An Authoritative Guide to A Customer Loyalty Program
This guide explains - Introduction to customer loyalty, Setting a customer loyalty program, Managing a customer rewards program, Evaluating the impact of a customer rewards program

Customer loyalty programs wereimplemented only by retailers in the past. Over the years, the demands ofcustomers across other verticals have forced loyalty program vendors to tailortheir offerings to suit these differing needs. This evolution of customerloyalty solutions has helped companies build a competitive advantage. Today, acustomer loyalty program is an integral part of a company’s strategy.

If a company does not implement acustomer loyalty program, they risk getting left behind. Also, if a loyaltyprogram is not structured properly it is likely to end up a liability ratherthan an asset. It is thus imperative that each company optimally structuretheir program, contextual to the unique needs of their business. It may seemlike a daunting task to implement a loyalty rewards solution and get it rightthe first time. Easier said than done, right?! WRONG! Zinrelo’s guide willaddress every aspect of setting up a customer rewards program.

To understand the nuances ofa loyalty program, it isimportant to understand all the elements, starting with the tenets of customerloyalty. We will break this down in four parts:

1.     Introduction to customerloyalty

2.     Setting a customer loyaltyprogram

3.     Managing a customer rewardsprogram

4.     Evaluating the impact of acustomer rewards program



Why is customer loyalty important?


Revenue Impact: The ParetoPrinciple when applied to marketing, states that 20% of repeatcustomers are responsible for 80% of the sales; and this is true for mostbusinesses. Thus, even a slight increase in the percentage of repeat customerswill lead to an exponential growth in revenues.

Profitability Impact: Harvard Business Review estimates that just a 5%increase in customer retention boosts profitability by 50%. Again, a minorincrease in the customer retention can yield a dramatic increase in theprofitability.

Acquisition Costs vs. RetentionCosts: As per reports, acquiring new customers is 7x more expensive thanretaining these same customers; and the AOV increases with each incrementalrepeat purchase.

In short, loyal customers helpincrease revenues & profitability, thus making it a very leveraged investment.Increasing your customer base is important but a company’s primary focus shouldalways be on retaining the loyalty of existing customers.

Why think ofa customer loyalty program?


With the importance of customerloyalty established, let us now understand how a customer loyalty program canhelp.

Businesses usually offerdiscounts to stay competitive and retain customers. This prompts customers tobe opportunistic towards discounts. This transactional loyalty does not inspiretrue loyalty, nor does it help to engage customers. Moreover, these discountshurt profit margins. A well-designed customer loyalty program can address thisproblem by focusing on loyalty & points-based promotions instead. 

Customer engagement is just thefirst of many reasons to implement a customer loyalty program. To keepcustomers engaged with the brand, businesses need to strategize their marketingcampaigns to be relevant to each customer. Customer loyalty and retentionsoftware offerings have evolved into becoming an integral part of the marketingmix. The best customer loyalty program software can create multiple customersegments based on various attributes, and effectively address multiple aspectsof the relationship between a business and its customers. Read more…

Touch points of 360-degree loyalty program



Customers do not just chaseprices while considering a brand but look at the complete user experience onoffer. The best customer loyalty program software allows businesses to engagecustomers on multiple levels and provide a holistic user experience. A loyaltyprogram software should encompass a 360-degree loyalty engine that rewards thecustomers for multi-dimensional engagement with the brand. Transactionalloyalty is just the tip of the iceberg. Read more…

How can a loyalty program reduce discounting?


We have discussed how a loyaltyprogram can enable business growth. The aim of a customer rewards program is toengage customers through a gamification process: multiple points earningactivities and attractive points redemption rewards. This ability to earnloyalty points with each purchase creates a hook for not just the ongoingpurchase, but the subsequent one as well. Therein lies the huge difference.Thus, customer rewards program can significantly reduce discounting. Learnmore…


How to make loyalty programs succeed?



We have talked about theimportance of a customer loyalty program, and how it can structure businessgrowth.

Before you make haste to get a loyaltyprogram for your own company, please understand certain pitfalls you mustavoid. If the customer loyalty program cannot increase the customer retentionor loyalty (or improves just marginally) then it would be a colossal waste andit can add liability to your business.

Not only will the desired goalnot be achieved, but the expenses and other resources spent on the customerrewards program will become a sunk cost. Customer loyalty programs can be madesuccessful by avoiding certain pitfalls. Learn more…


 Terminologyin loyalty programs  

To understand the nuances of aloyalty program, it is important to understand all the elements starting withthe specific terms used in such customer loyalty programs. While some terms areself-explanatory, some others can be quite confusing. Understanding these helpswhile structuring and managing the program. We have covered all the importantones here.

How to arrive at the programdesign?


Simply implementing a loyalty program does not guaranteeinstant success. We have covered this briefly in our previous article.While it is easy to understand the ‘whys’ answering the ‘how’ can bechallenging. People will wonder ‘How many points should be awarded forpurchases?’. Which activities can earn loyalty points or which rewards to beoffered? This is what differentiates the best loyalty program vendors from therest. With a thorough analysis of past data, an optimum structure can beachieved very easily.


