How to Launch a Loyalty Program: Step-by-Step Guide

Launching a loyalty program can boost customer retention, increase revenue, and encourage repeat purchases. Here's a quick breakdown of how to get started:

1. Set Clear Goals: Define measurable objectives like retention rates or revenue growth.
2. Choose a Program Type: Options include points-based, tiered, cashback, subscription, or value-based programs.
3. Design Rewards: Offer a mix of financial perks (cashback, discounts) and exclusive benefits (VIP access, events).
4. Select Technology: Use software with features like data tracking, integration with existing systems, and analytics.
5. Promote and Track: Launch with marketing campaigns, train your team, and monitor metrics like sign-ups and engagement.

Quick Overview of Program Types

This guide walks you through each step, from planning to launching and optimizing, so you can create a program that works for your business and customers.

Crash Course: How to Build a Loyalty Program

Step 1: Set Program Goals

Establish clear and measurable objectives to build a strong foundation for your loyalty program. With 77% of loyalty programs failing within their first two years, setting the right goals is essential for long-term success.

Define Business Targets

Your loyalty program goals should align with specific business objectives. Here are some examples:

Additionally, 56% of customers are willing to spend more on brands they trust.

Choose Success Metrics

Tracking the right metrics will help you measure your program’s performance. Focus on these key performance indicators (KPIs):

"When it comes to digital marketing, data is king, and analytics serve as the compass guiding businesses toward success".

Match Customer Expectations

Customers value loyalty programs, with 71% of Gen X, 70% of Millennials, 63% of Baby Boomers, and 62% of Gen Z considering them when choosing a brand. U.S. consumers primarily join loyalty programs because they are "easy to use" and "easy to understand".

To stand out in a crowded market - where the average U.S. consumer belongs to over 15 loyalty programs - offer clear, appealing benefits that meet customer needs. A straightforward and rewarding program will help you attract and retain loyal customers.

Step 2: Pick Your Program Type

Program Types Overview

Loyalty programs come in many forms to suit different business models and customer preferences. Interestingly, nearly 60% of consumers adjust their spending habits to earn loyalty rewards.

Program Type Analysis

Each program type comes with its own set of strengths and challenges:

• Points-based programs keep customers engaged by letting them earn points for transactions. However, careful planning is needed to maintain profitability.
• Tiered programs are highly appealing - 62% of consumers say status tiers make them feel valued. The Canadian AIR MILES Reward Program is a great example, offering multi-level benefits across 300+ brands.
• Cashback programs deliver direct financial rewards, but they require a thoughtful approach to ensure they remain profitable.

"Coupons and other monetary benefits are good but they'll have short-term effects and are more applicable to maintaining loyalty, not driving it." - Moaaz Nagori, Cloudlead

Making the Final Choice

When deciding on a program type, consider the following:

• Business Model Fit: For example, TOMS uses a value-based 'One for One' approach, where every purchase funds a donation, perfectly aligning with its mission.
• Customer Behavior: Subscription-based programs have grown significantly, with participation tripling since 2015. Amazon Prime is a standout example, offering free shipping and exclusive content to subscribers.
• Operational Capacity: Some programs, like tiered models, require advanced tracking systems. Make sure your business can handle the complexity.

With 53% of consumers now paying for subscription-based programs, it's essential to choose a format that matches your customers' expectations, operational abilities, and growth goals.

Once you've selected your program type, you can start designing rewards that truly engage your audience.

Step 3: Build Your Rewards

Research Customer Wants

Studies reveal that 75% of consumers are more likely to buy from brands offering loyalty programs. To design rewards that resonate, take a closer look at your audience:

Mix Reward Types

Nearly 75% of customer engagement is driven by emotional perks, especially among younger audiences. A blend of rewards can keep your program appealing and effective.

Financial Perks:

• Points redeemable for purchases
• Cashback on eligible transactions
• Birthday rewards and milestone bonuses
• Seasonal discounts

Exclusive Benefits:

• Early access to new products
• Invitations to special events
• VIP customer service
• Free shipping or product upgrades

A great example is IKEA Family. In 2022, their loyalty program contributed to 58% of their total sales by offering a mix of savings and exclusive access.

