How to create an effective loyalty program

In the article, we will consider the perception of deferred benefits by customers, the typology of loyalty programs and a number of nuances of their implementation.

To launch an effective loyalty program, it is important to look at the benefits offered from the customer's point of view. Psychological experiments show that a person perceives "himself in the future" as an outsider. As a result: The negative, postponed for the future, is not perceived as vividly as if it had to be experienced now.

Instant promotions and offers are more valuable in the eyes of the buyer than offers with benefits in the long term. Moreover, the longer the benefit is postponed, the weaker it is perceived. There are several ways to support the client's interest:

• Reducing the period of "waiting" for benefits by the client is splitting the loyalty program into smaller periods. Efficiency will increase even if the benefits in the price dimension are the same.

• Regular offers of "unexpected" bonuses to the client, which are actually included in the program. For example, in addition to the cumulative component, add discounts on various categories or product lines. At the same time, it is important to position such discounts as part of the loyalty program.

• Instant discount upon registration. One of the main levers that incline the client to participate in the loyalty program is to receive a discount at the time of registration (benefit here and now). In this case, a significant discount on the first purchase will work better than the basic% for the cumulative program.

The feasibility of launching a loyalty program and its effectiveness depend on a number of variables, including the business sector and the target audience. At the same time, one company may have several types of loyalty programs for different audiences. The most common option at the moment is the basic loyalty program + the "premium" option.

Idea: a fixed discount for cardholders.

Suitable for: a business selling daily goods / services that are used frequently.

Idea: % of the purchase is returned to the card in the form of bonuses (the most common rate is 1 bonus = 1 aed).

Suitable for: goods and services of frequent demand, in highly competitive conditions.

Idea: getting a bonus (free product / service, discount, compliment) with reference to the frequency of purchases or when buying a set of services.

Suitable for: mainly HoReCa, car service stations, regular use services.

Idea: a cumulative program for a limited number of people with exclusive bonuses.

Suitable for: premium segment brands, for which the key profit factor is customer loyalty.

Idea: the client brings a client from among his acquaintances and receives a bonus in the form of a discount or a gift.

Suitable for: the service sector, including courses and subscription services, catering.

Idea: two brands create a common loyalty program. The bonuses apply to both companies.

Suitable: non-competing brands with a similar target audience and philosophy or producing complementary products/services.

Thus, the main problem of loyalty programs is the low value of deferred benefits in the eyes of the customer. Splitting the loyalty program into shorter segments, providing unexpected and initial bonuses will increase the effectiveness of the program.

The typology of loyalty programs is diverse – the choice should be made based on the business area and the target audience. A common solution is to construct a unique program from different elements of standard types.

The loyalty program should be considered as a separate product, paying attention to all aspects of branding. Constant data collection, analytics and making edits to the program also determine its effectiveness. From the customer's point of view, its intuitiveness (accessibility) and the level of customization can increase the attractiveness of a loyalty program.