Lessons From the Most Successful Customer Loyalty Programs

July 7, 2014 Rieva Lesonsky

loyalty programs

Does your small business have a loyalty program? If not, you may want to think about adding one. The 2014 Loyalty Report from Bond Brand Loyalty found that two rapidly growing consumer groups—Hispanics and Millennials (defined as aged 20 to 34) are more likely than other demographics to not only join loyalty programs, but also modify their purchasing behavior based on loyalty perks and rewards.

Bond studied the 150 top loyalty programs to come up with some insights into what works best. Here are some takeaways every business can apply:

Driven to be loyal

To work best, the study says, a loyalty program should satisfy four primary “drives” that consumers have: The drive to acquire (money or status), the drive to defend (status or perks that they’ve earned), the drive to create (express oneself) and the drive to bond (be part of a community).

Most loyalty programs focus on the drives to acquire and defend—and indeed, those are the two biggest motivators for consumers to use loyalty programs. But a significant percentage of consumers also value loyalty benefits that help them contribute to the business (such as by expressing their opinions), bond with peers or gain recognition from peers.

Millennial madness

As Millennials grow up and become bigger spenders, they’re shaping the future of loyalty programs. This age group is first and foremost loyal to themselves: 60 percent of Millennial respondents say they’d switch brands and two-thirds say they’d change where they shop if it meant earning more loyalty rewards. A whopping two-thirds say a company must have a good loyalty program, or they won’t stick around.

No surprise here: Millennials are more likely than other demographics to want loyalty programs that work on a mobile device. They also care more about non-monetary rewards (the “bonding” and “creating” opportunities I mentioned), like being named the Mayor of your store on FourSquare or being on your customer advisory board to share their opinions.

Lots of loyalty—but some stumbling blocks

The average consumer is enrolled in of 10.4 loyalty programs and active in about seven. Why do people hesitate to join loyalty programs? Cost is the number-one reason (cited by 68 percent), followed by concerns about privacy (58 percent).

Ideally, your loyalty program should be free, and you should clearly state how you handle customers’ personal data so that they feel secure. You can also encourage personal data sharing by making consumers feel valued and important; consumers in the report admit when companies do this, they’re more likely to open up about personal information.

Peronalization matters when creating your loyalty program. Offering discounts based on their shopping history, inviting them to tailored special events and inviting them to join communities for loyalty members all work to create a personal feeling.

Last, but not least, personalize rewards not only to the user, but also to your business. In other words, make sure they’re a natural extension of your brand. For example, consumers in the study say it can seem “creepy” when a retailer uses GPS to send them messages based on location, but for a gasoline company, it’s “cool” to do so since GPS is tied into driving. On the same note, a gas company inviting members to an event seems “creepy,” but a retailer doing so seems “cool.”

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Author information

Rieva Lesonsky

Rieva Lesonsky

Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at rieva@smallbizdaily.com, follow her on Google+ and Twitter.com/Rieva, and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for Rieva’s free TrendCast reports.

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