5 Tips to Creating an Effective Loyalty Program

(Source: pixabay.com)  

We have all been guilty of falling prey to the array of loyalty programs available out there in the market. But what exactly are loyalty programs for? Are they really beneficial?

Loyalty programs are basically a reward system to track customer’s preference and keep them coming back. Often times customer’s information are collected upon sign up such as name, address, birthdate, gender, phone number, etc., and are used for marketing campaigns or to track customers’ demographics. This can be beneficial to the merchant as they could now understand their customers’ shopping patterns, such as the frequency of them returning to the store or the age range of their target market. All these info can then be used to determine the types of promotions they can run or the type of product that they should focus on, and most importantly, to keep a steady flow of loyal customers to their store.

But while it is essentially to benefit a merchant in their business, how does one entice customers to join their program and stay loyal? Here are a few tips to offer an effective loyalty program:

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1) Offer more value to your customers
Most of the time, customers are only interested in WIIFM (What’s in it for me). If you want them to give up their already limited card slots in their wallet for your card, you have to give them a good reason to do so. Customers are always out there seeking for value; whether it is a promotion, a discount, or even a small gift, customers want to feel that it is worth their effort or money. There is no harm in implementing a small annual fee to your membership, but ensure that you give them back something that they would deem worthwhile.  

TGV Cinema Logo (Source: tgv.com.my)  

A good example would be Malaysian cinema chain TGV Cinema. In the recent years they have offered what they call the MovieClub. With a sign-up fee of RM30, here are the benefits listed on the website:

Benefits of MovieClub (source: tgv.com.my/movieclub)  

The more prominent benefits that one would receive are:

  • Redeem two free movie tickets plus one regular popcorn set when you sign-up.
  • Redeem two free movie tickets plus one regular popcorn set on your birthday month.
  • Earn MovieMoney on all purchases made online and in TGV Cinemas.

So let’s crunch some numbers. A typical new released blockbuster movie cost approximately RM15 for a standard seat and a regular popcorn set will set you back roughly RM10, so just upon signing up itself you will be getting a total of RM40 value in return, and with the additional birthday rewards, that would give you a total of RM80 value, which would make sense for customers as they are essentially saving more money by joining the membership. On top of that, to keep you constantly coming back, they even offer a 10% cash rebate for all purchases made which will be credited to you as MovieMoney to be spent for future purchases.

With all the benefits offered, customers would feel that they are receiving higher returns by participating as a member. Look for a product or service you have that you can offer to your customers to add value to your loyalty program, help them save more while bringing more sales to your business.  

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2. Reward your loyal customers
Loyalty is a two way thing. In order for customers to stay loyal to you, you must give them a reason to do so. There have been many instances where retailers only offer rewards for new sign ups or to old customers who have yet to come back for quite a while to try to draw back sales from them, neglecting existing customers and making them feel unappreciated.

Not too long ago, a telco company in Malaysia was facing some marketing backlash from their customers (read full story here: https://forum.lowyat.net/topic/3890167). To summarize, customers were furious because they felt that the company was being unfair by offering different people different packages, and many loyal customers were still paying an exorbitant amount for their plan whilst newer customers or customers planning on leaving the service were being offered better deals. The whole purpose of the company offering such a deal was to try to get people from all income range to join them, and to also try to retain their customers by offering them cheaper packages. But while doing so, they have neglected their loyal customers. This in turn backfired as loyal customers felt betrayed and no longer see a point in staying faithful with them.

Statistics have shown that it is approximately 5 times cheaper to retain an existing customer than to acquire a new one, with over 70% of respondents agreeing to it (read more on the statistics). So not only for the benefit of your company image but also at a financial standpoint, it is important to protect the interest of your existing customers to ensure their continued loyalty to your brand (find out more about branding here). If not, they will eventually bring their loyalty elsewhere.  

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3. Ensure customers are aware of your benefits
This might sound pretty obvious, as one would think that if a customer were to sign up for a membership, they are bound to know about the benefits, right? Well, it may not necessarily be true.

Sadly, more often than not, customers sign up because they were coaxed by the retailer with a ‘free’ membership, but they are not properly informed of all the perks they could get out of the card. If you were to look at all your cards right now, do you actually know the full benefits of each card?

