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Customer Loyalty, Customer Service

How to Design an Effective Loyalty Program for your Patrons

Serving your first customer ever is always special and memorable for any entrepreneur. However, as time passes and you get the hang of the trade, the sense of competition is becoming more apparent. Hence, there is a heightened demand for an increase in the number of customer acquisitions as well as retaining already existing customers – and this is where a common problem ensues.

Some of the promos businesses offer are discounts, sale packages, coupons, bonuses and free merchandises. All these perks are an attempt to encourage customers to come back in the hopes that they will become the business’ loyal patrons. But do these measures work?

What owners, managers and marketers often do is measure customer loyalty regarding consumers’ purchase behavior and any patterns they can derive from it. Often, if a client has purchased your product or services multiple times over a given period, then she or he is identified as loyal. Then, this assessment covers two types of customers. The ones who genuinely enjoy your products and keep purchasing them are who we consider loyal, and those who are merely buying your goods or services as a last resort are who we call frequent customers.

Frequent vs. loyal

What exactly is the difference between frequent and loyal customers? Is there even any difference? In general, loyal customers are regular patrons, but not all frequent customers are loyal. Loyal customers often do not mind paying a higher price for a product or service of a brand or small business they trust even when they have the option to purchase something similar at a smaller cost. These loyal clients are also often proud of the products they are using, and they can be the best marketers a brand can ever hope for when they are convincing other people to follow suit.

The iPhone is a perfect example of a product with loyal consumers who wait for the annual release of its new model. There are other great phones worthy of competition, but there are just loyal customers who continue to support Apple products even if they have to pay a larger sum of money. Apple has been selling exclusivity and prestige to its growing loyal customer base, and that’s just one edge it has over other tech companies.

As for frequent customers, they purchase products not necessarily because they prefer your brand or they trust your business like loyal customers do. Instead, they buy goods and services either because they lack other options or because they get to spend less on your product compared to other brands. Frequent clients are the kind of consumers who will continue buying from or transacting with you until they find another brand that will offer them better products or give them greater discounts.

To put it simply, frequent consumers may continue buying your goods and services as long as they find no alternative, which suits their preferences, in the market. On the other hand, loyal customers will choose your products before all the other range of options they have as many of them have formed a rather emotional bond, not just mere economic relation with your brand.

Now that we have differentiated the loyal from frequent customers, build your brand’s relationship with your devoted customers. Here are a few steps to better take care of your patrons through loyalty programs.

The advantages of loyalty programs

A loyalty program can significantly help you take care of your customers. But before you kickstart one, you have to familiarize yourself first with what that program can do for you and your patrons.

When you implement a program correctly, you can encourage people to proactively choose your products by spending more for them compared to other brands’ goods. The programs can also invite would-be loyal customers to shift to and stick with your business. Also, word of mouth is a robust and inexpensive marketing strategy that can be born out of such programs, and this move works well with a loyal following. Any loyalty program may also provide you with the right data on consumers’ spending habits, and you can use such information to refine your marketing strategy.

Program planning

The benefits a business and its patrons can get from loyalty programs depends primarily on how well it was planned. The initial steps you must take to come up with an appropriate program include the establishment of goals, identification of key customers and their product preferences, selection of program type, and method for recording participation.

Establishing goals is about being clear about your motivation as a business owner or manager for creating a loyalty program. If you are still starting out in the industry, your program objective may be to gather as many prospect loyal clients as you can. If your business already has a loyal following, then your goal could be making their experience with your product more enjoyable or making transactions with you more profitable. And if you’ve lost some loyal customers and hope to regain their patronage, then a loyalty program might just do that for you. You may also only use the program to track data on your consumers’ purchasing decisions and preferences for streamlining your marketing campaigns.

The identification of key customers and their preferences is also crucial in the planning of your program as it determines who your best clients are and the kind of products and services they favor. Using a CRM system may also help in identifying your most loyal, and therefore profitable, customers. And by understanding the reasons why your loyal customers prefer your products, you get to design programs with rewards they find appealing. Consequently, with that kind of data on hand, you can better manage your loyalty program.

In choosing a program type, you have to take into account the spending habits of your customers to determine what measures will best suit their needs. It is good to remember that although a loyalty program serves to benefit your business, in the long run, it does so by putting your customers first before everything else.

The types of program you can implement range from points-based marketing that will reward gift certificates to special promos that give away custom-printed business cards customers can use to claim a select merchandise. These programs may also be open to all clients or exclusive to well-performing ones only. Whichever kind of program you will settle with, you have to base it on the preferences of your customers for it to work out well.

Last but not the least part of the planning is determining how to track the participation of your consumers. Figuring out how to track the overall participation of customers is important as it will help you gauge the probability of program success. Doing so will also help you save time and money.

Loyalty program testing

Like in any other programs you develop, it is important to test its viability. You will have to implement a pilot program to check if everything works according to plan and if it will likely meet your target.

To run an initial test, implement your program first on a small scale basis by inviting a limited number of people to use it. The pilot plan should involve the kind of customers you identified based on the motivation behind your program. If you want to gain a loyal following, invite various clients. If you want to develop your business relations with your patrons further, attract the most loyal on your list. If you want to regain customers you lost, then target people who decided to go with your competitors.

Once you run the program, take note of the problems you encounter, from the minor to major issues. You will have to address each one to guarantee a smooth implementation of the program, in time for its availability to a wider audience. After addressing every issue, advertise your program extensively to your niche market to make sure there are plenty of participants during the launch and days to follow.

Run and manage your loyalty program

Loyalty programs do not exactly have an expiry date. Unless your program did not work or you need to transform it into a new one, the loyalty program requires maintenance and continued improvement. The most successful programs are often the most useful to both business and clients. As such, business teams must regularly monitor their plans to improve what needs to be improved.

As mentioned earlier, running a program helps you gain a lot of insight on your customers purchasing practices and preferences. And so, as you acquire new information, you can then develop fresh ways to generate consistent engagement from your patrons, and in turn encourage more rewarding transactions.

Keep in mind that managing the program means putting the data you gathered to good use, monitoring your results and if they reached your target, and making the necessary adjustments to improve the program.

Designing and implementing an efficient loyalty program is one way to take care of your ardent customers. Doing so requires careful thought and consideration, and it takes time and effort to manage it well enough for it to become beneficial to both clients and business. But all the planning and work will pay off once you retain your most faithful customers, draw new ones, or inspire old customers to return.

Earl Jonathan Tech is an entrepreneur focused on print marketing and advertising. At a young age, Earl founded PrintMeister, an Australia-based company that provides online printing services nationwide. While he is busy with work that is mostly related to print and merchandising, Earl makes sure he’s able to write when he has the time.

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