3 Top Strategies for Building a Customer Loyalty Program

Much like you would foster relationships with your business’s employees through employee recognition strategies, you must also strengthen bonds with your customers to gain their loyalty and future patronage. Since acquiring a new customer can cost five to seven times more than retaining an old one, it’s worthwhile for you to seriously consider improving customer retention.

Building a customer loyalty program is one of the best strategies for businesses looking to bolster customer relationships. To help you, we’ll cover the top strategies for structuring an impactful program in this guide. With a thoughtful and well-established program that focuses on keeping customers engaged, you’ll be able to further grow your business.


Why create a customer loyalty program?

We’ve already mentioned the biggest benefit of creating a successful customer loyalty program: customer retention. However, it comes with other benefits as well, such as:

  • Word-of-mouth marketing. Customer loyalty programs work by incentivizing clients to continue to patronize your business. When customers regularly purchase items or services from you, they’ll form a more positive view of your organization. In turn, they’ll be more likely to speak favorably about your business to their friends and family, helping market your business with minimal effort.
  • Higher profits. As you grow your customer base, your consumers will be inclined to make multiple purchases from your business over time. This leads to higher sales and greater profits. Plus, you’ll have reduced marketing costs, as you won’t need to focus so much on acquiring new customers.
  • Customer engagement. Aside from retaining your customers, you’ll also be in a better position to keep them engaged. With loyalty programs, customers will opt-in to receive regular communications from your business, keeping your products and services top of mind.

All of these benefits work together to support your business’s long-term growth, allowing you to develop and improve your products and services. With a well-executed customer loyalty program, you’ll be able to secure a sustainable financial future for your company.

Now that you know why you should create a customer loyalty program, let’s go over three top strategies for doing so.


1. Determine how your program will work

One of the most important parts of establishing your loyalty program is determining what type of program it will be. Most businesses choose just one program to implement, but if you run a larger organization, you might consider two or three.

Common customer loyalty program types include:

  • Email opt-in. In exchange for subscribing to your email newsletter or receiving text notifications from your business, a customer receives a small reward that they can redeem on their first purchase. The main goal of this program is to ensure that a potential loyal customer receives communications from your business.
  • Free trial. For businesses that offer services rather than products, a free trial allows customers to try your services and decide if they enjoy them. This is a great way to earn your customers’ trust and ease them into making a purchase.
  • Punch card. This works best for smaller businesses with minimal online presence. For example, a local cookie store might use this system. You would receive one punch per cookie you buy, and after a set amount, your next cookie would be free.
  • Loyalty discount. For this system, after a customer makes their first purchase with your business, you offer them a discount on all future purchases. This program type works best for businesses that are just starting out and need to build a reliable customer base.
  • Points system. With a points system, you allow customers to accumulate points based on the number of items or services they purchase or the monetary value of those purchases. Customers can then redeem these points for select rewards, such as gift cards or discounts.
  • Memberships. Membership programs work best for service-based businesses, though those that sell products can make them work, too. The customer purchases a membership, which comes along with certain benefits. For example, gyms sell memberships so customers can get a discounted rate on using their facilities.
  • Referral program. If you’re looking for a way to retain existing customers while acquiring new ones, a referral program is the way to go. With this program, existing customers refer new ones to your business. Once they make a purchase, both customers receive some form of benefit. For example, the new customer might receive a $10 gift card and the loyal customer a $20 gift card.

Ultimately, the type of program you decide on should be determined by your business’s needs. If you’re a small business trying to grow, you might want to start with an email opt-in or a free trial and then, once you have established customers, move into a loyalty discount system. On the other hand, if you run a larger business, you may benefit from a referral program and a points system.


2. Establish the rewards for your loyalty program

After deciding on the type of customer loyalty program to implement, you’ll need to establish what rewards your customers get from participating in that program. There are many different types of rewards you can offer, such as:

  • Discounts
  • Free products or services
  • Coupons
  • Exclusive access to events, merchandise drops, etc.
  • Custom offers
  • Gift cards
  • Free shipping

What’s important is to offer a reward that makes sense for your business and your clients. For example, let’s say you’re just starting a massage business. At this time, your most important task is to secure a loyal customer base. That means that discounts and coupons may be your best bet. Additionally, you can create custom offers for your first repeat customers to secure their future patronage and show that you value them.

On top of deciding what type of customer loyalty program to offer, you’ll also need to choose how to keep track of your customers’ rewards. For instance, if you run a small tutoring agency, you might set up a loyalty program where students earn digital badges after completing an educational course. After a certain number of digital badges, they’ll receive a discount on their next course or tutoring session.

If you run a large online business, you might track rewards by asking customers to create an account with you. All their purchases will be automatically recorded as part of a points-based loyalty program.


3. Promote your program to your customers

The final step to building a customer loyalty program is promoting it to your customers. You can do so through all of your usual marketing channels, including:

  • Your website. Showcase your loyalty program on your website, including how it works and how customers can join it. Create a better online experience by allowing clients to enroll or sign up directly on your website.
  • Direct mail. Get the word out about your business and your loyalty program by sending flyers and coupons to families and individuals in your community.
  • Email. If you’ve cultivated your customer base through email marketing, include the details of your loyalty program in your next newsletter.
  • Social media. Social media platforms allow you to promote your business to a greater audience, making it a great way to reach new customers. Offer a first-time purchase coupon or discount to maximize your impact.
  • Mobile app. Larger businesses may have a dedicated mobile app that customers can use to shop on. Promote your customer loyalty program with a banner advertisement at the top of your app and allow customers to easily manage their rewards all from this centralized mobile hub.

You may also benefit from promoting your customer loyalty program through partnerships with other businesses or influencers. By doing so, you’ll gain access to their followers, acquiring new customers to steward.

If you’re looking to upgrade the value of existing customers, a loyalty program is the right direction to go. With a well-designed program suited to your business’s and clients’ needs, you’ll be able to grow your loyal customer base and cultivate greater business success.

March 18, 2024

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