From a recent experience of mine, I have applied for a new shopping mall card since, well, it was free. But frankly, I haven’t gotten a clue about the benefits of the card other than point accumulation. Upon signing up, I was informed by customer service that I will get a 10% cash rebate into the card when I spend at their mall, and only upon further inquiry did they inform me that the points are only redeemable at the food court. But oddly enough, as I was trying to redeem my points at the food court, the waiter told me that they didn’t know how the redemption was done and that I could only use the card to collect points. To complicate matters, they now even have a new stamp collection system at the food court in addition to the mall card. So what exactly is the card for? It still remains a mystery to me.  

Stamps logo (Source: stamps.co.id)  

Take a look at another example. In Indonesia, there is a loyalty system called Stamps. Stamps is a multi-merchant partner company whereby they have partnered with numerous merchants across the country for members to collect points and redeem rewards. What customers have to do is inform the merchant of his/her email address upon payment to utilize the service.

The issue with these types of services is that, with such an extensive list of participating merchants, customers often find it hard to remember who they are. Hence, they will constantly lose out on rewards and may eventually lose interest in the loyalty program as they don’t see the perks of it. That is why ensuring that they are aware of all your benefits is important. Inform customers how to look out for your merchants, whether is it a sign in-store, or perhaps ensuring that all your partner merchants have their staff well informed so that they are able to remind customers upon payment   .

Partial excerpt from Stamp participating merchant list (Source: stamps.co.id/our-merchants)  

Always be certain that your customers are well aware so that they can properly utilize your loyalty program. After all, you would not want your efforts to go to waste as well. When customers can fully benefit from it they will start to see the value of your loyalty program and would be happy to continue giving you their support.

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4. Cater to your customer’s needs
Every business services a different group of customers, and each group of customers will have different needs. There is no point in implementing a one-size-fits-all program just because everyone else is doing it. Your customers may be looking for something different.  

Japanese international retail chain Aeon logo (Source: aeon.info)  

For instance, some retailers opt to go with a point redemption system such as Japanese international retail chain Aeon, whereby customers get to collect points and use said point to redeem gifts or vouchers. This system has been around for a long time and many have adopted it into their business as well. However, while it may seem tempting to follow the footsteps of others as it has worked for them for so many years, is it really suitable for your customers? Instead, you should look at your customers’ needs and see what is appropriate for them. Ask yourself, are they drawn to this type of loyalty system? Are they able to achieve the requirements for the rewards? Are the rewards suitable for your customers?

Find out what your customers are essentially looking for. Perhaps they may be more interested in a store discount? Or perhaps cash rebates? Find something that your customers are actually interested in and work out a system that is beneficial and workable for them, rather than just implementing a generic system. After all, what is going to set you apart from the rest if you are just going to follow the crowd?  

(Source: pixabay)

5. Keeping things simple
With so many other loyalty programs out there, the least customers need is another complicated loyalty system for them to keep track of. It is best to stick to a straightforward system. Have a system that is easy for customers to calculate their benefits.  

Marina Bay Sands Logo (Source: marinabaysands.com)  

Marina Bay Sands in Singapore has launched a card call Sands Rewards Lifestyle Membership. But trying to keep track of their earning scheme proves to be quite a feat. First we have what they call Destination Point (DP) and Destination Dollars (DD). Conversions for DP are every $50 is equivalent to 1 DP and DD are calculated as 3% of your total expenses. So let’s say if I have spent $63.50, how much would I be earning exactly? And to make things worse, to redeem your DD at partner outlets, the conversion is every 1.2 DD is equivalent to $1.

I think I may have to bust out my calculator each time I attempt to calculate my rewards.

Sands Rewards Lifestyle Membership point system (source: marinabaysands.com/sands-rewards-lifestyle/participating-outlets)  

Complex systems would cause unnecessary frustration among customers. If customers are unable to keep track of the rewards they are earning, they may just decide to forgo the program as they would not know what exactly has to be done to earn the rewards. Implement something straightforward to ease customers’ burden. There is no harm in even implementing just a simple stamp card if that is what works for you. That way, you will not have to worry about maintaining a system and spending more resources on it especially if you are just starting up a small business. Less is more, right?

Putting all these tips into consideration would help create a more effective loyalty programs that not only benefits you, but your customers as well. With an oversaturated amount of merchants out there in the market it is getting harder to maintain customers’ loyalty amidst the tight competition. But looking out for your customers and understanding their needs to add value into their lifestyle is the first step to maintaining a good relationship with your customers and eventually converting them into your loyal followers.  


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