Loyalty programs are everywhere.

But while a recent study (PDF) conducted by Bond Brand Loyalty and Visa found that these programs appeal to the majority of consumers, actually building loyalty requires more than just the launch of any old program.

Here are six tips for brands looking to build successful loyalty programs.

Don't overplay the discount card

Discounts are a common part of loyalty programs and probably always will be. But just as discounting outside of loyalty programs isn't always effective, discounting inside loyalty programs isn't always effective either.

For example, when a loyalty program provides a discount to a customer already likely to make a purchase, the program really isn't engendering loyalty and moving the needle.

Find ways to make members feel special

Consumers are increasingly demanding experiential rewards from loyalty programs.

As Director of Search Marketing at 17 Agency and Econsultancy contributor Andrew Broadbent explained, "Simple discounts do not give people an experience that touches their five senses."

But emotional, memorable connections can be developed through experiences, such as access to exclusive offers and events.

What's more: these experiential rewards are far more likely to be promoted by customers on social media.

Understand the customer and personalise accordingly

Personalisation is key to gaining customer loyalty, and savvy brands like L’Oreal take advantage of this.

While personalisation should be employed broadly, brands often have the greatest opportunities to use it in loyalty programs because the data collected through the programs gives brands the ability to understand customer behavior in great detail.

With that data, brands can implement effective, personalised discount strategies, as well as experiential rewards that really resonate with specific customer groups. 

Avoid unnecessary complexity, but recognize your VIPs

Loyalty programs should offer a clear and compelling value proposition to customers, and that usually means that less complex is better than more complex. But customers aren't created equal and it's important to make sure that the most valuable customers feel valued. 

Numerous programs have tiers, and as customers establish their loyalty, they can move into tiers that provide greater rewards.

For instance, beauty brand Sephora has a three-tiered program and members in the highest tier have access to free two-day shipping, custom makeovers and invitations to private events.

Be thoughtful and careful about changes

As with any initiative, loyalty programs should be monitored closely and adjustments made when appropriate. Sometimes major changes are required, but it behooves brands to be thoughtful and careful about such changes. 

Case in point: when Starbucks updated its rewards program earlier this year, tying rewards to dollars spent instead of visits, it upset many of its customers, creating a backlash that the company had to weather.

Put a time limit on it

In some cases, brands with specific goals can consider implementing short-term loyalty initiatives like the one Chipotle recently announced

Its Chiptopia scheme, which is running for three months only, was launched to help the restaurant chain recover foot traffic after E. coli outbreaks dented its business.

Chiptopia offers members free entrées after a certain number of visits, and customers who visit Chipotle 11 times in three consecutive months even receive free catering for a party of 20. Such generous rewards are probably not warranted, or sustainable, over the long term, but if the brand has its way, Chiptopia will help it get customers back into its stores.

Patricio Robles

Published 1 August, 2016 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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