Loyalty programs are a great way to increase retention and drive more expansion revenue.

According to research by Bond Brand Loyalty:

  • 81% of customers are more likely to continue buying from brands with a loyalty program
  • 66% of customers actively modify their spending to maximize their loyalty points
  • 73% are more likely to recommend brands with strong loyalty programs

The good news is that you don’t have to be a giant ecommerce business to benefit from a loyalty program. Many independent brands have achieved great results by implementing programs at a more modest scale that reflects on the size of their organization.

The key element is not size, but engagement. Bond Brand Loyalty’s research found that while the average customer is signed up for 14 loyalty programs, they only tend to be actively engaged in half of them. If you want your loyalty program to be successful, it needs to be able to hold your customer’s interest, and keep him participating on a regular basis.

Here are three fundamental principles that will help you design an engaging loyalty program:

 

Keep it Simple

Complexity kills loyalty programs. If you want your program to be successful, do your best to make it as simple and user-friendly as possible.

A study by LoyaltyOne found that 81% of customers continue to participate in loyalty programs because they find them easy to understand, while 56% left programs because they found points too hard to earn. Think twice about adding unnecessary bells and whistles, when a much simpler model will do.

Acquisition Efforts vs Retention Efforts

There are three types of simplicity to design for. You want to make sure your program is:

1. Easy to Understand

A loyalty program should not be rocket science. In the space of a few lines, your customers should be able to understand:

  • What rewards they can get
  • How many points they need to get those rewards
  • What they can do to earn points

Here’s a great example from Gongshow:

Despite its name, Gongshow has a very easy to understand loyalty concept

2. Easy to Join

The signup process should be quick and painless. Don’t insist on collecting their full address, phone number, or credit card details at this point. All that can come later, when they’re ready to make a purchase. For now, all you really need is your customer’s:

  • Name
  • Email address
  • Password

Bonus points if you skip the signup process altogether and allow them to sign in with a Google, Facebook or Twitter account, like Gilt does:

Bonus points if you skip the signup process altogether and allow them to sign in with a Google, Facebook or Twitter account, like Gilt does
3. Easy to Participate

Your customers should be able to easily accumulate points without having to change their regular behavior. For many customers, even the thought of having to enter an additional password or redeem coupon codes is too much hassle for a loyalty program.

In Starbucks’ loyalty program, you earn and redeem rewards in the same way: by paying with your Starbucks card. As a result, participation is virtually seamless:

In Starbucks’ loyalty program, you earn and redeem rewards by paying with your Starbucks card. As a result, participation is virtually seamless:

By making sure your loyalty program is simple and easy to use, you will make it a lot more appealing for your customers to stay engaged.

 

Offer a Sense of Progress

One of the best ways to motivate consistent engagement in your loyalty program is to offer multiple levels of membership, with increasing rewards at each level.

People love having a concrete goal to progress towards, and a clear way of keeping track of their progress. If you can provide them with the tangible sense that they are improving their “score” every time they make a purchase, participating in your loyalty program will become fun and exciting.

This is the essence of gamification, and it’s something that Starbucks does very well. Their loyalty program comes with a mobile app that shows you how many stars you have collected, how many more you need to get to the next level and reward, and even has limited-time objectives that grant bonus stars. This keeps things fresh and novel, even for long-time members.

Starbucks uses a gamification model to help drive activity with its loyalty program

Another way to keep customers engaged over the long-term is to bake in an element of mystery or surprise to the progression system. Macy’s does this with their loyalty program, which includes an unspecified birthday surprise for its members. There is no mention of what the surprise might be, or how it differs from tier to tier. This keeps members guessing, and provides an added incentive to get to the next tier to find out if you can get an “upgraded” gift.

The Macy's model introduces a surprise element to its loyalty program

 

Actively Encourage Referrals

If you want your loyalty program to grow, you need to actively encourage your members to share the program with their friends. There are several ways you can do this:

1. Create a Truly Appealing Program

This is the most important factor. If your program is fun, easy to understand, and generous in its rewards, your customers will naturally start talking about it. The reason Starbucks’ loyalty program went viral was because they hit the mark on all of those elements.

2. Make it Easy to Share

If it isn’t obvious by now, convenience is a major success driver in every element of a successful loyalty program. Social sharing is no different, and if you want your program to spread, you have to make the process as quick and easy as possible.

Be sure to add social sharing icons to all relevant rewards pages. Also, allow users to post specific details about their rewards status to social media. Many people feel a sense of satisfaction when they achieve a new level or earn a reward, so give them an easy way to share their small victory with their friends. For instance, you might have a Twitter widget that auto-fills a tweet with “I just got a free _____ with my loyalty points!”

3. Reward Users for Sharing

While some people will recommend your program for purely altruistic or social reasons, most will require a small nudge in the right direction. In fact, a Nielsen study found that a remarkable 88% of people say they would share a product on social media if offered a reward. For people under the age of 34, that number jumped to 95%!

Themefuse has a straightforward example of this on their website:

Never underestimate the power of social proofing

In this case, Themefuse was after page likes, but you can offer similar rewards for shares or even direct referrals. You can even use loyalty points instead of shares to minimize the upfront cost.

The important thing is to offer some incentive that will help your customers justify the effort of sharing your program.

 

Loyalty Yields Long-Term Benefits

A well-designed loyalty program is rewarding not only for your customers, but for your brand as well. It might take some time to get everything right, and patience is required before you see the full payoff. But as long as you stick to the solid fundamentals described in this article, you’ll be able to build a strong, engaging program that will yield significant benefits over time.