Jan 24, 2023

How to Use Rewards to Promote Customer Loyalty

Here’s something not every business thinks about (but should): Your most loyal customers are also your most profitable. With each additional year of your relationship, your loyal customers become less costly to serve. Over time, as the loyalty life cycle plays out, those loyal customers even become your biggest business builders. They buy more, pay premium prices and bring in new customers through referrals, making customer loyalty something well worth growing and maintaining.

Rewards can build a customer’s loyalty-and they do. In practice, however, reward programs are widely misunderstood and often used incorrectly.

When rewards aren’t very rewarding

When it comes to the design and implementation of customer loyalty programs, too many businesses use rewards as short-term promotional giveaways or monthly specials.

Used in this way, rewards can, indeed, create some value by motivating new or existing customers to try a product or service. But until these programs are designed to build true loyalty, businesses will see their efforts return, at best, a small fraction of their potential value.

When rewards reach their full loyalty potential

A well-designed rewards program can accelerate the customer loyalty life cycle, encouraging first- or second-year customers to behave like your most profitable tenth-year customers. The trick is to plan and implement your rewards program as part of a larger loyalty-management strategy. You need to find ways to share value with your customers in proportion to the value their loyalty creates for your business.

Your goal has to be to develop a system through which your customers are continually educated about the very tangible rewards of their loyalty, as well as be motivated to earn those rewards. You’re giving ongoing value to ongoing customers. That’s how a loyalty system is used to build profitable customers.

Four reward program ideas that promote ongoing loyalty

The following is not meant to be an exhaustive list of ideas, but a list of thought starters. To get the whole story, talk to Blackhawk Network (BHN), an industry pioneer and leader in gift cards, rewards and incentives.

1. Offer first-time purchase gift cards to new customers
This is where too many loyalty programs start and stop. But attracting new customers is just the first step in the loyalty life cycle. It’s important, now, to keep these new customers happy. Better yet, it’s important to keep them feeling special (because they are).

2. Present special offers or gift cards in exchange for reward points
If a customer is engaged enough in your business that they’re earning reward points of any kind, that’s the beginnings of the perfect customer. This is when you surprise them with something more, like added value for those points or a gift card-just because. This only encourages them to continue, or even accelerate, their point-earning behaviors.

3. Celebrate customer birthdays with gift cards
Again, make them feel special, this time by celebrating their special day. Birthday gift cards don’t have to be big; the value is your thoughtfulness. But no matter the size of the card, remember that most people who come in to use a gift card spend more than the value of the card. So, this is a win for the customer and a win for you.

4. Give out special rewards or gift cards for referrals
You want to encourage the best kind of loyal customer behaviors, like bringing you new customers. So, make sure they know that referrals are well rewarded, as they should be. Think about your cost of new customer acquisitions. Anything you give your loyal customers for doing the work for you is a bargain.

The most rewarding idea: Talk to BHN

As an industry leader (and group of smart, team-oriented experts), BHN can help you develop your customer loyalty program from set-up to fulfillment. We have the platform to handle the most complex programs, and the people to solve any problem. Whether you’re just starting your loyalty journey, or optimizing your current program, we’re here to help.

Just click here to get started or call 866.219.7533.