Mastering Loyalty Management: How to Increase Customer Loyalty

Imagine there are two coffee shops on your block.  

They’re equidistant from your house, offer drinks of equal quality, and are within the same price range. 

Needless to say, you might have a hard time deciding which of these coffee shops to frequent. 

But wait! Only one of them has a loyalty program. 

You learn that with every cup of coffee you purchase, you’ll earn points that you can eventually cash in for discounts and free products.  

The choice is clear now. 

Not only does good loyalty management set your brand apart from the competition, but it also gives customers a reason to keep coming back. 

But what exactly does an effective loyalty program entail?  

Learn everything you need to know about customer loyalty management, including the benefits, best practices, and technologies that will set you up for success. 

Customer loyalty management is a strategy companies use to gain and retain customers, typically through rewards and incentives. To foster meaningful, lasting relationships with these consumers, businesses establish loyalty programs to create positive customer experiences, improve engagement, and encourage repeat purchases.

When you ensure successful loyalty program management across your partner network, you can turn customers into loyal brand advocates.

A strong loyalty management strategy can go a long way. When you empower your partners to create high-performing customer loyalty programs, you can expect the following benefits for your brand: 

• Improving customer retention: Loyalty programs improve the customer experience by helping consumers get more value from each purchase. As a result of these positive brand interactions, your customers are more likely to remain loyal customers in the long term.  
• Saving money: Acquiring new customers costs between five and 25 times more than retaining existing ones. That means loyalty management is an effective means of saving money by prioritizing existing customers. 
• Gaining a competitive edge: With a strong customer loyalty program in your corner, you can make your brand stand out, giving customers a reason to choose you over your competitors.  
• Encouraging word-of-mouth marketing: When customers have positive experiences with your brand, they’ll tell others about it — and 89% of consumers trust product recommendations from friends and family. That means the better your loyalty program, the more people your consumers will recruit! 
• Boosting brand reputation: Boosting customer loyalty means maintaining a positive reputation for your brand, helping you build trust and credibility. 
• Increasing purchases: Because loyalty programs incentivize customers to continue buying from your brand, you’ll generate more sales. 

Loyalty management looks a lot different now than it did in the past. In fact, loyalty programs date back as early as the late 1700s, when merchants would present customers with copper tokens they could use on future purchases. In the 1800s, businesses began giving out “checks” (which acted similarly to coupons), tickets customers could redeem for free products, punch cards, and collectible stamps that could be exchanged for rewards.  

The influence these early loyalty management tactics had on modern programs is clear. But in an unsurprising turn of events, customer loyalty programs have gradually shifted from physical to digital platforms. Now, many businesses garner loyalty through things like points programs and apps.  

While these digital channels have made it easy for businesses to gather first-party data, it’s important that your data collection methods are respectful of consumers’ privacy concerns. That means being transparent about data collection and usage, expressly gaining consent to collect data, and employing data security methods like encryption. 

Loyalty programs aren’t one-size-fits-all. That’s why there are numerous types of program structures you can choose from when establishing your loyalty marketing strategy.

Tiered loyalty programs present customers with perks depending on how much they spend over time. These rewards are organized into numerous tiers to reflect different levels of spending. Essentially, the more a customer spends, the higher the tier they reach, and the better the rewards they receive. 

Starbucks’ rewards program is a great example of a tiered loyalty program. This program has two tiers — Green and Gold — and all customers start at the Green level. Customers then earn stars for every purchase they make, and with each star, they make their way toward achieving Gold status. Once a customer earns enough stars to reach the Gold level, they receive exclusive benefits like free refills, complimentary birthday beverages, and exclusive offers. 

Through points-based loyalty programs, customers earn points with every transaction, which they can eventually cash in for rewards and discounts. Customers can also earn points by completing desired actions, such as leaving reviews or subscribing to email lists. The more points a customer acquires, the more rewards they’ll unlock.  

Chipotle has a points-based rewards structure where customers earn 10 points for every dollar they spend. Then, they can redeem these points for food, beverages, and sides, depending on how many points they have. For example, you can get a fountain drink with 400 points and a full entrée at 1,650 points. 