Set Realistic Goals

Your reward tiers need to strike a balance - they should excite customers and remain cost-effective. For B2C loyalty programs, the average annual cost per member ranges from $20 to $60.

"Simplicity and ease are more important than personalization for loyalty users." - Jeffrey Casullo, Senior Manager at Monitor Deloitte

Adidas adiClub is a standout example. Members shop 50% more often than non-members and have double the lifetime value. Their success comes from:

• Clear and achievable tier progression
• Easy-to-earn initial rewards
• Premium perks at higher tiers
• Frequent engagement opportunities

When done right, loyalty programs can accelerate revenue growth by 2.5×. For instance, Lululemon’s program attracted 9 million members within 5 months, with over 30% actively using their benefits. This shows how thoughtful planning can create a program that benefits both customers and the business.

Step 4: Set Up Program Technology

Once your program structure is in place, the next step is selecting the right technology platform to bring it to life.

Review Software Options

Choose loyalty software that can grow with your business and covers your current needs. Focus on these features:

A solid loyalty platform helps you design, manage, and track your program, aligning it with your business goals.

Connect Business Systems

To make your loyalty program work seamlessly, integrate it with these essential systems:

• Point of Sale (POS) systems
• Customer Relationship Management (CRM) tools
• E-commerce platforms
• Marketing automation tools
• Mobile app infrastructure

Ensure all systems sync in real-time and maintain data accuracy during the integration process.

Set Up Data Tracking

Accurate data tracking is crucial for measuring your program's success. In fact, precise tracking can increase revenue per customer by 20%.

Here are the key metrics to monitor:

Make sure to track both numbers (like sales data) and softer indicators, such as customer loyalty and satisfaction, to get a full picture of your program's performance.

Step 5: Start Your Program

Now that your program design and technology are ready, it's time to put your launch plan into motion.

Create Launch Marketing

Promote your loyalty program to encourage sign-ups and participation. Use a multi-channel approach to connect with customers where they’re most active.

Focus on clear, benefit-driven messaging. For example, Trip.com highlights its rewards program on its homepage and provides a detailed page explaining the rules and perks.

Prepare Staff

Your staff plays a key role in the program’s success. Ensure they’re prepared with thorough training that covers:

• Program basics: Benefits, rules, and how members redeem rewards
• Customer interactions: Scripts to confidently explain the program's value
• Technical skills: Hands-on practice with the program software
• Ongoing support: Regular updates and refresher training sessions

Consider offering incentives to staff for encouraging sign-ups. This can motivate them to actively promote the program.

Track Launch Results

Monitoring key metrics will help you make informed adjustments as needed:

Make the rewards redemption process straightforward and keep communication consistent, especially about updates and exclusive offers. These insights will help you fine-tune and improve your program over time.

Next Steps

Success Steps Summary

Did you know that 77% of loyalty programs fail within their first two years? To avoid this pitfall, focus on these key phases and actions:

These steps serve as a roadmap to continuously refine and enhance your loyalty program.

Program Updates

To keep your loyalty program effective, regular evaluation is a must. Pay close attention to these metrics:

• Customer retention rate
• Average order value (AOV)
• Purchase frequency
• Program enrollment rate
• Reward redemption rates

For example, Starbucks customizes over 20 million offers weekly, achieving a return three times higher than non-personalized offers. Regularly analyzing these numbers helps you stay in sync with changing customer preferences and ensures your program remains competitive.

Start Planning Now

With 79% of customers favoring businesses that offer strong loyalty programs, now is the time to act. Here's how you can get started:

• Analyze your customer base and define measurable goals.
• Invest in technology for accurate tracking and reporting.
• Scale your program strategically by using performance data.

Take inspiration from Qantas Loyalty, which generated $2.2 billion in 2023 by partnering with over 700 companies. Collaborating with loyalty program experts can also help you pinpoint challenges and apply industry best practices.

Related Blog Posts

• Points vs. Tiers: Choosing the Right Loyalty Structure
• 7 Customer Loyalty Metrics That Drive Retail Growth