MDG Solutions

Retail loyalty programs that drive results

Article highlights:

  1. A loyalty program is a program conceptualized and promoted by brands and communities that provides incentives and benefits for being part of the program.
  2. Loyalty programs do not have to be big and bold to be effective. 
  3. Retail loyalty programs encourage long-term customer relationships, repeat purchases, increased customer spending, and brand loyalty.
  4. Since you’ve set the goals and objectives, it will be easy to work backwards to determine what specific metrics support those goals.
  5. Measure lifetime value of a loyalty member vs non-loyalty member to show how much value each delivers to the brand. 

Loyalty and rewards programs have exploded in popularity, and it can feel like every brand has one already. However, there is much room for improvement across the retail industry. Most of the time, the rewards do not match the time and effort required to be part of the program, and even fewer programs leverage the amazing community they are building. To make retail loyalty programs truly great, brands are going to have to dig deeper and put more energy into delivering superior customer loyalty plans. Trust us, it’s definitely worth it. 

What is a loyalty program?

We’ll start with the basics. A loyalty program is a program conceptualized and promoted by companies and communities that provides incentives for being part of the program. In retail, loyalty programs are activated for customers once they make a purchase and encourage them to make more purchases. The objective behind a successful loyalty program is to build value in the intersection between promotion and loyalty, delivering additional value to customers and while also scaling the brand. Most brands will offer some benefit to encourage change in customer behaviors and long-term commitments.

Benefits of loyalty programs for retailers

Brands wouldn’t run programs unless they delivered a clear benefit to the brand. Retail loyalty programs encourage long-term customer relationships, repeat purchases, increased customer spending, and brand loyalty. However, they also reward customers with unique promotions and benefits not available to the general population. Amazon Prime is an example of a loyalty program that provides faster shipping and access to music and TV shows that are available to non-Prime members at much higher prices. 

How to create a loyalty program 

So, what should your loyalty program look like? Ideally, a brand’s loyalty program should be structured with their customers and values in mind. It’s best to be realistic about what your brand can offer. Do not promise price discounts or additional features that will be harmful to your business to deliver because loyalty programs do not have to be big and bold to be effective. 

Here are some tips for creating a successful loyalty program:

  1. Define the goals and the budget – Each loyalty program should be founded to achieve a certain goal or objective. Additionally, it’s important to work out how much it will cost and what the potential monetary return could be. Without this information, brands risk missing the mark and losing money in the process. 
  2. Decide on what kind of program you will be creating – There are countless options to choose from, including points-based loyalty program, loyalty program cards, point-of-sale rewards programs, tiered loyalty programs, and more. The loyalty program can evolve, but it should be clear from the start what customers have to do to earn benefits. 
  3. Select the technology for loyalty program management- Loyalty programs require careful tracking, so make sure you have a CRM, customer loyalty software, loyalty program provider, or other loyalty program tool in use to carefully measure and monitor the program in action. Customers today do not have to worry about a punch card in their wallet. The easier you make it for them to participate and track, the more people will be excited and the bigger the rewards. 
  4. Launch and promote the program – If people don’t know about the program, they can’t join. Make sure to create special marketing campaigns to spread the word about your loyalty program, as it will be vital to its success and evolution. 
  5. Measure and adjust – The one consistent across all programs and initiatives is measuring and adjusting as needed. 

How to track loyalty program effectiveness in retail to demonstrate ROI

Tracking the effectiveness of your brand’s loyalty program is important, and it can be done in multiple ways. Since you’ve set the goals and objectives, it will be easy to work backwards to determine what specific metrics support those goals. If you need a place to start, these are great metrics for determining the success of a loyalty program:

  • Redemption rate or the number of customers that actually use their benefits. 
  • Engagement rate to give you an idea of how many customers are engaging with the program at any given touchpoint and earning rewards.
  • Average amount spent by customers using the program to show if it encourages repeat buys or increases in spending. 
  • Lifetime value of a loyalty member vs non-loyalty member to show how much value each delivers to the brand. 

Loyalty programs can be incredibly powerful tools for brands to build connection, increase customer spending, strengthen brand equity, and encourage long-lasting customer relationships. When brands do it right, it helps to build an enduring brand with a committed and connected community. For more examples of top loyalty programs or to start your own, contact the MDG team today. We’d be delighted to help build a loyalty program with strong ROI.