In a spend-based loyalty program, the more a customer spends, the more rewards they earn. These programs reward customers based on how much they spend rather than their number of purchases. 

Spend-based loyalty programs are incredibly similar to points-based — the only real difference between them is that spend-based programs are based solely on monetary transactions, whereas points-based programs can include other types of interactions like signing up for text alerts and leaving reviews. 

In a subscription program, customers purchase a paid subscription to your loyalty program in exchange for exclusive perks. Subscribers typically buy this subscription upfront and pay a monthly or yearly fee to retain the privileges of membership. 

Amazon Prime is a well-known example of a subscription program, where members pay $14.99 a month for a wide range of benefits, such as free shipping, two-day delivery, and access to Amazon’s streaming service. 

Value-based loyalty programs are often philanthropic, allocating a portion of a customer’s purchase toward a charitable cause typically aligned with the organization’s values. This loyalty model differs from other program types because instead of providing the customer with perks, the reward is participating in a good cause.  

TOMS is a company well-known for its value-based loyalty programs. In 2006, TOMS donated a pair of shoes to a child in need with every pair sold. Now, the brand uses one-third of its profits to support children’s health, education, and well-being. 

The right loyalty software can be a game-changer for you and your partners. Loyalty management platforms act as a centralized location where brands can efficiently build, manage, and measure loyalty programs for their channel partners. These streamlined solutions make it easy to view partners’ loyalty efforts, track customer data, and gain valuable insights into your programs.  

A successful loyalty management software will possess the following capabilities and characteristics: 

• Reporting and analytics: Performance tracking is a vital part of any loyalty platform, giving you visibility into customer engagement so you can determine what’s working and what needs revisiting. 
• Personalization: Your loyalty software should be able to segment customers based on their unique needs and behaviors and use this data to create personalized customer experiences. 
• Omnichannel distribution: Loyalty management platforms should deliver consistent experiences across all touchpoints, from social media to email to your website. 
• Integration: Integration capabilities are crucial for ensuring your loyalty management platform fits within your existing tech stack to facilitate seamless data collection and sharing. 
• Scalability: Your platform should be easily scalable to your needs, meaning this software should continue to serve you even as your partner network evolves. 
• Rewards customization: You should be able to give customers the option to choose from various rewards based on their preferences to boost customer satisfaction.  

To improve customer loyalty, you need a strong loyalty management strategy that you can implement across your partner network. 

Not sure where to start? Here’s how to help your partners increase customer loyalty. 

There’s no doubt that purchase-based loyalty programs are effective. But nowadays, customers want to earn perks for other activities, too. In fact, 75% of consumers want to be rewarded for their actions — not just transactions.  

Consider designing loyalty programs that incentivize other forms of engagement, such as: 

• Leaving reviews 
• Making referrals 
• Engaging with social media posts 
• Taking surveys 
• Watching videos 
• Subscribing to newsletters 

Not only will this encourage more customers to join your loyalty program, but you’ll also see engagement increase. 

Your loyalty program should reflect your brand’s business goals. In other words, it should incentivize the customer behaviors you most want to see. 

For example, say you’re trying to shift purchase behavior toward your brand’s new product line. You could gear your loyalty program toward this goal by offering more points for purchases within that product line.  

The better aligned your customer loyalty program is to your business goals, the faster you’ll reach them.  

Chances are, your loyalty program probably won’t be fully optimized from the get-go. Consider A/B testing different program elements to see which resonate most with consumers. You can experiment with different incentives, expiration dates, and offers across customer segments before rolling them out to your full user base to determine the approach that will make the biggest splash.  

Keep testing and optimizing your loyalty program over time to ensure your program continues to drive results even as business goals and customer preferences evolve. 

Loyalty management shouldn’t be a struggle for you, your partners, or your customers. That’s why both your customer loyalty program and your loyalty management platform should be optimized for ease of use.  

