How To Build The Best Retail Loyalty Program

Retail customer loyalty programs

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Updated August 9, 2023.

You have a customer who prefers your brands, your service, and your retail store.

How do you reward that loyal customer and make the most of their higher conversion rates?

For too many retailers, the solution is a frequent-shopper discount program.

Like all other discounts and markdowns, this is a losing proposition for your store and doesn’t really benefit your customers.

Why discount programs don’t work

On its face, a customer discount program can seem like a good idea. It seems like you’re telling customers that their loyalty has earned them a little extra money in their pockets.

However, if you dig a little deeper, the message is much different.

You’re telling your customers, “Hey, thanks for buying our stuff at the regular markup. We could have sold it to you for less to begin with, but thanks for playing along anyway. Now that you’ve bought enough at full price, we can start selling to you at a discount. Congratulations!”

Now your customer feels like they’ve been ripped off and your products are of lesser value. That doesn’t seem like a fitting reward for being a loyal customer, does it?

What Does Work

What works is a retail loyalty program that rewards loyal customers with more of what made them loyal, to begin with. They like your brands and service, so your program must include giving them more. You know their buying preferences and the types of shopping experiences they expect, so their loyalty reward should be a focused effort to leverage that knowledge.

Here are nine tips for building a great loyalty program...

1. Brand Awareness. You know what your customers like. Show them their brand awareness is relevant to you. A great way to reward loyalty is by keeping them in the loop about new products that fit their interests. When a new product line is coming up, your loyal customers should be the first to hear about it. Instead of waiting for items to hit the showroom floor, your loyal customers should expect a sneak preview, so they can be the first to enjoy those new items.  How cool would it be to text a loyal customer while you’re at a trade show and show them a picture of what you are buying that will be available in your store the next month? I can assure you - pretty cool.

2. Sustainability and Ethical Considerations. Loyal customers appreciate brands that align with their values. Highlight the importance of incorporating sustainability initiatives and ethical practices within the loyalty program. This could involve rewards for eco-friendly actions or supporting causes that resonate with customers.

3. Valuable Additions. You already know that a loyal customer enjoys one product that you carry. When you get a new line of merchandise or begin offering a service that would enhance a previous purchase, alert them. Are you offering while-you-wait alterations? Trade-ins on new products? Tell them! You don't want your loyal customers to be last. Matching products and services to your customer is a great value to them, a great way to boost your bottom line, and an excellent reward for their loyalty. Your customers will know they can trust you, and that loyalty will make it possible for you to make further suggestions and recommendations for product pairings and add-ons.

4. Tiered Loyalty Levels. Reward customers on their level of engagement and spending. This strategy encourages customers to strive for higher tiers by offering increasingly valuable rewards, which fosters long-term commitment.

5. Communication Strategy. A robust communication plan is essential to keep customers engaged with your loyalty program. Consistent and personalized communication that informs customers about new rewards, promotions, and updates could involve email campaigns, push notifications, and social media updates.

6. Exceptional Service. This one is a no-brainer. Every single one of your customers should expect and receive exceptional customer service. Loyal customers make taking that service to an even higher level easy. They give you all of the information you need to create a personalized experience every time they walk through the door. Using long-established rapport, your salespeople can reward loyalty by making the shopping experience unique to the individual shopper.

7. Feedback Mechanisms. Incorporate customer feedback tools via surveys, reviews, or direct communication channels where customers can voice their opinions. Such feedback helps with continuous improvement and shows that you value customer input.

8. Measuring Success. Conversion rates, customer retention rates, average transaction values, and Net Promoter Score are some of the metrics that can provide insights into your program's effectiveness.

9. Adaptability and Evolution. Customer preferences and market trends can change over time, and the program should be able to adjust to these shifts. Regularly assess the program's performance and gather feedback to identify areas for improvement. Instagram is useful for checking out what techniques new, up-and-coming retailers are using.

Give 'em What They Want

You have loyal customers because you’re already giving them what they want. Hopefully, that doesn’t involve discounts and markdowns. If it does, they’re not really loyal customers, they’re just looking for low prices, and that’s a battle you can’t win.

If you’re winning loyalty the right way, with the best products and service, then you want to continue giving them more of the same. You need to step up your game and make the experience even more meaningful for your loyal followers.

That means stepping up your training and giving your salespeople the tools and knowledge they need to make every shopping experience personal and positive.

That’s the way to build your customer loyalty program.