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How to develop a customer loyalty program

Customer satisfaction and retention are critical aspects of ensuring your customers return to you for repeat business.

In fact, research indicates that about 20% of your customers are responsible for about 80% of your total sales.

Therefore, isn’t it wise to keep your customers loyal to you so that your business thrives and flourishes?

In this blog post, we’ll explore some of the ways you can create your own loyalty program for repeat business, increased sales, more customers and a whole host of other benefits.

3 Steps to creating a loyalty program

You can create your own customer loyalty program by following a few simple steps. 

We outline these for you below:

1. Find out more about your existing clientele

Studying the habits of your current customers is a great way of starting your customer loyalty program, as this will give you insights into their purchasing preferences.

Some aspects and questions to consider when doing so include:

  • The amount the customer purchases from you in a year
  • The types of products purchased and the frequency of these purchases
  • The length of time your customer has been such 
  • Whether you can cross-sell other products to them
  • Which other suppliers, if any, do they use, and if so, who are they?
  • What is your profit on their purchases
  • Are they regular payers?
  • What levels of satisfaction do they have with your business?
  • How can your relationship with them be improved?

2. Set measurable goals as well as a budget

Once you’ve identified your customer types and know who you’d like to target, the next step is to set measurable goals.

This could mean that if, on average, your customer purchases five times from you in a year, you may want to make this seven times.

Alternatively, you could choose the price route and set a ceiling for how much you’d like your customer to spend at your business. 

Whatever goals you set, you’ll also need a budget.

Whether for freebies or other customer-retention expenses (which will be discussed in more detail below), having a clear budget for this purpose is crucial.

3. Choose the right loyalty program for your business

Next up, you will need to choose which type of loyalty program you will use to retain customers. 

There is a wide variety of options and we discuss each one in brief below, so you can take your pick. 

Partner rewards: Well-suited for service-based businesses, partner rewards are a great way of boosting customer loyalty. You can take advantage of your partnerships by offering your customers special deals if they purchase from your partner or vice versa.

Membership fee system: If you choose to charge your customers a membership fee for your loyalty program, make sure that the benefits for your customers are worthwhile. By charging a membership fee, this makes for a great way of offsetting your costs.

Tiered rewards: Often free for customers to join, tiered rewards programs are a great way of cross-selling or up-selling a more expensive item. These types of rewards work in the same way as tiers in an online game. The more your customer purchases or participates, the more rewards they are going to receive. Ultimately, it’s a win-win situation for both parties. 

Buy 5 get 1 free: Ideal for coffee shops, bistros, bars and restaurants, this type of reward program offers a customer a free item from your shop after purchasing a certain amount of items beforehand. This leads to almost instant gratification and is a great way of keeping customers returning to your business. 

Point system: Common for supermarkets, with the point system, your customer earns a certain number of points based on the value or amount of their purchase. With these points, the customer can then redeem them for cash or use them to make another purchase at your store for free. 

Earn & burn: This is a reward redemption method of retaining customers. Through this system, your customers purchase items/services from your business and get a reward for free. Ranging from an ice-cream to a free service, you can choose the rewards you offer your customers. As long as they fall within your budget, which was discussed above.  

Perks: Perks like free services or discounted prices can be another great way of getting customers to return. By incentivising perks, you’ll not only meet your margins, but you’ll also have a solid clientele that keeps on coming back for more.

Gamified programs: We all love to play at heart and games are a great way of incentivising customers to come back. By playing games, striving to meet challenges, earning badges or other forms of gamification, your customers will feel engaged and this will boost their loyalty. 

Contests: People, by their very nature, love to win. And that’s why holding contests for your loyal customers could see them coming back for more. Set a suitable prize, clear terms for the competition and begin!

Email promotions: Email marketing is a great way of reaching your customers. Through emails, you can offer customers discounted products or services, keep them updated on developments at your company, increase brand loyalty by keeping them engaged and informed and so much more!

Referrals: Word-of-mouth advertising is one of the best methods to gain a new clientele. Nothing is more powerful than a positive (or negative) review as people seek other people’s opinion before proceeding to buy your product or service. Offering incentives to both parties, the referrer and the referee, will see you not only gain a new customer, but keep your existing ones.

Hybrid loyalty programs: These program types are a combination of two or more of the loyalty programs discussed above. By choosing the best of two worlds and offering this to your customer, they’ll be engaged and will keep on coming back for more.

The benefits of a customer loyalty program

In the sections above, we spoke about some of the ways you can engage your existing customers to keep them coming back for more.

By now, you might be convinced that a customer loyalty program is what your business needs.

But if you’re not, here are some reasons you might consider for opting for this type of program.

1. Increase in revenue

There’s a direct correlation between retained customers and sales. 

If your customer trusts your brand, they’re likely to return, making more transactions, and ultimately more sales. 

The best part is that, depending on the loyalty program you choose to use, you’ll be enjoying the financial benefits from both existing and new customers.

2. Better customer experience

Most modern consumers these days are seeking a personalised experience that talks to their values.

If you cater to their needs by offering them great products and great crewards, this will improve their experience and they are likely to continue shopping from you.

3. Attract new customers

As mentioned above, there are some loyalty reward programs which focus on attracting new customers while helping existing customers gain benefits from using your product or service.

The referral program is a great example of this. 

With the popularity of word-of-mouth marketing, you’ll have new customers and an increased, improved revenue stream.

4. Retain existing customers

You’ll also be able to retain existing customers, as they’ll see value in your business offering.

This means that your “regular” clientele will increase and you’ll have an even more stable stream of income.

5. User generated content and positive reviews

Ultimately, your satisfied customers can create user generated content and leave positive reviews for your business.

There’s nothing better than this, as this is one of the best (and free) ways of advertising.

A great example: The myPOS Referral Program


myPOS isn’t far behind when it comes to loyalty programs for our merchants. 

We offer each newly onboarded merchant and the referring merchant a financial incentive for signing up and buying a card machine.

With a whopping 15% of all new merchants coming from our referral program, it’s safe to say that this is not only a great marketing strategy, but makes good business sense, as well!


Whether you’re just starting out on your business journey, or you’ve already established a presence in your market, it’s definitely a good idea to engage with your customers and invite them to come back for more by offering them special deals. 

These deals can come in a variety of shapes and forms, it’s completely up to you to see which model suits your business type the best.

In this blog post, we’ve outlined the 3 most important steps to starting your own customer loyalty program, the types of programs available and, ultimately, the top reasons why you should consider starting one.

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