How to Create a Customer Loyalty Program: A Step-by-step Guide
Snipp Interactive
Customer Acquisition Retention and Engagement (CARE) Platform Loyalty - Promotions - Sweepstakes - Rebates - Rewards
Discover the six simple steps to success:
Loyalty is Earned, Not Bought
Loyalty is the cornerstone of brand success. Customers have more choices than ever regarding the products and services they buy and their channels. In this fiercely competitive market, loyalty is crucial in retaining and attracting new customers.
Of course, earning customer loyalty is easier said than done. The most successful brands run sophisticated customer loyalty programs that add value to the buying experience and build meaningful connections with their customers.
From providing discounts on everyday essentials to giving brand advocates the chance to win once-in-a-lifetime experiences, consumers want programs that align with their values and interests. They also want programs that stand out from the pack.
Let’s explore how you can create a customer loyalty program that turns casual consumers into enthusiastic brand advocates.
What is a Customer Loyalty Program?
Popular among B2C and B2B brands, customer loyalty programs reward members for buying products or engaging with brands in other ways, such as following your brand on social media, creating user-generated content (UGC), referring a friend, or completing a survey.
Loyalty program rewards are as diverse as the brands that run them. Beyond simple discounts, popular rewards include:
70% of U.S. consumers say customer loyalty programs are a key driver of brand loyalty. It’s similar in Europe, where 57% of consumers admit to modifying their purchasing habits to earn more benefits from their favorite brands.
With so much potential to influence customers, it’s not surprising that many brands are investing heavily in their loyalty programs.
Customer Loyalty Program Brand Benefits
Creating Your Customer Loyalty Program
The first thing to decide is the structure of your customer loyalty program. Should you choose a simple reward or a point-based scheme? Or do you need a more sophisticated, tiered program?
Each program structure has specific advantages. Selecting the right one for your business depends on your goals and your customer’s buying habits. The four most common structures are:
Once you've chosen a structure, you're ready to create your customer loyalty program. To keep everything on track, we recommend following these six simple steps.
Step 1. Define Your Goals
Defining your goals is the first step in creating a customer loyalty program. Do you want to encourage repeat purchases, increase brand engagement, or unlock cross- or upsell opportunities?
Setting clear goals keeps your program on track and aligned with your wider brand strategy. Goals are also crucial to measuring success. If you don't know what you're trying to achieve, how will you know you've achieved it?
We recommend using the SMART framework to set your goals to ensure they're:
Step 2. Set the Entry Conditions
How will members earn points or rewards when they join your customer loyalty program? It might seem obvious, but there are many ways to approach it.
The most common entry condition is purchase-based activity, like a receipt upload promotion. Members buy a certain product a certain number of times and get a reward. But it’s not the only one.
Customers engage with brands in different ways. Expanding your entry conditions beyond simple buy-to-earn mechanics makes your program more accessible and inclusive. Today’s channel-agnostic consumers appreciate this, especially during periods of economic uncertainty. When finances are tight, they’ll explore every avenue to cut costs.
Your customer loyalty program doesn’t have to include every entry method and channel. Focus on those that make the most sense for your brand and help you achieve your goals.
Popular entry conditions include:
Step 3. Select Your Rewards
Rewards are the main reason people join customer loyalty programs.
A common mistake is to make your rewards seem unachievable and not worth the time or effort to redeem them. We see this frequently in points-based programs. Instead, focus on creating a simple redemption process that allows members to earn rewards quickly. Not only does this generate excitement, but it also incentivizes members to participate regularly. Never underestimate the power of instant gratification.
Multiple ways exist to drive participation. These include offering rebates, discounts on future purchases, and exclusive access to members-only products. Third-party products and services can also boost your program—ultimately, the goal is to provide a range of relevant and valuable rewards.
Value is subjective and isn’t always tied to price. For example, a $20 in-store gift card might not mean much to customers of a luxury jewelry brand who regularly spend thousands. Relevance similarly depends on your brand. Fast food restaurant vouchers won’t resonate with customers of an outdoor lifestyle brand as much as a free three-month gym membership.
Step 4. Create Your Reward Tiers
Tiering your customer loyalty program is an effective strategy for increasing average order value and purchase frequency. Whether you opt for a point or reward-based approach, splitting rewards into separate paid tiers adds an element of exclusivity some members can’t resist.
