Does your loyalty program give customers the engaging relationship they crave?

A truly loyal customer knows she could score her favorite mascara online at a discount, but chooses your store instead, where she can learn the newest makeup tips from your in-store stylists and that her points accrual could mean a free tube of lash lengthener at the end of the year or advance access to a blowout sale. Similarly, a successful retail loyalty program takes a bit more effort than simply offering a rewards card to your shoppers and hoping for the best. To cultivate true profit-driving loyalty, retailers must take a thoughtful approach to their loyalty programs and identify what — exactly — they aim to achieve, and how they aim to achieve it.

Why a Loyalty Program Matters

To thrive in a crowded retail landscape, every retailer must strive to develop a strong base of dedicated customers. These loyal shoppers who represent enthusiastic repeat business are the customers who deserve the most of your time, attention, and rewards. Today’s shoppers have seemingly limitless choices, so if they make the effort to keep their dollars with you, make sure you recognize and reward their loyalty. After all, according to some estimates, 20 percent of a retailer’s best customers generate 80 percent of its revenues.

Components of a Great Loyalty Program

Rewards that resonate – An attractive retail loyalty program acknowledges, first and foremost, that your best customers’ business is important to you and that you appreciate their decision to shop at your stores. But going one step further, your retail loyalty program must offer the kinds of rewards that resonate with your customers. Without the right rewards, customers may not be sufficiently motivated to spend their dollars to meet rewards-level goals.

Use all the data – POS, CRM, etc. — Use all of the data at your disposal to understand customer purchase behavior and identify the kinds of rewards that will activate shoppers. Do they want a $10 voucher for every $100 they spend? Or is a 20 percent off shopping pass more attractive when they reach a certain spending threshold?

Meaningful Engagement – A successful retail loyalty program also builds meaningful relationships with customers by being great at the basics: top-notch customer service and solving problems before they balloon into a crisis. Empower your employees to resolve issues with your best, most loyal customers in order to demonstrate how much you value their business.

Options for Structuring Your Retail Loyalty Program

You have some options to consider when designing your retail loyalty program. Many retailers opt for a basic points program: shoppers earn points for every dollar (or few dollars) they spend and can cash in those points for a discount or physical goods when they accumulate enough. Most customers are accustomed to these kinds of program, as they’re commonly used by casual restaurants, coffee shops, and other retail businesses.

Another popular option is a tiered program that offers a small reward for initial purchases and loyalty, which can solve the challenge of “delayed gratification” when working towards big rewards that require a longer-term retail relationship. What’s more, a tiered program can give a customer a greater sense of importance and status as they “graduate” from a lower tier to a higher one. Tiered retail loyalty programs play into the gamification phenomenon that’s becoming popular with consumers today.

Creating a winning retail loyalty program benefits your best customers as well as your business. Use the data you gather through your loyalty program to better understand your customers, how they shop, and the products and services they buy most frequently. With these strategic insights, you can improve your operations and product lines, investing in the kinds of items shoppers prefer while scaling back investments in less popular areas.

Make loyalty a smart part of your retail business and give your customers the engaging relationship they crave.