, it’s essential to have a detailed and feasible timeline. Your program launch will directly impact participation rates and overall customer sentiment. Therefore, it’s important to involve different departments early on, depending on the size of your team, to ensure a cohesive and effective launch.

Build a Program Timeline

1. Determine the Program Completion Date

Building a loyalty program takes time, so it’s crucial to decide on the program’s exact completion date before selecting a launch date. Align with your team on the program’s structure, rewards, and perks that best suit your brand.

2. Choose a Launch Date

Once you’ve determined the program’s completion date, select a launch date a few weeks later. This will allow you to schedule your promotional campaigns and strategies effectively and build excitement around the program.

3. Consider the Customer Experience (CX)

Make it easy for shoppers to learn about and join the program. Think about your ongoing promotional strategy to engage new shoppers, including how to draw awareness and visibility to the program in a way that entices shoppers to join.

4. Develop an Education Strategy

Effectively explain the program to your customers. Communicate its benefits, rewards, and perks in a clear and concise way.

5. Plan an Engagement Strategy

Keep the program top of mind for customers and use it to catalyze excitement and loyalty for your brand. Encourage participation and incentivize customers to refer others to the program.

6. Create a Soft Launch Strategy

Creating buzz a few weeks before launch can help build excitement and anticipation. Use on-site teaser pages, social campaigns, emails, and SMS to generate interest and ensure consistency across promotional channels.

2. Set Specific Program Goals

Set Specific Program Goals

Measuring the success of a customer loyalty program requires setting specific goals and defining how you will measure success. While baseline metrics like points earned, points spent, referrals made, and average order value (AOV) are important, it’s also essential to investigate how the program influences customer behavior over time and how it performs against business-specific benchmarks.

Here are some program goals you may consider:

  • Boosting customer retention rates
  • Increasing the frequency of purchases
  • Encouraging customers to refer others to the program
  • Driving sales of specific products or product categories
  • Increasing customer engagement and loyalty
  • Improving the customer experience

You can choose to focus on just one or two of these goals or all of them, but it’s crucial to define how you will measure success. With clear benchmarks, you’ll know what’s working more concretely and can quickly pinpoint and adjust what’s not.

Let’s say you own an e-commerce store that sells outdoor gear and you want to launch a loyalty program to encourage repeat purchases and increase customer retention. After conducting some research, you decide to focus on two specific program goals:

  1. Boosting customer retention rates: You want to increase the number of customers who make repeat purchases from your store.
  2. Increasing the frequency of purchases: You want to encourage customers to make more purchases over time.

To measure the success of your program, you’ll need to track metrics such as:

  • The number of customers who join the program
  • The number of repeat purchases made by loyalty program members
  • The average order value (AOV) of loyalty program members
  • The total revenue generated by loyalty program members

With these metrics in mind, you can set specific benchmarks for each goal. For example, you might set a target of increasing the number of repeat purchases by 25% within the first six months of the program, and increasing the AOV of loyalty program members by 10%.

By setting these goals and tracking your progress, you can make data-driven decisions about how to improve your program and ensure that it delivers the desired results. For example, if you find that loyalty program members are not making enough repeat purchases, you might offer more exclusive rewards or create targeted email campaigns to encourage them to come back to your store.

3. Create the Right Program Structure

Create the Right Program Structure

Creating a captivating program and establishing a communication strategy around it are essential for the success of your loyalty program. To make sure your program resonates with your shoppers, start by creating a structure that aligns with your brand goals. Keep it simple by choosing 4 to 6 campaigns that offer rewards for actions such as signing up, leaving a review, or celebrating a birthday. Assign values to these campaigns and make sure your customers understand the mechanics and rewards of the program.

When strategizing promotion, consider what rewards and perks will entice different groups of shoppers. Engage different customer segments about your program launch and make sure your VIP tier names resonate with your target audience. Encourage shoppers to “level up” their VIP tier and tease a reward or perk during your pre-launch stages to create excitement. After the initial launch, continue to launch timely campaigns to encourage sign-ups from new shoppers.

For example, let’s say you are launching a loyalty program for your online beauty store. You could offer a reward of 50 points for signing up, which customers can redeem for a $5 discount. For customers who leave a review, you could offer 100 points, which they can redeem for a $10 discount. And for customers who celebrate a birthday, you could offer 200 points, which they can redeem for a free gift with their next purchase.

To promote the program, you could create targeted social media ads and email campaigns for different customer segments. You could also use influencers to share the program with their followers and create a sense of exclusivity around the VIP tier. Tease a special birthday reward in your pre-launch campaign to create excitement, and after the initial launch, offer a limited-time promotion to encourage sign-ups from new shoppers. By creating a captivating program and establishing the right communication strategy around it, you can increase customer engagement and loyalty for your brand.