At the lower tiers, members earn small rewards, like discounts on their next purchase. VIP tiers allow members to win high-value prizes, such as all-expenses-paid holidays. The promise of increasingly valuable rewards encourages members to spend more as they work their way to the top tier.
With higher barriers to entry at the top member levels, tiered customer loyalty programs are ideal for B2B brands. However, they’re becoming increasingly popular in B2C. According to Deloitte, 53% of customers belong to a premium loyalty program – up 36% from 2021.
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Step 5. Outline Additional Member Benefits
Beyond rewards, offering additional member benefits gives customers the nudge they need to join your loyalty program. Things like free shipping or extended return periods are powerful incentives. Alternatively, you could offer exclusive, tier-based benefits that scale in value as members progress through your program.
Other benefits to consider include:
Step 6. Program Design
Designing an effective customer loyalty program involves many aspects, from mapping the member journey to selecting the software you’ll use to manage it. Success depends on each one of these areas working in harmony.
Map the Member Journey
No matter how enticing your rewards are, people won’t engage with your program if it’s difficult to access them. Carefully map the member journey, removing unnecessary steps or friction to provide a seamless experience. Avoid overwhelming members with options when they login to your program. Aim for a simple and intuitive user interface (UI) that’s easy to navigate.
Decide the Basic Reward-earning Mechanics
Aside from earn and burn mechanics, customer loyalty programs support various promotions, contests, and campaigns. Weaving them into your program keeps existing customers engaged and attracts new ones looking for the best deals.
As you create your customer loyalty program, consider which promotions are the right fit for your customers. Would they prefer the instant gratification of a gift-with-purchase promotion? Do they respond to personalized social media campaigns? Or do they prefer the thrill of instant win opportunities combined with a final grand prize sweepstakes?
Identify the Potential Integrations Required
List the systems that must connect to your loyalty program to function correctly. The exact makeup of your underlying tech stack depends on several factors, including your program structure, entry methods, and marketing channels.
Common technologies include:
Choose Your Customer Loyalty Platform
Choosing the right customer loyalty platform can make or break your program. Enterprise loyalty solutions enable you to customize and manage every facet of your program from one place. They allow you to layer earn-and-burn mechanics; tailor offers to different segments, measure progress against your KPIs, and more.
Customer Loyalty Platform Considerations
Finding the right customer loyalty platform for your program isn’t only a question of technology. While technical capabilities are important, the best vendors provide support through the design, implementation, and steady-state phases. From concept, strategy, design, and resource planning to implementation and activation, they work with you to create your ideal program.
Before committing to a platform or provider, there are some key things to consider.
Launching and Marketing Your Loyalty Program
The first rule to creating a successful customer loyalty program is to get company-wide buy-in.
Everyone should know you’re launching a program, understand how it works, and want to participate. How will you convince customers to join if you can’t get staff interested in your program?
There are many ways to market a customer loyalty program. However, rather than concentrating on one avenue, an omnichannel approach that employs various tactics delivers the best results. Make it easy for customers to buy from you anywhere and on any device so they can engage with your program their way.
Common marketing channels include:
Measuring Success
Once you’ve launched your program and collected some data, you can begin measuring performance against your goals.
It’s important to choose the right metrics. Your precise mix will depend on your goals and the quality and quantity of the available data. However, standard metrics include:
Monitoring your program helps you identify what is and isn’t working so you can gauge your success and adjust your program accordingly.
Margins and Liabilities
Margins and liabilities are crucial to determining success in customer loyalty programs. When customers redeem their points, they convert them into rewards, which you deduct from their account.
These points have a dollar value. Predicting and limiting how much your members cash out is a balancing act since you need to protect your margins and give members enough value to convince them to join your program.
Customer Loyalty Program Examples
Looking for inspiration to help you create the perfect customer loyalty program? Over the years, we’ve helped thousands of brands design and manage their programs.
Here are a few examples below:
Create Your Perfect Customer Loyalty Program with Snipp
SnippLoyalty is a modular, end-to-end customer loyalty platform that supports ambitious brands. Backed by decades of industry experience and marketing expertise, we help you design enticing programs that form powerful customer acquisition and engagement hubs.
With a range of core modules and seamless third-party integration support, you can tailor your programs to meet the demands of any industry. Whether you want to reach new customers or delight your existing ones, you can achieve your marketing goals with Snipp.
This guide appears on the Snipp blog.