Rewarding loyal customers and encouraging repeat business is essential for any company looking to build lasting customer relationships. A well-structured loyalty scheme can turn occasional shoppers into repeat buyers, but a poorly executed plan can be costly and ineffective. So how do you start a retail rewards program and ensure it’s successful among your customers?
What is a retail loyalty scheme?
A retail loyalty scheme is a structured program designed to incentivize repeat purchases by offering rewards to customers. These rewards can take various forms, such as points, discounts, exclusive deals, or early access to sales. By participating, customers receive tangible benefits for their continued patronage, while retailers gain valuable insights into consumer behavior, helping them refine marketing strategies and enhance customer engagement.
There are several types of retail loyalty programs, each catering to different customer needs and business objectives:
- Points-based loyalty programs. Customers earn points for purchases, which can be redeemed for discounts, products, or other rewards.
- Tiered loyalty programs. Customers unlock increasing benefits as they spend more. This encourages long-term engagement by providing better rewards to high-value customers, such as in Sephora’s Beauty Insider program.
- Subscription-based loyalty programs. Customers pay a recurring fee to access exclusive benefits, such as Amazon Prime’s free shipping and special discounts.
- Cashback loyalty programs. Customers receive a percentage of their spending back in the form of store credit or cash, making it a direct incentive for repeat purchases.
- Partnered loyalty programs. Businesses collaborate to offer shared rewards across different brands, increasing the attractiveness of the loyalty program.
How to build a successful customer loyalty program
A successful loyalty program must be easy to use, well-promoted, data-driven, accessible across multiple channels, and continuously optimized. Here are five essential practices for building a loyalty scheme that fosters long-term customer engagement and retention.
1. Keep registration simple
If signing up for a loyalty program feels like a hassle, many customers won’t bother. Make the process quick and straightforward by asking only for necessary information and offering multiple ways to enroll, whether in-store, online, or via an app.
Once enrolled, customers should have no difficulty understanding how to earn and redeem rewards. A recent Bond Brand Loyalty study found that 57% of consumers abandon loyalty programs because they find them too complicated. A clear, easy-to-follow structure increases participation and ensures that members see value in staying engaged.
2. Promote the loyalty scheme to your customers
A loyalty scheme can’t be effective if customers don’t know it exists. Promote it across all touchpoints — your website, social media, email campaigns, and in-store displays. Your employees should also be well-informed and able to communicate the program’s benefits to customers at the checkout.
Encourage word-of-mouth referrals by offering incentives for members who bring in friends. Nielsen reports that 92% of people trust recommendations from friends and family over traditional advertising. A well-executed referral strategy can significantly boost enrollment and program engagement.
3. Use customer data to improve the experience
Loyalty schemes provide valuable insights into customer behavior. Use this data to tailor offers, personalize recommendations, and send targeted promotions that align with individual shopping habits.
Accenture reports that 91% of consumers prefer brands that offer personalized recommendations based on their purchase history. Additionally, 75% of loyalty program members are comfortable sharing their shopping behavior in exchange for exclusive benefits. Leveraging this data effectively will help you enhance customer experience and strengthen brand loyalty.
4. Reward your customers across multiple channels
Consumers expect a connected shopping experience, whether they’re purchasing in-store, online, or through an app. A successful loyalty program should allow customers to earn and redeem rewards across all channels.
For example, Starbucks Rewards enables members to accumulate points through in-app orders, drive-thru purchases, and in-store transactions. This flexibility increases engagement by making it easier for customers to participate, regardless of how they choose to shop.
5. Measure the success of your loyalty program
Once you set up your loyalty scheme, set clear objectives and evaluate its effectiveness. Are you looking to increase customer retention, boost transaction size, or encourage repeat visits? Define key performance indicators (KPIs) such as enrollment rates, reward redemption rates, and customer lifetime value to track progress and make data-driven adjustments.
According to McKinsey, companies with well-executed, data-driven loyalty programs see up to a 25% increase in revenue from enrolled customers. Regularly reviewing program metrics allows businesses to refine their approach and maximize long-term impact.
A system that helps you foster long-term customer loyalty
You can create a powerful loyalty program, but without the right system to support you, how can you truly measure its success? With LS Central, you can manage sales, inventory, replenishment, customer loyalty, and a range of retail-specific functionality all within a single platform.
Customize your loyalty program to match your business and customer needs, allow shoppers to redeem rewards across multiple channels, and track their purchase history in real time. With these capabilities, you can enhance customer engagement, provide a more personalized shopping experience, and drive repeat visits to your stores. Want to know more about how LS Central can improve your loyalty capabilities? Contact our experts.
And check out our other blog where we explore the most common pitfalls in loyalty programs and how to avoid them.
