Five Steps to a Customer Loyalty Program

by Larry Mersereau, CTC

How many of those plastic cards from loyalty programs to you have in your wallet or on your key chain? How many of them to you actually use?

We’ve come to a point where customers expect just about everyone to have a loyalty program. If you haven’t done anything specific yet, here are five easy tips to get you started, no matter how small your business may be:

1. Identify your Best Customers. Any loyalty program has to begin with the people who are already loyal. The more data you can accumulate about them, the better your program will be. You don’t need a sophisticated database program to look at customer data. At least pull out all of your invoices for the last year, and look at what names come up over and over. Look at what they have in common.

Depending on how much detail you keep, you may identify trends in age, neighborhoods, family status, whether they come in to meet in person, do things on the phone or all online. The idea of your loyalty program is to draw more people just like these good customers. You’re going to design your program around these people, with the goal of attracting more people just like them.

If you haven’t been capturing name, address and email address from every client up to now (and making notes about age, family status, preferences, etc.), start today. A year from now you’ll have the data you need to start a loyalty program.

2. Look at your Competition. If your competitors are offering loyalty programs, you need to know how they work. You want your program to be competitive, but clearly different. Don’t fall into the trap of matching or exceeding generous programs a competitor offers. They may be losing money on their program and not realize it! Make sure your program is right for you, and especially for your best customers.

3. Look at your Allies. Allies are other businesses that sell related products to the same customer base. For a travel agency, that may be a luggage store, a kennel, a tanning salon or a dry cleaner. See if they have loyalty programs that you might become part of, and if they would like to become part of yours. If you belong to an airline loyalty program, you see offers every day from florists, car rental companies, hotel companies, even brokerage firms. They’re all sharing access to an established customer base.

4. Set Rules and Rewards. Your program can be as simple as a punch card. After five bookings, you give a $100 credit or a free cabin upgrade on the sixth. Do the math before you print the card. Make sure you’re requiring enough profit from the first five that you’re not giving it all away on the sixth!

By the way: Be sure customers can earn a reward within a reasonable amount of time. If it takes two years to get something back, they’ll quickly forget the program. A good customer should be getting something back within three to six months. Even if it’s a small reward.

Another manageable format is the “club.” Clients become members, then get unique benefits that one-time customers never see. Give them as many perks as you can without giving away your profits. Look for all of the goodies you can get for free or nearly for free from suppliers and reserve them for your club members only.

You can establish different levels of membership, so your best customers enjoy additional recognition.

More complex programs, like dollar thresholds or rewards points will require more sophisticated accounting and POS software. There are also online programs you can buy into, but they’re not going to be as personal as something you design yourself.

5. Sell the Program. First, you have to sell it to your employees. It’s important for them to see the benefit to the business (and ultimately, to themselves) of promoting this program. After all, they’re going to have to sell it to the customers. They have to ask every customer if they’d like to be part of the loyalty program and members of the club. If there are eligibility rules, the employees have to know them so they know who to invite.

Bonus Tip. Engage. Communicate regularly by email, snail mail, and on social media. Make sure they know where they stand and how close they’re getting to a reward. (I confess that last year I bought a plane ticket to Miami and back on the same day to make it to the next level on the airline’s frequent flyer program.) People will actually make another purchase just to get to a reward threshold! In many cases, you can completely manage a small program on social media. You might have a members-only site, or a forum where they can leave comments and ask questions. Happy customers can bring you more prospects just like themselves if you engage them properly.

People love loyalty programs, but only if they see a payoff. If you’re going to start a program, be sure participants earn rewards quickly and regularly. Keep them informed on their progress towards thresholds and their status in your program.

Smart business owners, marketers and sales professionals (people just like you!) turn to Larry Mersereau, CTC, for the ideas and insights they need to bring in more business and take home more money. More at