Why anomni-channel strategy matters for customer loyalty programs?


Traditionally, businesses implemented customer loyaltyprograms either offline or online depending on how they operated. With passageof time businesses have started operating across many platforms. Rather thanexclude a segment of business from the loyalty program, omni-channel loyaltymarketing allows you to give the same seamless experience the customer has cometo expect from your business. Such a hybrid approach combines the best of bothworlds.

A critical point while setting up a rewards program, is thata one-size-fits-all approach will never work. The mark of a good customerloyalty program software is the flexibility it offers to optimize for specificuse cases. The features and functionalities will be common but the way theseare implemented will mean the difference between success and failure. How onearrives at the optimum program design will vastly differ for retail loyaltyprograms as compared to B2Bloyalty programs. It is important to launch a customer loyalty programtailored for your specific industry and business objectives.


Howto name and brand your loyalty program?


Once you are clear about the program structure, the nextstep in setting up your customer loyalty program is to name and brand itappropriately. The name of the program and how it is represented creates thefirst impression, and hence becomes just as crucial to the loyalty program structure.Like any other branding exercise, the logo, colors, branding etc. of theloyalty program should be attractive and relate to your brand tone. But moreimportantly, the customer loyalty program needs to have a name which can forman emotional connect, resonate with customers, and project exclusivity.


How to design membership tiers in your loyalty program?

 Tiered rewards programs is one of the critical differencesbetween a good loyalty and a great loyalty program. Customers look forward tothe exclusive benefits associated with higher tiers. Moreover, these highertiers provide a sense of exclusivity. For the business, tiers add a gamificationelement to influence buying behavior. There are many doubts that arise whilecreating tiers, first of which is ‘How many tiers should we have?’. To answerthis and derive insights on how to structure your enterprise reward tiers,check this article.



Why include targeted marketing campaigns in a customer rewards program?

Customized and personalized offerings always yield betterresults. Same is true for targeted marketing campaigns as compared to genericpromotions. The ability to create multiple customer segments and run targetedloyalty campaigns is thus an important part of a customer rewards programs.With frequent and only relevant promotions, the customers look forward tocommunication from your side. With certain tweaks, the campaigns helpbusinesses influence the buying and engagement behavior of diverse customersegments. Therefore, a campaigns engine is crucial for any customer rewardsprogram.

Expand the rewards in your customer loyalty program


 When a person thinks of rewards in a loyalty program thefirst thing that comes to mind are discounts. We have covered that discountsand even free shipping form a transactional loyalty. These rewards play animportant part to get customers to buy from the business, but these rewards donot generate long-term loyalty. Moreover, the same rewards would becomemonotonous. It is important to offer rewards which go beyond monetary benefitsto create long term engagement with customers. These could be industry specificbased on the interests and preferences of individual customers. A trend fastcatching up is providing an option to donate to certain charitable foundations.Studies say, 80% of Americans are likely to switch brands to the one thatsupports a charity. A customer loyalty program needs to have a good mix ofrewards.


Howto build an emotional connect through a customer rewards program?

Who would not welcome a surprise gift? Surprise and delightmodel helps businesses create an emotional connect with their customers. Thesegifts need not be expensive. Even a small gesture of bonus points on birthdaysor free samples of perfumes would go a long way to win customer loyalty. It isimportant to engage and communicate with customers regularly and not just whenthey make a purchase.

By being present in their daily lives and acknowledgingshared values will create a stronger bond. For example, if a customer donatesto a charity through your loyalty program, you can acknowledge it and give ashout out to the member. Providing recognition creates a strong bond and suchmembers will be more attached to your loyalty program. Taking this a stepfurther, businesses should always extend special treatment for their VIP tiermembers. There are many such use cases that can be implemented through acustomer rewards program.



Calculate the value delivered by your customer rewards program


It is vital to monitor the performance of a customer rewardsprogram. The performance depends on the objectives of the business andpre-defined KPIs and success metrics, eg., increase in customer engagement,customer retention, repeat purchase revenues, etc. Progress needs to be trackedon multiple fronts like ecommerce carts, point of sale, mobile app, 3rd partystores, etc., and both macro & micro level performance is important. Suchrigorous tracking can be a daunting task, but what if it was available at aclick of a button?

Financial accounting for customer rewards program liability

With the launch of your rewards program, it is critical toevaluate the impact of reward points on the business’s financial statements.With the Accounting Standards Codification ASC, companies must defer revenue tocover the costs of rewards points. It can get a bit technical for a layman, butwe have you covered! In our post,we cover all the important aspects to account the rewards program liability.Furthermore, we have 5strategies to minimize such liabilities.


Starting with the importance of customer loyalty we have covered the essential steps to set up a customer loyalty program. After the launch of the loyalty program, it is crucial to communicate regularly with the customers and not only when they make a purchase. The time between purchases needs to be utilized by the business to nurture the relationship with the customer. A customer loyalty program allows businesses to create the emotional connect to keep the customers invested in the program. Over time, a loyalty program generates enough data insights about the customers to help businesses strategize for long term growth.

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