4. Set Up Your Loyalty Emails

Setting up your loyalty program emails is an essential part of your communication strategy. Before launching your rewards program, it’s important to set up the following emails:

Program Announcement Email: Send an email to all subscribers announcing the program’s launch, including a catchy subject line, a brief overview of how the program works, and a call-to-action to encourage shoppers to create an account.

Welcome Email: After shoppers join, send a welcome email explaining the program’s benefits, how to earn and redeem points, and encourage shoppers to complete campaigns to earn points.

Referral Share Email: Encourage loyalty members to share your brand by sending personalized referral emails with incentives to referred customers.

Redemption Created Email: Notify loyalty members when they have a usable reward and send an email with the coupon to be used at checkout.

Tier Earned Email: Notify customers when they enter a new VIP tier and include their discount code if applicable.

Other recommended emails include birthday and anniversary emails, points and redemption reminders, and referral share reminders.

By setting up these emails, you’ll be able to keep your customers engaged and informed about your rewards program, driving their loyalty and advocacy for your brand.

5. Get Ready to Launch

Creating excitement among potential customers before launching a loyalty program is essential for its success, as it encourages high sign-up and participation rates. Here are some effective strategies to generate buzz around your upcoming loyalty program:

  1. On-Site Teaser Pages: Use the “Coming Soon” module to create a teaser page on your website, which will engage with shoppers and collect email addresses before launching the rewards page.
  2. Pre-Launch Social Campaigns: Use your social media platforms to tease the program launch and start collecting customer emails and phone numbers. You can also offer incentives to those who sign up early.
  3. Pre-Launch Emails: Send pre-launch emails to your email subscribers to incentivize sign-ups.
  4. Pre-Launch SMS Campaigns: Use personalized messages to your SMS subscriber list to announce the forthcoming program. Consumers prefer receiving loyalty updates through SMS.
  5. Implementing Various Strategies: Use a combination of on-site teasers, on-site countdowns, engaging social campaigns, banners on-site linking to the rewards page, email campaigns, and SMS campaigns to generate excitement.

6. It’s Time to Launch

It’s the big day – your loyalty program launch day! After creating anticipation during the pre-launch phase, it’s time to maintain the momentum and promote your program on all channels.

Here are some effective strategies to use on launch day:

  1. On-Site Banners and Footers: Use prime real estate on your website, such as the banner section above the fold, to announce the launch and highlight the membership sign-up incentive. Promote the program on any other high-traffic pages to maximize visibility.
  2. Social Campaigns: Leverage social media to engage your community and promote the launch. Use Facebook and Instagram stories to announce the program, create a launch video or social stories, and educate customers on joining, earning points, and redeeming rewards. Create organic social posts and paid ads to increase visibility.
  3. SMS Campaigns: Use SMS to announce the program to your subscriber list. Keep messages concise to stay within the character limit and highlight any account creation incentives. Include a CTA linking to the rewards page for customers to create an account.

Remember, maintaining momentum is crucial, so don’t hesitate to use all available channels to promote your program. With a well-executed launch, you can attract and retain customers and drive long-term success.

7. Monitor Program Metrics

After launching your brand’s loyalty program, the next step is management, optimization, and ongoing promotion. Here are some key metrics to measure the program’s success:

  1. A steady flow of new member sign-ups: This indicates that the program remains fresh, engaging, and relevant for new shoppers. Launch timely campaigns to keep shoppers interested.
  2. Members actively redeem rewards: If too few members redeem rewards, it may indicate an issue with their obtainability or desirability. This may also signal a promotional issue, and it can be solved by sending redemption reminder emails or text messages to members about their reward balance.
  3. Higher AOV among members compared to non-members: Loyalty members are your most valuable shoppers, which is represented in part by AOV. Basket size-oriented perks, like free samples, can boost cross-product adoption.
  4. Higher CLTV among members compared to non-members: Similarly, loyalty members are long-term, frequent shoppers. If you’re not seeing a higher CLTV from members, consider your reward offerings. Do they resonate and excite your target audience?

Agile loyalty programs offer you the flexibility to adjust your program as needed and adapt to shoppers’ desires.

Ongoing program promotion is also crucial to ensure that new shoppers are aware and excited to engage with the program, and it also keeps sign-up rates high. For example, KOS, a health and wellness brand, promotes their loyalty program through Instagram stories. They ask viewers to answer trivia questions about the program, effectively educating new shoppers about the ins and outs of membership and redemption.

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