Boosting Sales with an Effective Loyalty Program

Think about it. You advertise an irresistible special deal at a bargain price. You gain many customers. But then you discover that many of those who cash in on the deal never become repeat customers — until you advertise another special offer. Perhaps it’s time to consider diverting those advertising dollars to a loyalty program that keeps your customers returning again and again. Chances are it will pay off in the long run. Indeed, researchers say that it costs six to seven times more to gain a new customer than to keep an existing one.


Loyalty programs — which originated decades ago when airlines began offering miles toward free flights — usually offer a certain number of points for each purchase or service to those customers who sign up for the program. The points increase with each purchase until the customer has sufficient points to gain a free product or service, a discount, or some other sort of special reward.


Rewards programs are proving to be an effective way to boost sales. Not only do your customers keep returning to spend their money with you rather than elsewhere, but researchers say they also spend up to two-thirds more than first-time customers. In addition, in a market that is crowded with competitors offering similar products or services, a loyalty program will encourage customers to choose you above the others.


A loyalty program also enables you to track your customers’ spending patterns, thereby allowing you to meet their needs more effectively.


Loyalty programs work best for businesses whose customers make frequent, short-term purchases. A roofing company, for example, is unlikely to have a customer return regularly for a new roof. If your company is in that category, however, you might want to join up with other companies and offer a joint rewards program. In that way, the customer who purchases a new roof from you gains rewards points that can also be earned and used at partners in generally the same field, such as a paint store, a hardware store or a furniture store.


Even if you have regular sales, partnering with non-competitors in the same neighborhood on a rewards program is worth considering.


Here are tips on setting up and running a loyalty program:

  • Make your program as simple as possible. The application form should consist of only a few lines. Avoid asking for too much personal information, such as age and income levels. This information might be useful to have, but it will deter many from joining. Or you could make such personal information optional.
  • Provide rewards that are easy to calculate. If customers know that, for example, they receive 10 points in rewards for each dollar they spend, it will be easy for them to know how many rewards they have accumulated with each purchase. If you can do so, print the total rewards they have accumulated on each receipt.
  • The most popular form of reward is to give customers a discount on future purchases. Once customers accumulate a certain number of dollar points they will be eligible to receive a discount on their next purchase. Other rewards provide exclusive deals, coupons or even gift cards. Another form of reward, depending on your type of product or service, is to provide a benefit, such as free delivery, when customers reach a certain point level.
  • Consider offering special rewards to those who reach certain levels, such as silver, gold or platinum. Customers like to know they are part of an elite group and will be encouraged to buy from you more often to reach a new level.
  • Be innovative. If you face competition, devise ways to make your program more attractive and more rewarding than others. Depending on the nature of your company, you might want to consider a tiered system that offers smaller rewards at the start and then increases them as the customer spends more and more money.
  • Some companies are finding success with a loyalty program that charges customers an upfront fee to gain benefits. Under this system, customers pay a monthly or annual fee to be eligible for lower prices on a wide range of products, for example, or perhaps to obtain services at no cost. For example, some doctors are charging a set monthly or annual fee that gives patients a certain number of free visits a year. You might want to adopt a similar practice in your industry, thereby rewarding your customers’ loyalty in an entirely different way.
  • E-mail is the most effective way to advertise your rewards program. Ask for a customer’s e-mail address on their application form and you can send them special offers and details of new products that will encourage them to keep buying your products or using your services.

In addition, use social media, such as Twitter, Facebook, Pinterest and Instagram, to inform existing and potential customers about your rewards program. Advertise your loyalty program on your website.

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SMBReviews is committed to providing small and mid-sized business owners with the information and resources they need to select the best service or product for their company.

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