Customer Reward Programs are one of the most underrated tools in any marketer’s toolbox. Often businesses get so caught up in acquiring new customers, that we forget that it generally costs 5 – 25 times more to acquire a new customer, than it does to retain an existing customer. That’s an incredible number!
Obviously customer reward programs aren’t the only thing that impact your customer retention, but it’s something that can play a big part. In addition to increasing retention, customer reward programs can also increase the frequency that your customers purchase, increase the average order size, and increase the number of customer referrals you receive. (We’ve previously looked at Customer Referral Programs here.)
Customer reward programs don’t have to be complex either. We’re all aware of the airlines and their fancy systems, but that’s not the only way to go. Small businesses can also implement a system to make their customers feel valued.
Objectives of a Customer Reward Program
Before we dive into how to set up a customer reward program in your business, let’s think about what your objectives might be. For instance, a customer reward program can be designed to;
- Increase customer retention / decrease customer churn
- Improve customer satisfaction / Net Promoter Score
- Generate customer referrals
- Increase frequency of purchases / visits
- Raise your average order sizes
- Protect against competitor poaching
- Strengthen the relationship between your customers and your business
- Give customer data for market research and insights
- Access customer data for customizing their experience
- Provide customer contact details to allow ongoing communication
- Strengthen your brand
Once you know what your specific goals are, you can start thinking of ways to design your own customer reward program.
Customer Reward Program Ideas
Loyalty Discounts or Freebies
Loyalty cards are one of the most common ways to reward customers for their repeated patronage. These can be high-tech, or low-tech – so don’t assume that just because you don’t have a fancy system in place you can’t implement something like this.
At the low-tech end, we’ve all see the ‘coffee cards’ where you get a stamp for each coffee you buy. But this could also be done for other in-person shopping experiences – haircuts, plants bought, toy purchases etc. The reward can be a free gift (eg. a free coffee, free haircut, product giveaway), or a discount (eg $20 off for every $100 you spend).
Ideally a loyalty discount or gift will encourage the customer to transact with you more often than they might have otherwise. They’ll choose your coffee shop instead of the one down the road. Make sure your reward is significant for the customer and never ever make them feel guilty for claiming it!
Have you noticed how a lot of computer games work? They reward players with badges, titles, and fictional gems as they progress through the game. This keeps players engaged and focused on reaching the next level (as well as wanting to retain their current level). I’ve seen in my own children how addictive this is!
Businesses can take these same concepts and apply them to their customer rewards program. For instance, can you give an award to everyone who keeps up-to-date with their car maintenance? Or could you award your coaching clients when they reach certain milestones? You can use discounts and giveaways like above, but sometimes just a recognition of their status can make a big difference on it’s own. This is the principle that the airline clubs operate under – people don’t want to lose their ‘Silver Status’ so make sure they keep flying with that airline.
Another option as a customer reward is something that provides exclusivity. Airlines do this with their lounge access and priority seating, but smaller businesses can do things like; VIP nights, access to the founder / CEO, case study write-ups on your blog/newsletter, showcasing your customers in social media, a higher level of service, access to an exclusive customer group, or early access to your sales or new product releases.
Gifts can also be used to reward customers for their loyalty. These can be done via a defined rewards program, or can be more adhoc and offered spontaneously to customers. (Clearly, Christmas is a popular time for giving customer gifts but because of this, it might be better to surprise your customers and give something at a different time of year.)
Customer gifts can be things like; your own product/s, hampers, flowers, vouchers (for your business or another), stationery, beautiful soaps/toiletries, wine, technology (eg headphones, USB stick, portable phone charger), etc. Be careful though as it needs to be something that customers actually value – in most cases, giving away a branded T-shirt is unlikely to do it!
You could also give a gift with personalization – eg your product with their name on it, a nice diary stamped with their initials, etc.
Giving something away to a charity to reward customer loyalty is also a good idea. However, this needs to be properly implemented in order for the customer to acknowledge any value. For instance, you could get the customer to choose a charity that you donate to, or you could ensure there is a lot of communication back to the customer about how their specific contribution has helped (eg. “here’s a photo of the tree we planted for you!”).
Something to Share
Structuring a customer rewards program where the customer is rewarded with something to share is a great idea as it not only rewards your customer, but there’s a good chance they’ll introduce your business to a friend of theirs. This could be as simple as giving a business client a tray of muffins one day to share around the office, a jar of lollies, or a basket of fruit. Or, you could give a voucher for two people to use (eg dinner for two), or a direct giveaway if they bring a friend along (this becomes similar to a customer referral program).
Customer rewards programs don’t have to be very structured either. For example, you could have an alert in your system so that each 10th time a customer uses your services you do something extra special for them (eg give them a massage, have a longer consultation, give them a glass of champagne!) Or, you could have a way of randomly selecting a “Customer of the day/week”. In this case you could also give them something special and make a fuss (so that other customers notice!).
How to Design a Customer Referral Program
Designing your own customer referral program is actually not that hard.
- First, figure out the behaviour you want to encourage or reward. Is it a certain $ amount of spending, frequency of ordering, providing information? What does the customer need to do in order to qualify?
- Second, determine the reward/s.
- Third, decide whether you’ll make this explicit to your customers – as in “do this, and you’ll get that”, or a nice surprise
- Just start doing it! You’ll soon figure out whether it’s right or needs tweaking.
Make sure your customer rewards program is designed to meet your objectives, but also fits with your business branding. For instance, if you’re an exclusive store, offering a discount for loyalty is a bit incongruent. VIP nights or exclusive gifts might be a better option.
Customer Rewards Programs don’t necessarily need to be complex. Just because your business is small, there’s no reason not to be recognizing and rewarding your best customers. And there’s a lot of reasons to do it!