How Loyalty Programs Work
You’ve probably come across a loyalty program before. For example, when you go to a store and, upon paying, the cashier asks if you’re interested in joining their membership program to earn perks on future purchases. That’s what a loyalty program is all about—rewarding your loyalty to encourage repeat business. Let’s explore how these programs work and why they’re so effective
- Points-based system: Whenever customers make a purchase, they earn a point that can be exchanged for rewards, such as discounts, free shipping or products.
- Tiered programs: The more a customer spends, the higher their tier level is and the more rewards they receive
- Referral program: It’s when your current customers get rewarded for bringing a new customer to your brand
To see which loyalty program best suits your store, you can read this blog.
With all these different types of loyalty programs let’s learn how they all work. Here are the three psychological principles:
The Psychology Behind Loyalty Programs
1. Recognizing your customers behavior by rewarding them
Remember when we were kids and getting a sticker from your teacher felt like the best thing ever? The same concept applies to loyalty programs today. Your customers get motivated to take action, such as making a purchase. Make sure the rewards not only make your customers feel good but also address their needs or solve a problem.
For example, Walgreens’ Balance Rewards program encourages healthier behavior by rewarding customers with discounts on medications, vitamins, and groceries when they take actions like walking more or get flu shots. By offering rewards that align with your customers’ needs and desires, you’re not just selling a product—you’re providing a solution.
Ako Marketing Tip: With Ako Marketing, you can effortlessly design a meaningful loyalty program using VIP tiers, point systems, and referral features to drive engagement and loyalty.
2. Creating FOMO by Exclusivity
No one likes missing out. This Fear of Missing Out (FOMO) drives people to seek inclusion in exclusive groups or deals. By creating a VIP membership program, you can leverage this desire to boost customer engagement.
First, you can launch a "Members-Only Collection" that includes limited-edition items available only to loyalty members. Nike is a good example. They rebranded their membership program to be more exclusive, offering a “Nike By You” service, where members can customize sneakers with unique colorways, patterns, and materials. This sense of exclusivity makes customers feel special and increases their loyalty to the brand.
Ako Marketing Tip: Launch limited-time offers and exclusive collections for your VIP members. Ensure that the rewards are easily accessible and provide instant gratification. Using apps like Klaviyo integrated with Ako Loyalty Retargeting CRM, you can create personalized offers that make your customers feel truly valued.
Adidas has also successfully tapped into this exclusivity with their membership program. Members get access to exclusive perks such as Adidas Member’s Week, special events, early access to product drops, and even opportunities to win tickets to sporting events. These exclusive benefits make customers feel valued and part of a special community.
They have over 200 million members, whose customer lifetime value is twice as high compared to non-members. Additionally, members are 50% more likely to make a purchase compared to non-members.
3. Building Personal Attachment
Loyalty is like a relationship since it requires effort to make it last. To truly make your customers invested, you need to go beyond transactional interactions and focus on building genuine connections. Once customers commit to something, they are more likely to stick with it to maintain a consistent self-image. Your loyalty program can start by encouraging small and easy commitments, like signing up for a newsletter.
If you’d like to learn how a loyalty program can boost your customers' spending, you can check out this blog. Here’s how you can build strong connections with your customers:
Understanding your customers
To build a real connection with your customers, you need to understand who they are and what matters to them. Here are two ways you can do:
- Use data analytics: When you use a CRM software, you can easily track your customers behavior and preferences accurately. Numbers never lie!
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Customer surveys: To show your customers that you value their voices, you can conduct surveys. Ask questions about their preferences, expectations, and experiences with your brand.
Ako Tip: Ako Marketing’s CRM software offers powerful analytics tools that can help you track customer behaviors, preferences, and trends, making it easier to tailor your loyalty program to their needs.
Sharing your brand’s story
Customers are more likely to stick with a brand that aligns with their values. Sharing your brand’s story, achievements, and values can create a lasting connection.
Here’s what you can do:
- Storytelling: You can highlight your brand’s history, achievements, and the impact you make.
- Transparent Practices: With the rising awareness of sustainability, people nowadays value transparency. Consider integrating sustainable practices into your brand!
Ako Marketing Tip: Highlight your brand’s commitment to sustainability or other values through storytelling. Use Judge.me integrated with Ako Marketing to feature reviews that praise your eco-friendly practices, helping you connect with customers who care about these issues.
Making your customers feel special
Everyone loves feeling valued. Simple gestures like remembering a customer’s birthday or engaging with them on social media can make a significant difference in how they perceive your brand.
Pro Marketing Tip: Use Ako’s Instagram DM automation to engage with your customers on social media. Automatically send personalized DMs or reply to comments, driving higher engagement and conversion rates.
Additionally, use Tagshop to track and feature user-generated content (UGC) that includes your products. Sharing these posts on your social media channels can create engaging, shoppable content that drives traffic to your store.
Conclusion
A strong loyalty program connects with customers on a deeper level. Offer rewards that matter to them and make them feel special. Create a sense of exclusivity and that shows you understand their needs and values. Engage with them personally and make them feel appreciated. This approach will build lasting loyalty and strengthen your relationship with your customers. Start making your loyalty program meaningful today!