Customer Churn & Retention

Tips for Customer Loyalty Incentive Programs


A customer loyalty program encourages customers to keep coming back to you. A loyalty incentive program goes one step further, offering them a reward for their repeat business.

Whether it involves collecting points, swiping a card or just spending a certain amount of money with you, a loyalty incentive scheme is an up-front deal with the customer: buy from us, and we’ll give you something extra in return. Incentives could include vouchers and discount codes, exclusive products and member-only prices, free delivery or even free merchandise.

It’s a subset of the customer retention program idea, and it’s a well-established way to retain customers and build loyalty. That said, it’s not always easy to get it right. Here are some tips for making your customer incentive program a success.

Focus on ease

If you want customers to keep coming back, you need to make sure it’s simple for them to do so. Once they’ve bought into your loyalty program and are committed to it, you need to reinforce that commitment by making their transactions as effortless as possible – especially when it comes to collecting and redeeming rewards. That way, purchasing from you becomes a habit that’s hard to break. If they’re faced with a clunky or unreliable system, or the rules for getting rewards are full of caveats and conditions, they won’t stay around for long.

A Customer Effort Score (CES) survey can be helpful for gauging the ease of an existing loyalty program, or of your customer experience in general.

Fees are OK, as long as the value is above and beyond

We’ve recently seen the traditional loyalty program evolve into something more like a subscription, with customers paying a monthly fee in return for a VIP experience with a business. This could be unlimited free priority shipping, after the example of Amazon Prime, or additional perks and features, as with premium packaged bank accounts like HSBC Premier.

It might seem counter-intuitive, but charging a fee isn’t a deal-breaker for many customers, provided the perceived value of the reward is substantially higher than the payment. It can actually be viewed as a way to save money, particularly if the customer would be shopping regularly with you anyway. They might prefer to pay $10 a month up front rather than multiple shipping fees of $3.99.

Offer flexibility

Giving your customers a choice of rewards can be very appealing, and it broadens the range of people who will be tempted by your loyalty scheme. Understanding your customer segments and their preferences and priorities can be instrumental here.

For example, if you know that your customers are located worldwide and predominantly shop online, you’ll want to include rewards that appeal to them specifically, such as free international shipping. If your customer feedback shows that limited edition or special one-off products are highly popular, issue a reward freebie that is exclusive to your loyalty program members.

Tier your rewards

Make loyalty rewards a progressive achievement by building tiers into your program. The more loyal a customer is, the more rewards they get. This is a form of gamification which encourages customers to get to the next level and unlock more benefits. It can have a competitive element too, with high-tier customers feeling proud of their status and lower-tier ones feeling motivated to achieve the same level of prestige.

To get the most out of a tiered program, make sure all the levels available are shown clearly in your marketing, and that the pathway to getting to a higher tier is clearly explained. You can encourage high-tier customers to spread the word about the program by giving them profile badges or icons to use on your website or on social media.

Want to learn more about how to increase customer loyalty and boost customer retention? Dig deeper with our guides.

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