Nothing is more valuable for retailers today than building a loyal customer base. The last two years have seen an influx of loyalty programs as retailers attempt to capture both repeat customers and their data. But what makes an enticing loyalty program that customers will want to join? And how can retailers find the right value exchange for their customers? These are questions that must be answered to ensure the program serves its purpose – to increase customer retention. Here are four questions to ask yourself as you build your retail loyalty program.

How should my loyalty program work?

It’s essential to first plan out exactly what you want to achieve through your loyalty program. Do you want to increase your average order value? Do you want to increase the number of visits to your store? Or perhaps it’s a new product or range you want to launch with a bang? Whatever your objective, structure your loyalty program in a way that helps you achieve your goal. Options include:

  • Spend-based: Reward customers based on the amount of money they spend per transaction. For example, for every $10 spent they earn 10 reward points. Once a certain number of points are accrued, they can be redeemed in store.
  • Visit-based: Reward customers on a per-visit basis. For example, every time they visit your store and spend over $10, they receive points or a stamp on their loyalty card.
  • Item-based: Reward customers for buying certain items. For example, when they’ve purchased three items, they get the fourth for free.

Don’t overcomplicate things; a successful loyalty program should be straightforward, incentivising and with an achievable timeframe for your customers. Before finalising your offer, there are two important considerations: Is the reward enticing enough that it will incentivise loyalty? And how much will this affect your bottom line? After all, while you want to reward their patronage, you don’t want to hurt your business financially.

How should I manage my loyalty program?

When you’ve determined your structure and reward, the next step is managing your program. From traditional loyalty cards that get stamped with every purchase to bespoke loyalty apps and software, there are a range of options to consider. Physical loyalty cards have been a staple feature in retail stores for years. While they’re really simple and affordable, they can be difficult to track and monitor, easy for your customers to lose or forge, and they require physical interaction – which many people are, understandably, keen to avoid today.

Loyalty software lets retailers integrate a contactless, digital loyalty program that can integrate directly with their point of sale. This is a great way to manage your loyalty program as it has several advantages over traditional loyalty cards. It provides, for example, detailed and real-time reporting, can be built seamlessly into your digital marketing, is contactless and allows you to segment customers based on their habits and preferences.

How should I launch and promote my loyalty program?

When launching your loyalty program, the key to your success lies with your customers. Therefore, it’s important to clearly communicate the benefits of the program to encourage them to engage. Keep your marketing as simple as possible. If signing-up appears too complicated or the offer too far in the future, your loyalty program won’t gain traction. And don’t over-promise, but do give them reason to be excited. Promote your program on a variety of different channels, like social media, your website, via email or SMS marketing, and of course via your bricks-and-mortar store.

How do I measure its performance?

Getting your loyalty program off the ground is one thing, measuring its success is another entirely. Once live, don’t neglect it or assume everything is running smoothly. It works best when you track performance, measure success and refine accordingly. A digital program allows you to easily track customer data, so you can understand if your program is achieving your original goals.

Certain metrics to measure include how often people on your loyalty program make purchases compared with those who aren’t, how much they spend compared to those who aren’t, how often they visit your store compared to those who aren’t, and how their own spending and engagement changes when they sign up.

Based on your findings – and don’t forget to ask for feedback – you can refine your strategy to ensure your customers are happy, your goals are being met and your loyalty program is working just as hard for your retail business as you are.

Gordana Redzovski is vice president retail for Asia Pacific at Lightspeed.