Think about it: If your loyalty program is confusing or complex, customers won’t bother to use it (and may even become frustrated in the process). The same goes for your partners — if they have a hard time managing your customer loyalty programs, your brand isn’t going to get the best results. That’s why you should offer a seamless user experience to both your customers and partners to ensure maximum program success. 

You can show customers they matter while simultaneously improving your loyalty program by requesting and implementing customer feedback. There are a few ways you can get insight into customers’ thoughts on your program: 

• Leverage support tickets 
• Launch surveys 
• Read reviews 
• Monitor social media mentions 

Taking your customers’ opinions and recommendations into consideration and using them to inform your loyalty program is a great way to maintain customer satisfaction.  

Analyzing customer behaviors goes a long way. When you gather consumer data through your loyalty management software, you can use this valuable information to personalize loyalty rewards and communications. When you tailor your loyalty program to your customers’ unique preferences and behaviors, you improve the customer experience and, therefore, the success of your program. 

The key to perfecting your customer loyalty management strategy is knowing the common pitfalls to avoid. Here are the main obstacles brands face when managing loyalty programs and how to overcome them: 

• Addressing technology issues: Disconnected systems and integration issues can throw a wrench in your loyalty program management. Invest in centralized software with seamless integration capabilities to ensure a frictionless experience for your customers and partners.  
• Avoiding loyalty fatigue: If your loyalty program never changes, customers will start to lose interest. Keep things fresh and engaging by periodically updating your program with new offers and rewards.  
• Ensuring data consent: To offer personalized loyalty experiences, you need to leverage customer data. To get consumers to consent to letting you use this data, you need to demonstrate the value they’ll receive from your loyalty program in exchange. Otherwise, they may not be willing to share it. 
• Fostering true brand loyalty: You want customers to use your loyalty program — but when they only show up for the discounts, they’re not truly committed to your brand. That’s why your program should incentivize other types of engagement focused on creating a connection with your brand, resulting in true brand advocacy.  
• Measuring program effectiveness: To know whether your loyalty program is really working, you need to be able to measure its performance. Be sure to track metrics like engagement, customer lifetime value, repeat purchase rate, purchase frequency, and retention rate (a centralized loyalty management platform will make this easy). 

Customer loyalty management has evolved drastically over past centuries, and it will continue to change over time. Here’s what you can expect over the next few years.

It probably doesn’t come as a surprise that AI will make its way to the loyalty management landscape. As machine learning continues to advance, AI-driven predictive analytics will become a commonly used tool for loyalty programs.  

Predictive analytics use customer data, machine learning tactics, and sophisticated algorithms to anticipate future customer trends, behaviors, and desires. By leveraging AI in this way, brands will be able to better optimize their loyalty programs for success. 

Most loyalty programs reward users with traditional benefits like discounts and free products. However, brands will soon begin providing experiential rewards to forge deeper connections with consumers while setting themselves apart from competitors. Experiential rewards are experience-based perks like exclusive events, tours, workshops, and travel opportunities. By breaking the mold with experiential rewards, brands can offer more unique and meaningful customer experiences. 

Blockchain is a digital ledger that documents transactions across multiple computers. Because this form of technology is decentralized and not controlled by a single entity, it ensures that recorded information cannot be retroactively altered. In addition to ensuring data integrity, blockchain technology also enables users to view their transaction history. By incorporating blockchain into loyalty programs, brands will be able to offer a deeper level of security and transparency for consumers.   

Consumers are becoming more and more concerned about the environment — and this awareness is leading them to prioritize more sustainable choices.  

Loyalty programs will lean into tactics that resonate with these values to create stronger emotional connections. For example, brands may incentivize eco-friendly purchases and behaviors by offering discounts on sustainable products, providing points for shopping with reusable bags, or partnering with earth-conscious organizations to create exclusive offers.  

Ensuring effective loyalty management across your partner ecosystem is crucial for retaining customers, improving brand image, and boosting sales. 

Talk to one of our experts about how you can optimize your current loyalty approach with Ansira’s proven loyalty management platform.