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Loyalty & Retention

6 Steps to a Successful Customer Loyalty Program

Ashley Sefferman  //  April 29, 2021  //  7 min read

Looking to launch a customer loyalty program this year? Read on for an overview of what a loyalty program does, which of the four types you should try, and six steps to help set you up for success.

What is a customer loyalty program?

A customer loyalty program is an incentives-based relationship builder. Companies offer loyalty programs to consumers to encourage engagement, and eventually, to drive lasting loyalty to the brand. When consumers engage in loyalty programs, they get access to rewards, free or discounted products, early releases, coupons, and more.

Loyalty programs can be configured in many different ways, but the one thing they have in common is providing some type of value or incentive to customers in exchange for their engagement. Customers who participate in loyalty programs should always feel rewarded for their time.

Customer Loyalty Program

What are the benefits of a customer loyalty program?

It’s common knowledge that loyalty programs work wonders to keep customers coming back time and time again.

So, why is this? Loyalty programs work because they:

  • Retain and engage customers: Gamification through points and achievements keeps people coming back to the app time and time again. Ultimately, when people are more engaged beyond the point of purchase, they’re more likely to stick around.
  • Save money and resources: It costs far more for companies to acquire new customers than it does to sell to an existing one. Brands save money by increasing retention and activating their current customers for repeat purchases.
  • Increase the number of referrals: Killing two birds with one stone, companies can reward customers for referring friends. This keeps the current customer happy and engaged while the brands gain a new customer at a much lower cost.

If you’re ready to get started building your loyalty program, keep reading!

Types of loyalty programs

There are four main types of loyalty programs:

1. Points-based loyalty programs: Points-based methodologies are by far the most common set ups for loyalty programs. The more customers engage, the more points they earn, and the points translate into some type of reward. It’s straightforward without a major learning curve for most consumers. However, the way some brands promote points-earning activities can be incredibly disruptive—which completely defeats the purpose of the program: driving loyalty. Make sure you keep your points-based programs simple and part of your customers’ natural journey.

2. Paid loyalty programs: It might make sense to require a fee in order to participate in your loyalty program (think Amazon Prime). Customers pay the fee in order to access the perks and benefits of being a program member. However, before you explore a paid loyalty program, understand the additional barriers adding a paid element to driving loyalty might bring. Paid programs are not right for every business.

3. Partnership loyalty programs: Partnership loyalty programs are born from company-to-company relationships and rely on customers who express interest in both. They are an effective way of growing loyal customers by tapping into their related interests. For example, if you are a hair salon, you may partner with a nearby nail salon to offer co-branded deals that are mutually beneficial for the businesses and the consumer.

4. Games-centered loyalty programs: Enter gamification! Games-centered loyalty programs apply gaming principles to non-game scenarios to encourage customer engagement. Gaming elements applied within your business’s digital experience can help make purchases engaging and exciting. Make sure you offer games with achievable goals that don’t detract from a consumer’s intended goal, and ensure that the rules and restrictions of your games are public and agreed upon within your legal department.

Mobile loyalty experiences are more successful

No matter the customer loyalty program type you choose, the mobile channel is likely the most important channel to consider. Mobile apps have completely changed the way reward programs work. They’re easier to use, completely customizable, convenient, and overall provide a more robust customer experience. On top of that, mobile phones are constantly attached to your customers, easily accessible at any moment. Brands are just a tap away at all times.

Using a mobile rewards account is so much faster than traditional plastic rewards cards or manually providing an email address at every point of purchase. Most retail apps also offer mobile order and pay, so integrating that experience with loyalty programs is a no-brainer. In combining your loyalty experience with the mobile payment system, you’re removing friction from the buying process and therefore encouraging repeat business.

Customers can also instantly see their loyalty status or points at any time with mobile reward programs. They can watch these metrics change in real-time, providing instant gratification with each purchase. The gamification of earning points and achieving milestones gets customers to come back to check their status again and again. Adding a bit of competition to your mobile experience will engage customers and drive retention.

Mobile channel drives loyalty

Finally, adding a loyalty program into your mobile app will help you acquire valuable data about your customers’ experience. Engaging with rewards members via mobile will help inform your product roadmap. Better understanding how they use your app and consistently gathering feedback will help you continuously iterate and improve your CX. In asking for feedback from loyalty members at the right time and place, you’re showing them that you care about their opinion and give them a platform for their voice to be heard. Since reward members tend to spend more, it’s critical to foster the relationships with this select group of customers. Customer feedback is key to doing this effectively.

