How to Use Loyalty Programs to Increase Customer Satisfaction and Brand Awareness

Loyalty programs have become increasingly popular over the years. According to Accenture, roughly 90 percent of all businesses have implemented customer loyalty programs. However, since the start of the pandemic, it has become increasingly vital for businesses to integrate loyalty programs into consumers’ digital lives, or create “omni-channel accessibility.” In doing so, consumers are rewarded for their loyalty through various mediums, whether it’s purchasing products or services, or spreading the word about a company on social media platforms. These activities contribute to a seamless customer experience and help give brands a more permanent presence in the minds of consumers. 

Some tactics of implementing customer loyalty programs are more successful than others. Research has shown that consumers, especially millennials, react negatively to direct company attempts to lure them into loyalty programs, and 61 percent switched some or all of their business from one brand to another in the last year.

With that in mind, some of the most successful companies have loyalty built into the default experience and consider loyalty as part of their customer experience. These companies reward consumers with a mix of rational, emotional, and social/community benefits, or something beyond reducing the price of their transactions.

Loyalty programs are essential, but they can quickly become a waste of money if not implemented strategically. Small businesses must find a way to give away something that is perceived to hold a high value to consumers, but that costs little to the business. The end goal of this exchange is a fully integrated customer experience that results in not only transactional rewards, like a free meal but also unique experiences and benefits, such as getting early access to new products or being “close friends” on Instagram. Here are some examples of simple loyalty programs small businesses can implement to get started:

1. Point-Based Systems:

This is the simplest loyalty program and is a good place for small businesses to start. Within a point-based reward system, when someone buys a certain product, they receive points that build up over time to allow users to eventually spend these points on products. Small businesses can assign value to these points however they see fit, whether through awarding one point per dollar spent, or through giving more points for purchases that businesses prefer their consumers make. For example, let’s say a small business finds that anytime someone buys a sticker, they also tend to buy four other items. This “expected basket size” for purchases is bigger when it includes a sticker than when it includes any other item, and stickers have a relatively high profit margin for the company. Thus, small businesses should be willing to entice visitors to buy stickers by making it known that they will receive points for purchasing stickers.

Along with this, small businesses can reward other types of actions, such as consumers referring friends, tagging the small business in their social media posts, or leaving reviews on the company website. There are many options depending on which platforms are used to implement a points-based system. To see an example of a successful points-based reward system, see Dr. Brandt Skincare who has effectively implemented this strategy.  

2. Tiered Systems:

Tiered systems are similar to points-based systems, except they allow small businesses to segment their customers by loyalty and create exclusive opportunities for those with the most loyalty. With tiered systems, small businesses can allow their consumers to move up tiers depending on how much they spend, or how often they participate in activities. Each tier grants the consumer more perks such as free shipping, access to exclusive products, or more points gained per purchase. For an example of a tiered system see Blume Skincare who uses a combination of a tiered system and a point-based system.

3. Gamification:

Both tiered and point-based systems can have a gamified aspect to them, where consumers must complete a “mission” or “challenge” to move up to a tier, remain in a current tier, or gain points. To take advantage of word-of-mouth marketing, small businesses could challenge consumers to post a picture on social media tagging the company or wearing the product, where winners are chosen for their creativity or reach. This would likely require consumers to link their social media when completing a purchase so that companies can match the user to the social media account more easily. For smaller companies with fewer participants, winning participants could be personally messaged to allocate points or be rewarded with a gift card.

After Starting with the Basics, Determine How to Move On:

As a small business, once experience is gained from running these systems, it becomes much easier to determine whether or not to move forward with more integrated loyalty experiences for consumers. The most important factor going into this is that small businesses consider what matters most about the chosen loyalty program. Small businesses can’t give away free items to everyone and expect them to come back and buy their products, but if they do so for specific consumers who are likely to promote them, they can expect large returns on investment.

As a social impact initiative, Rem and Company also offers free consulting services and resources to small businesses and nonprofits impacted by COVID-19. Our pro-bono consulting teams provide small businesses with the opportunity to identify and prioritize issues facing their business, propose innovative strategies, and facilitate execution. If you are a small business or nonprofit in need of assistance, learn more about how we can help.