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How to create an effective loyalty program

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Table of contents of the article

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.

Perception of deferred benefits

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.

A deferred positive or reward also loses its power

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.
coupon after registration

Choosing the type of loyalty 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.

Discount program

Idea: a fixed discount for cardholders.

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

Cumulative program

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.

The bonus program

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.

A private club (privilege program)

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.
privilege program

Referral program

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.

Affiliate program (co-branding)

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.

What else does efficiency depend on?

  • Availability. The terms of use must be transparent and understandable to the client. The easiest way to visually demonstrate the principles of the program will be visualization in the form of a diagram. At the same time, you should not limit yourself to the "every X purchase is free" program - there are many gamification elements (encouraging reviews, ratings, reward systems, etc.) that can be implemented into the program, adding variety, but maintaining accessibility.

  • Branding. The loyalty program should be considered as a separate product – this is how it is perceived by the customer. The effectiveness of the program will be enhanced by thoughtful naming (easy to remember, associated with the brand concept), image and visual image, tone of voice.

  • Analytics. The launch and maintenance of a loyalty program should be accompanied by the collection of analytics about customer behavior and feedback. In this way, it is possible to track not only the effectiveness of the program as a whole, but also its various segments. Working out feedback and timely adjustment of the program will increase its effectiveness.

  • Segmentation. Audience segmentation will help you build an effective loyalty program: by average receipt, payment method, generations, time since registration and activity level. For example, for customers with a large average check, a cumulative discount is especially relevant, and a sudden bonus can help to "awaken" an inactive customer.

  • Individuality. The benefit is perceived more vividly by the client if it is the result of his own choice, and only he receives it. In reality, this is impossible, but customization of the loyalty program not only increases the attractiveness of the program from a psychological point of view, but also reduces the risk of customer churn due to flexibility.
loyalty program in McDonalds

Conclusion

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.
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