Customer loyalty schemes

Posted on: 28 April 2014

Implementing strategies to find and keep good customers is vital for any business. Introducing a customer loyalty scheme could help you do just that.

We’ve all heard the concept that finding new customers is much more expensive than keeping existing ones. Setting up a good customer loyalty scheme could help turn new customers into repeat customers by rewarding them for spending more or coming back and buying your products or services again and again.

Will a customer loyalty scheme work for you?

Multi-million pound businesses like Tesco and Boots have the money, people and technology to invest heavily in loyalty schemes. However, don’t be put off by what the bigger businesses are doing, it doesn’t necessarily need to be expensive to implement a loyalty scheme. Take a look at our infographic and then ask yourself the following questions:

  • Will a loyalty scheme make my customers more loyal to my business?
  • Will having more information about my customers give me ways and means to better meet their needs?
  • Do my competitors offer loyalty schemes and will having one improve my competitive position?
  • Do I know what a successful loyalty scheme looks like for my business and can I feasibly achieve this?
  • Do I have the time, money or resources to set up and administer a scheme?

If you have answered ‘no’ to any of the questions above, it may be worth holding off on introducing a loyalty scheme just now. You can always look at other customer retention strategies to help keep your customers engaged with your business.

If, however, you have decided that having a loyalty scheme will make your business more profitable, it’s time to find out what your customers want.

Do your research

The key to creating a loyalty scheme that works is to know why customers use them and what gets customers to keep using them. Therefore, who better to ask than your customers!

It’s worth asking them what they would want from a scheme and features they could choose from, for example:

  • Format of the loyalty scheme – such as paper stamp card, plastic card or mobile phone app
  • Type of rewards – such as invitations to events, vouchers, discounts, prizes or extra goods
  • Communication preferences – emails, text messages or letters

Choose the right type of scheme for your business

The scheme needs to be attractive to your customers and achievable for your business. Getting this balance wrong could turn your customers off or end up with you making less profit than you were before. Or both.

The most simple and low cost schemes to implement are those involving stamps on a paper card for every visit, or paper based vouchers. In return for their details, customers receive anything from a free visit after ten paid ones to money-off their next purchase.

Managing your loyalty scheme digitally doesn’t have to involve complex software or expensive app development. You can use Facebook and Twitter to reward your followers with early access to new products, discount codes, cheaper shipping and voucher offers for referrals.

A fundamental part of running a successful loyalty scheme is knowing how much to offer, discount or give away. You need to work out how much you can afford to spend in return for your customers’ repeat business.

Measuring its success

Knowing whether or not you have achieved your intended outcomes defines whether you continue, adjust or walk away.

There are lots of ways to measure the success of your scheme. Here are a few ideas to get you started:

  • Compare the amount and frequency of spend by scheme members
  • Ask your members for feedback on how it is administered and what they would change
  • Review your stock records and see the impact on the sales
  • Evaluate whether your profit levels and cash flow have been affected by the scheme

Ultimately the success or failure of your customer loyalty scheme comes down to whether or not it made you money. So even if you feel like your customers are more engaged, more loyal and your reputation has improved in their eyes, unless your bank balance is also feeling the benefits, it might be time to focus on something else.

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Business Guidance

Customer loyalty schemes

28 April 2014

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