Article originally posted at Grid Dynamics Blog

Reward Loyal Customers: Comprehensive Guide to Loyalty Programs

The modern world is rapidly changing every day, bringing new levels of complexity and new challenges. This means both customers and retailers are continually making adjustments to their behaviors to meet changing desires, expectations, and environments.

What is a loyalty program?

Let’s take a look at a straightforward real life situation as an example. Say you are the owner of a burger place. Once a customer has finished their lunch and walks out the door, they’ll likely forget about your place. After they’ve walked out, they might see another burger place and think, “wow that looks like a nice place, I should try that out next time.”

What are the main benefits of loyalty programs?

As many studies have shown, increasing the customer retention rate by even a small margin can boost retailer profitability significantly. This is where loyalty programs can help by retaining existing customers as well as expanding the customer base. A dedicated and personalized loyalty program that offers customers benefits and privileges is one of the best ways to thank them for shopping with you and helps keep your business at the forefront of their mind rather than simply being a purchase they make once then forget about.

Types of loyalty programs

Loyalty programs have a very long history. At least as far back as the late 18th century when “premium marketing” was first used. At that time, American retailers began to give customers copper tokens with purchases that could be later redeemed for products on future purchases. Since then, loyalty programs have continued to evolve and today we now have an enormous array of them. Let’s take a closer look at the most common types.

How to build a loyalty program?

So you’ve decided you need a loyalty program because you want to improve your retention rate, bring more attention to the business as well as to help achieve other goals. Fantastic! It will be an exciting new challenge. But what’s the first step? Build it in-house or outsource a vendor?

Customer loyalty journey

There are multiple loyalty program types, and each program type has its own rules and flow. Let’s take a look at the basic loyalty flow:

  1. Meets the requirements to earn points or rewards
  2. Earns points or rewards
  3. Redeems rewards
  • Download an app — receive 50 points
  • Invite a friend
  • Write a review
  • Provide feedback
  • Sign up to a retailer credit card
  • Install a game

Conclusion

Almost all retailers eventually encounter some problems with 3rd party loyalty software, which can push them towards building in-house loyalty engine solutions. In this case, time and effort should be put into planning and implementing a loyalty engine so that the program is properly thought out and organized to deliver a quality outcome for you and your customers. Special attention should be paid to data migration and quality to ensure the transition from a 3rd party to an in-house solution is smooth and seamless.

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