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Factors to Consider When Starting a Loyalty Program

Jacob Brain


If you are thinking about starting a loyalty program, there are a few things you should consider before making the jump. Before deciding what type of program, or the rewards you’ll give out, you need to address three fundamental questions. Does loyalty matter to your business? Can you support it financially? And, what are the other options?

Does loyalty matter to your business?

This is a great question. On an instinctual level, we all answer yes to this question. But if we really dive into the question, we might come up with a different answer. For example, if you had high cost, high value, yet a low frequency industry, like a jewelry maker, you might have customers that will buy multiple times, yet a larger percentage are in very low frequency numbers, like 3-4 purchases total. So does crafting a loyalty program make sense? Would a one-time experience that drives referral traffic do better? The same argument could be said for most of all luxury items. So, as much as you’d like to have a customer for life, you might have this customer once. A real dive into what loyalty means to your business will really shape your program.

Can you financially support a loyalty program?

A big surprise to us is engaging with customers who never “ran the numbers” on their loyalty program. Without modeling, you loose valuable insight into the overall success of your program. We equate it to the cash flow of your business. With a good program you can do much, with a bad program, it can kill your business. So why are you not modeling?

Can you do something besides a loyalty program?

If you know the real drivers for your business and return to that business, then a loyalty program should be one of the items in your arsenal.  Referral programs, enhanced experiences, coupons, and freebees can be used to push for return visitors. So be sure you’ve identified exactly what your needs are before putting a loyalty program in the wrong place. Just having one, might put some lift in your numbers, but will be weak on ROI.

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