How to design a successful loyalty programme

In recent years, loyalty has received increasing attention from many companies. For many retailers, loyalty programmes have become an important tool for communicating with their customers, getting them excited about new offers and keeping them coming back. If customer loyalty is the goal, what options do retailers have to achieve it? How can any company – small or large – set up its own loyalty programme in no time?

Let's take a bakery as an example. Its main goal is to get customers to buy again, i.e. to increase customer loyalty and sales. Until recently, most loyalty systems required handing out paper stamp cards or plastic cards. In the past, our bakery might also have used a classic stamp card. Many shops still use them today – some hairdressers, coffee shops or even the kebab shop around the corner.

Handing them out is time-consuming and labour-intensive, and they offer little measurable value: collecting and analysing customer data is practically impossible, and for customers they're a bit of a hassle. A 2020 study showed that a well-built and well-maintained database of regular customers is a key success factor for many businesses. Add design and printing costs, and this kind of loyalty scheme suddenly looks a lot less attractive. It's a different story with a digital customer card that can be added to a customer account and easily topped up.

Rethinking loyalty in the digital age – what does a loyalty programme need to be able to do?

In today's world, flooded with information and offers, digital loyalty solutions have quickly gained importance. Many retailers invite their customers to download a loyalty app and link it to a customer account. But even without an expensive, custom-built app or complicated systems, a small business like the bakery in our example can offer its regular customers a simple and powerful loyalty programme in just a few steps.

In fact, it can say goodbye to paper stamp cards right away and move to digital loyalty rewards. Digital loyalty programmes are the fastest way to look after, reward and retain customers – across every channel and device, with a seamless customer experience.

Good loyalty programmes offer useful extras and rewards, treat customers as partners and know what they really value. Successful programmes also build real emotional bonds through experiences and positive emotions.

Rather than just rewards and discounts, many consumers look for something unique and stay loyal to the brands that give them exactly that feeling. For example, the bakery can delight customers with small gifts such as a slice of cake or a cup of coffee.

Restaurants, hotels and leisure and experience providers in particular now have the chance to modernize and digitize their loyalty programmes and focus them on experiences and other kinds of rewards. A leisure provider or a hotel, for example, can offer a ticket for one of its experiences or a visit to its own spa or sauna as a loyalty reward to thank customers for their loyalty.

A tourism or travel provider could offer VIP tickets to certain cultural events through the loyalty programme, and a cookery school could offer quick cooking classes or a cookbook. With loyalty promotions like these, brands give their most loyal customers the feeling of belonging to an exclusive group. These customers then become brand ambassadors.

Partnerships and affiliate campaigns are another innovative, low-cost part of modern customer loyalty. For example, Marriott has teamed up with Uber to reward Marriott club members when they use Uber or Uber Eats. Or a hotel in the Eifel region rewards guests who book 3 nights or more with free admission to the town's thermal baths.

Before you start: define the goals of your loyalty programme

• Increase customer loyalty
• Improve customer satisfaction
• Boost sales
• Collect customer data
• Promote brand loyalty
• Secure a competitive advantage
• Reduce customer churn
• Initiate behavioural change

Step 1: Define loyalty point rules & design your reward world strategically

Our bakery first needs to be clear about exactly what it wants to achieve with its loyalty programme. Does it want to win new customers, increase the repurchase rate, raise customer lifetime value, or offer customers special deals to bridge slow sales periods? Or does it simply want to make customers happy and strengthen brand loyalty?

The programme's goals determine which loyalty point rules you use – so it's important to tailor your loyalty promotions closely to your target group. The bakery should find the perfect experience and loyalty rewards that appeal to each customer segment and at the same time fit its brand and message.

Collecting and redeeming points should be as easy as possible for customers. The bakery can set in advance how many points a customer needs for a coupon or gift card (e.g. worth a free product) or to reach a certain loyalty level. The redemption rules must be clear and easy to understand in every case.

In the gurado loyalty system, rewards work like this: the customer makes a purchase and collects loyalty points. Once they reach a certain number of points, the points are automatically converted into a gift card, coupon or ticket (including a season pass or multi-use ticket) in their customer account. Or, if you prefer, the customer sees all available rewards in their account and chooses which one they'd like for their points.

Here is an overview of the loyalty point rules you can set up in the gurado system:

Loyalty points for creating an account:

Reward customers as soon as they create an account by giving them a set number of points (e.g. 25) when they sign up. They'll see the points in their account right away.

Award points on the customer's birthday:

Customers can enter their date of birth when signing up for a customer account. On their birthday, they are rewarded with additional bonus points (e.g. 50 or 100 points).
You can also offer a free product via a gift card once the customer reaches a certain number of points – or set up the gift as a coupon with a specific value. Example: the customer has 100 points credited to their account, which they can convert in their account into a gift card for a slice of Black Forest gateau worth 3 euros. This gift card is only valid on the customer's birthday.

Purchase above a certain amount (basket rule)

This is one of the most common rewards in loyalty programmes. When the customer exceeds a certain minimum order value (let's say 20 euros), they receive a loyalty reward or a discount (e.g. a 2-euro coupon for their next purchase).

Or let customers collect points for purchases above a certain amount, which they can later redeem for gifts. In this case, the customer could collect 10 points, for example, every time their order total is 20 euros or more.

Another example: the bakery awards 1 loyalty point for every euro spent. If the customer spends 11 euros and shows their digital customer card, 11 points are credited to their customer account. As soon as the customer reaches X points, the bakery can issue a coupon or a gift card for a small gift, such as a slice of cake worth 3 euros. The customer just shows their customer card to redeem the reward.

