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How Loyalty Marketing Programs Work and How to Build One

By Hicks Crawford, Last Modified
Jul 07, 2016
> Marketing

A loyalty program can be one of the most effective marketing tools for your brand.

Appealing to existing customers is an affordable way for businesses of any size to improve their profits over time.

There are many different ways to offer loyalty programs to your customers, providing them with discounts, perks and exclusive experiences.

Related Article: Baked to Perfection: The Secret Recipe for a Successful Customer Loyalty Programs

Benefits of Loyalty Marketing

Loyalty marketing benefits small businesses, as it is more profitable to earn business from existing customers. In fact, 20 percent of your customers will generate 80 percent of your revenue. Acquisition is also a more expensive process, as it costs up to 20 times more to sell to a new customer than it does to sell to one of your existing customers.

As such, any small business owner should work hard to appeal to their existing customer base. They will be able to sell products more effectively by keeping current customers loyal to their brand.

First, Build Trust

Trust can be achieved without loyalty schemes or discount codes. It is the first step in encouraging loyalty, and it is up to your business to ensure that customers can trust your brand. Reported by, it is most important to deliver a product that customers can depend on, while maintaining open and honest communication.

It is important to know that you have to first earn loyalty from customers. It does not come automatically as soon as you hand them a rewards card; your brand has to work hard to ensure that customers can trust you and want to work with you again. To do so, you must provide:

  • A great product
  • Transparency
  • Excellent customer support

According to KingofMaids, achieving this requires hard work and dedication. Your team must be committed to delivering a high quality of service, which will certainly pay off in the long term as you retain your most valuable customers.

Discount Programs

After establishing that customers will come back to your brand of their own accord, you can introduce various discount schemes that will further encourage repeat business. Some of the ways are outlined below:

Reciprocal Discounts

You can provide your customers with a discount for products from other stores or services from other brands. This is a successful cross-promotion technique that ensures customers will come back to your brand time and time again. It is commonly used by sports equipment stores, as purchasing products from the shop will provide customers with gym membership discounts and certain gym memberships come with vouchers for that particular store.

Loyalty Cards

This is a discount program that you see in a wide range of businesses, from coffee shops to nail salons. You can sell a high-volume, low-value product (such as a cup of coffee) and provide users with a stamp every time they make a purchase. Once they have reached their target (usually, five), they will receive an item for free. If you want multiple items to factor into the loyalty program, then a points system is your best solution.

Related Article:The Perks of Being Loyal: How to Build a Customer Loyalty Program That Works

Tiered Loyalty Programs

Another way to keep customers loyal to your brand is by setting up your rewards system as a tiered program. Encourage your customers to spend more time with your brand in order to reach the next level where they will receive more perks and bigger discounts.

The tiered loyalty program at British Airways is a great example; it uses Bronze, Silver and Gold levels that offer up small rewards based on the number of points they earn, such as priority boarding, free upgrades and discounted hotel stays. Another successful example is Shop4Vitamins, whose tiered loyalty program has resulted in a 35 percent increase in repeat customers


Encourage your customers to tell friends about your brand in exchange for rewards. These types of referral programs not only help you retain your existing customers but can also attract valuable new business.

A great example is Dropbox, which offers users extra storage space for inviting their friends. Over the years, the company’s refer-a-friend program has resulted in users sending 2.8 million referral invites and increase the number of registered users by 60 percent.

Experiential Marketing

Actively engage with your customers in person to keep them interested in your brand. Hosting exclusive events for existing customers will make them feel valued and encourage them to spread the word about your company and its products. There are plenty of different events that you can host as part of your loyalty scheme, including:

  • Preview evenings
  • Exclusive sales
  • Product trials

Related Article: Latte Love: 3 Customer Loyalty Tactics to Copy from Starbucks

One of the major benefits of experiential marketing is that guests are very likely to tell their friends about the experience on social media. Create a #hashtag for the event, and your shoppers can easily spread the word on Instagram and Twitter helping to do the marketing for you.

Hicks Crawford
Hicks Crawford
See Hicks Crawford's Profile
Hicks Crawford is a leading online marketing professional and author. Over the past 4 years, he has worked closely with clients from all over the world to help them get better results from inbound marketing and blogging. Through his experiences, he has mastered some of the most powerful tech, content marketing and social media platforms.
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