6 steps to customer loyalty program success

1. CREATE A BUSINESS CASE

Here are the questions you should ask yourself before building a loyalty program:

  • What are my long-term objectives?
  • How does this tie into any existing loyalty programs our business offers?
  • What channels do I want to offer this program through (mobile, kiosk, web, etc.)
  • How do we plan to go to market? How will we convert regular customers into loyalty members?
  • How do we measure success?
  • How do we plan to gather feedback from our loyalty members?

2. DESIGN AND DEVELOP

Once you’re done concepting and building out a business case for your mobile loyalty program, it’s time to turn words into action and start building a loyalty program. You’ll want to be cognizant of whether or not this will be an in-app loyalty program only or if it will exist across various channels since that will heavily influence decision making.

3. INVITE EXISTING CUSTOMERS TO JOIN A BETA PROGRAM

When it’s time to launch your loyalty program, try to test on people who will be more inclined to provide useful feedback. This is your first opportunity to get direct feedback from real customers before your mobile loyalty program is released to the general public—don’t waste it. Use a real-time feedback tool such as Apptentive to quickly identify bugs, receive validation on core features, and inform your product roadmap. Once you make changes requested by these beta customers, make sure you close the loop to let them know you’ve heard them and made changes to your loyalty program based on their feedback. This will help create fans and increase retention as well.

4. LAUNCH YOUR LOYALTY PROGRAM

The steps to launch a loyalty program are very similar to the steps to launch an app. We’ve written extensively about how to successfully accomplish this, but the biggest takeaway is this: Benchmark before launch and proactively gather mobile customer feedback during and after launch. This is absolutely essential.

The first step is to ask yourself, what is “normal” for an app in your category? We highly recommend reading through our 2021 Mobile App Benchmark Report to see data from 5,000+ active users across 1,000 mobile apps. This will help you understand how your app currently stacks up against the competition, and quickly identify areas for improvement.

5. PROMOTE

A big struggle of launching a mobile loyalty program for the first time is getting loyalty customers in the first place. It’s also important to think about marketing your loyalty program at all stages of the customer journey.

  • How will you convert existing customers into loyalty members? What incentives will you offer them?
  • How will you acquire new customers and app downloads solely based on the draw of your loyalty program?
  • How do you plan on onboarding loyalty members and educating them on all of the features you just built out?
  • What will keep people coming back time and time again? What’s the retention strategy for your loyalty program?

A big part of promoting your loyalty program comes back to app store optimization. The app stores are obviously one of the first places customers will encounter your app, so you want to communicate the value of your loyalty program right away. It’s imperative to make sure your app ranks highly in these search results. A comprehensive app store optimization strategy will include the following:

  • Target keywords. Very similar to SEO, ASO relies heavily on keywords and phrasing to understand how to rank apps in search results.
  • Screenshots. They say a picture says a thousand words. This is true in the app stores as well. Make sure your screenshots clearly illustrate the unique benefits of your app. This is also a great opportunity to visually communicate the value of your loyalty program and/or how it translates to in-person visits.
  • Descriptions. Brevity wins the day here. Quickly and concisely explain your unique value proposition in your summary.

6. ITERATE

Getting your app loyalty program up and running is only half the battle. What comes next is equally as important. How do you determine what is and isn’t working? How do you know what your customers need and want?

Essentially, proactively seeking feedback from customers post-launch is incredibly important. For one, your customers need to know that you value their voice and feedback. You need to put in-app mobile feedback tools in place so you can identify issues in real-time and quickly communicate when changes have been made.

Connect with people who are having a great experience within your app, and encourage them to share it in the app stores. Ask those who don’t love your app to leave feedback or fill out a short survey or connect with your team directly.

Wrapping it up

It’s clear customer loyalty programs can significantly improve customer engagement. And the mobile channel holds the key to the future of loyalty.

Perhaps the most important reason brands should incorporate their loyalty program into their mobile app is the ability to collect valuable customer analytics. By encouraging a larger chunk of customers to engage with your mobile app, you’ll be able to track and understand their experience better. Once they’re active within your app, you can begin gathering feedback that will help inform your mobile marketing strategy and product roadmap.

All in all, incorporating a customer loyalty program into your mobile strategy is absolutely imperative for increasing app retention, engaging customers, and driving mobile sales.

Ready to take the next step in improving your mobile customer experience? You can start gathering insightful feedback today with a demo of Apptentive.

About Ashley Sefferman

Ashley Sefferman is Head of Content at Apptentive. A digital communication and content strategy enthusiast, she writes about multichannel engagement strategies, customer communication, and making the digital world a better place for people. Follow Ashley on Twitter at @ashseff.
View all posts by Ashley Sefferman >

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