Credit topped up on the customer card

When credit is topped up successfully, the customer receives a certain number of points (e.g. 10 points). This encourages customers to use their customer card much like a gift card. Paying with the card earns them rewards – and gives you data on their buying behaviour in the loyalty system.

Referring a new customer (“refer a friend”):

Let's say our bakery also launches a “refer a friend” programme to grow its customer base quickly. A regular customer earns an attractive reward when they bring in a new customer who registers their account or card on the bakery's site. Every customer finds a personal referral code in their account to share.

First transaction of the referred customer:

New customers collect points automatically when they pay, and relevant customer data is stored automatically. When the referred customer has made their first transaction, they receive a certain number of points (e.g. 25 points). This encourages the new customer to shop more at the bakery.

Bonus points for certain occasions/times

These are one-off bonus points – ideal for seasonal campaigns, e.g. sales on a specific date or within a set period, or for celebrating occasions like your company anniversary once a customer reaches a certain total spend. In the case of our bakery, it would credit customers with an extra 50 points on 30 July – its 20th anniversary.

Launch a special campaign with an achievement code:

For businesses that want to run a gamification programme. You can define an achievement code (e.g. BRONZE21) in the system, which is passed via the gurado API. Customers who reach a certain loyalty level are awarded a set number of points.

Define your own rule via an interface (interface rule)

The bakery can award points based on parameters it defines in the system – for example, extra points for certain products or product groups, or a happy hour to boost sales on certain days. These rules need a POS integration or another inventory system that can talk to the loyalty system's API.

Example: gurado already has loyalty interfaces to the major POS systems (e.g. Schultes Kassen and Naramis-Kasse). We recommend that customers contact gurado support if they are interested in an interface rule, or if they are POS vendors/providers and would like to offer a gurado loyalty interface.

Step 2: Generate customer card codes and issue them to customers:

Let's say our bakery wants to offer rechargeable customer cards to 500 customers. Once the loyalty module is activated, it can generate the codes automatically in seconds and download them as a PDF or .csv file. How the codes reach customers is entirely up to the bakery.

The following options are available if the bakery wants to generate and send the codes for its customers in advance:

• Send the customer card by email/newsletter
  The customer receives their individual customer card number by email and can save it to their user account on your shop page. Mailing systems such as rapidmail also let you send individual codes by newsletter. The bakery sends just one newsletter, but each recipient gets a different code.
  Cost: from 0 euros + the costs of the mailing system provider.
• Print codes on label paper (65 stickers per page) and stick them on existing, anonymous cards. The bakery can hand these customer cards out in store to interested customers
  Cost: printing and label costs (approx. 20 euros/6,500 pieces)
• Have codes printed on paper or plastic customer cards
  Our bakery can also have the exported codes printed on reusable customer cards by any printer it likes. The barcodes and personalization data are usually supplied to the printer in an Excel file.
  Cost: printing & design costs (commercially from approx. 99 euros for 500 printed plastic cards + design and shipping costs)

Step 3: Linking the customer account to the customer card

It also works the other way round: customers are rewarded for creating an account – for example with a coupon when they first sign up. Once the account has been created, they can also generate a customer card themselves in the user area. This code is linked directly to their account, and the bakery can securely manage, view and analyse customer and sales data in the loyalty system's admin area – keeping track of every customer card in circulation.

Ideally, the codes the bakery creates are also linked to customer accounts. The bakery promotes the customer login on its website (linked to the gurado online shop), and customers sign up there and add the code they received by email or post.

In the user area, the end customer can at any time:

• See the main information about their customer card
• Check the balance and points on their customer card
• Top up credit on the customer card and use that credit to shop at the bakery
• View all points collected, rewards and even coupons the bakery has awarded as rewards
• View and activate loyalty coupons and have them sent by email
• View the gift card orders they placed in the online shop
• As well as all the (loyalty) coupons they have received

Step 4: Actively promote your loyalty programme

Now that your loyalty programme is set up, it's time to get customers excited about joining. Promote your programme to existing and potential customers, for example with an in-store banner, social media posts, a digital ad, or in the email you send after orders or in your newsletter.

More marketing ideas to make your loyalty programme stand out:

• Find a fun/fitting name for the loyalty programme.
• Rename the points or the currency to match your products.
• Adapt and personalise the design of the customer cards to your company
• Create an attractive landing page on your website where you can present all the benefits of your loyalty programme clearly and attractively.

You can quickly link this landing page to the customer sign-up page on gurado, and easily adapt the user page to your branding in the gurado admin area.

Step 5: Shop and collect loyalty points, win and redeem rewards

The customer then shops at the bakery or tops up their customer card and collects more and more points over time. In return, the loyalty programme automatically issues coupons, gift cards or tickets (promotional tickets, season passes or multi-use tickets) once a set number of points or a predefined level is reached.

What does the bakery do when

• •The customer wants to pay with the customer card: as soon as staff scan the card with the WebApp or the mobile app (iOS/Android), the customer's account, points and balance are displayed. The salesperson enters the order total in the app and confirms the sale via the customer card.
• The customer wants to redeem a reward (coupon, gift card or ticket): they show the code from their customer account, and the salesperson enters it in the mobile app or WebApp to redeem it.

***

We'll be publishing more practical articles on loyalty on the gurado blog to help you run your loyalty programme efficiently and cost-effectively.

If you need more information on the loyalty point rules in the gurado system, take a look at this help article (in German).