woman building her profitable business with a loyalty program

Why should you add a loyalty program? More profits and better customer engagement.

Most loyalty programs reward customers when they regularly buy from a business or have purchased a certain amount. The rewards program can offer free products, discounted future purchases, early bird ticket access, skip-the-line service, or a VIP service level.

It makes customers feel special and rewards them for their continued business.

A loyalty rewards program is a great way to encourage customers to keep purchasing from you.

Let’s start by defining the difference between loyalty rewards programs and membership programs.

Loyalty rewards programs let customers earn bonuses and perks based on spending or other measurable goals.

Memberships give customers immediate access and may or may not come with a monthly or annual fee.

The critical distinction is earning the reward (loyalty) vs. being given the reward (membership). In this section, we will discuss loyalty programs.

Here's an example of how different businesses can implement a loyalty program.

Your favorite ice cream place could offer a free punch-card loyalty rewards program. Purchase six ice cream cones and receive your 7th cone free.

Is it your birthday? You get a free scoop of your favorite flavor.

Show your card and get free sprinkles on any cone. Loyal cardholders also get discounts on ice cream cakes or hand-packed pints and toppings. These cost the business little but keep customers coming back.

It sounds counterintuitive, but consider a paid loyalty reward program if you want to increase loyalty.

A study by McKinsey showed that offering paid programs typically results in greater loyalty and higher average sales.

They list three keys to a successful paid reward program.

In terms of value for cost, It has to feel like a no-brainer:

Think of everyday discounts and free merchandise from a $5-a-month CVS CarePass.

Or getting $175 worth of free workout gear when you subscribe to a monthly clothing membership program.

Treat them as special VIPS:

Think about airport lounges that are only available to Platinum mileage members.

Amusement parks that offer fast-track access to rides and attractions.

Everyone loves getting behind the velvet rope.

Reach out and touch them. Often:

Offer surprise perks such as “Free Pie on Pi Day” or a free car wash after a messy storm.

You want them to be so delighted that they remain members.


woman building a profitable business and starting a loyalty program

For example, a car dealer could offer a $39 oil-change member reward program.

Buy five oil changes, and the next one is free. Members also get a free car wash and a free "10-point safety inspection" at every oil change.

You calculate that the oil change member reward program has a yearly value of $399 and advertise its value available for just $39.

When an oil-change member comes in, they get their oil changed and a 10-point inspection.

During the inspection, If the mechanics find a problem with the brakes or see fluids need to be topped off, most customers will agree to have the additional service done immediately. After all, the car is already up on a lift in the auto dealer’s shop.

The member keeps their oil changed and their car in safe condition, all from a business they trust.

You get an immediate cash infusion of $39 per member.

After figuring out the actual cost of one oil change, six car washes, and six safety inspections, you reach break-even.

You figure that 10% of all oil-change cars will need additional service, and about half the customers will let you proceed with a repair.

The loyalty rewards will vary and depend on what your customers find valuable – and what you want to achieve.

Loyalty programs can get expensive, so you must have measurable goals to determine if the program benefits your business.

For example, the oil change program should track how often customers buy additional services, upgrade their basic car wash to a premium wash and wax, and what the costs are regarding mechanics' time for the 10-point inspection.

There is certainly some way to reward loyal customers.

Office equipment. Customers who purchase the annual office equipment maintenance plan receive one free toner every month.

Snow shoveling. Customers who sign a contract for the season-long parking lot plowing plan receive free snow shoveling for their sidewalks.

Hotel guests. Your guests who stay at your hotel Friday through Sunday receive free hotel stays on Monday night (when your occupancy rates are lowest).

Determine whether you want to start with a simple free loyalty plan or a paid one.

People tend to value something they pay for rather than something they get free.

A paid loyalty program also gives you a built-in cash infusion to offset the cost of program benefits.

Here are three non-traditional ways to create a loyalty program for your business.

Partner with other businesses to offer a broader range of rewards.

Instead of solely focusing on rewards directly related to your business, establish partnerships with complementary service providers or products to create an ecosystem of benefits.

This adds value to your own offering and exposes your customers to quality services and products that align with their lifestyle or business needs.

Example: A local coffee shop could partner with a bookstore, music venue, and artisan market to offer its loyalty members exclusive access to book readings, concert ticket pre-sales, and special market events.

The coffee shop's loyalty members would receive a holistic experience that goes beyond just coffee discounts.

Turn your loyalty program into a skill-building experience:

Turn your loyalty program into an educational platform where customers can learn new skills or improve their knowledge.

This approach can be especially powerful for businesses that sell products that require skill or understanding to be appreciated fully.

Example: A kitchenware company could offer cooking classes or workshops as part of its loyalty program.

Customers earn the opportunity to participate in these classes by purchasing products or services and engaging with the brand through social media, submitting recipes, or participating in community events.

This could extend to online resources exclusive to loyalty members, like video tutorials by renowned chefs.

Let your customers create a positive impact in their community:

Design a loyalty program that aligns your business's interests with your customers' social values by enabling them to make a positive impact.

Reward customers for their purchases and for their actions that contribute to the community or environment.

Example: A sustainable clothing brand could create a loyalty program where customers earn points for recycling old clothes, participating in community clean-up events, or contributing to a collaborative sustainability blog or forum.

Points could then be redeemed for products or used to make donations to environmental causes, offering a tangible sense of contribution and community belonging.

Here's what to think about when you consider adding a loyalty reward program.

How can you create a win-win? Your customers get a valuable benefit and your business gains profits and loyalty,

What loyalty reward would be attractive to your customers? What would excite customers enough to participate in the program?

How can you make your loyalty rewards stand out in your customers' minds? Move past the run-of-the-mill offers and position your offer as tailored to your audience.

How could your business add a loyalty rewards program to benefit you and your customers?


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Taken from Profit-ize Your Business Book Two: Sales and Membership Programs




Like this post? It was taken from the Profitize Your Business series

Patricia Browne

Patricia Browne

Patricia Browne is the author of seven books that help businesses grow and profit.

Read about The Profit-ize system and what it can do for your business

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