Loyalty Programs

When is the Best Time to Start a Loyalty Program?

Written by

Brad Davis

January 14, 2022

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Many businesses struggle to figure out when exactly is the best time to start a loyalty program. For new businesses, it’s natural to focus on customer acquisition before worrying about retention, but in fact:

1. 65% of a company’s business typically comes from existing customers

2. Increasing customer retention by 5% can increase profits anywhere from 25% to 95% (Bain & Company)

3. It costs up to 7x more to acquire a new customer than it does to retain an existing one (Invesp)

It’s also common for marketers/business owners to think that a loyalty program will fail if they don’t build up a respectable customer base first. Again, this isn’t the case.

Less signups can actually be beneficial at the start, as it frees you up to play around with your rewards structure, ask for feedback from loyal customers and do a bit of trial and error until you get it right.

Let’s say you launch your loyalty program the same day that you open your doors (or activate your online store). If three customers sign up, make a purchase and return for a second transaction, it’s already worthwhile.

The reality is, whether you’re a new business or a well-established brand, there’s no bad timing for starting a loyalty program. The key is to choose a cost-effective option, and be prepared with a well-thought out implementation plan.

However, here are some tell-tale signs that right now is the best time to start a loyalty program:

1. You’re noticing a decline in sales, or a drop-off in customer retention

data on a spreadsheet — *A decline in sales*

Declining sales could be due to any number of things – poor quality products, bad customer service, mismanagement, scaling before your business is ready… the list goes on and on.

However, one of the biggest culprits for declining sales is when a business isn’t paying attention to its customers’ needs. This is where a decent loyalty program can help to turn things around.

By giving customers a reason to make repeat purchases (i.e. every 6th purchase is free), you should see a spike in retention rates. Of course, a digital loyalty program helps you to track and monitor retention rates in the first place!

Offering customers rewards for their ongoing loyalty shows that you value their business, and that you’re willing to invest in a mutually beneficial relationship. More retention = more sales.

2. You have no idea who your customers are, and you want to get to know them better

How can you fully understand your customers’ needs if you don’t know who they are? A loyalty program turns your customer base into individual people with different product preferences and shopping habits.

With every transaction made through the loyalty program, your business gains a better understanding of what products to recommend to each customer, what kind of rewards and offers to send them, and other personalised features that tailor the customer’s experience.

Personalisation is a sure-fire way to boost engagement and strengthen customers’ emotional connection to your brand. A digital rewards program will automate this process for you, and instantly bring your business and its customers closer together.

3. All your competitors have loyalty programs

business competitors competing — *Competing against your competitors*

Call me Captain Obvious, but when all your competitors have loyalty programs, it might be the best time to start one! In fact, even if they don’t, this is also perfect timing.

An enticing rewards program helps your business to stand out from the crowd and offer your valued customers something that your competitors aren’t offering.

Imagine if coffee chains like Caffe Nero, Dunkin’, Costa Coffee, Tim Horton’s and McCafe didn’t offer loyalty programs to compete with Starbucks Rewards?

Without an incentive for customers to keep choosing your brand, you risk alienating them. The good news is that you can roll out a digital loyalty program quicker, easier and more affordably than ever before.

4. You feel that your business lacks a brand identity

yellow umbrella in crowd of red umbrellas — *Stand out from the crowd*

Every company needs a clear brand identity. Gregg’s and Netflix are fun and quirky; Nike is edgy and motivational; Ben & Jerry’s and Levi’s adopt a firm stance on Corporate Social Responsibility.

What’s your brand identity? Are your customers aware of it? Loyalty programs are the perfect avenue for channelling your brand messaging, expanding awareness and reinforcing your brand’s core values.

A good example is award-winning independent Colorado-based cannabis and paraphernalia shop The Other Place is Greener. The team has done an excellent job of using a digital loyalty stamp card system to demonstrate its commitment to serving the community, rather than chasing profits.

The business’s emphasis on supporting local, supplying quality cultivated products, and adopting a more personal “deli-style” approach is weaved throughout the loyalty program.

Using Stamp Me’s digital rewards program, The Other Place is Greener has been able to:

Stand out from within a saturated competitor market
Connect and communicate with previously anonymous customers
Keep the shop front-of-mind for existing customers
Motivate customers new and old to come back to the shop for regular purchases
Reward customers for their patronage and build a positive emotional connection to the brand

5. Digital loyalty programs are increasingly important in a post-COVID era

Starting a loyalty program is especially beneficial now that we’re living with COVID. Not only are businesses more reliant on loyal customers than ever before, but people are more partial to online shopping, in-app purchases and contactless loyalty.

While research shows that the vast majority of consumers still prefer to shop in-person than online, the way that customers and brands engage has completely changed.

To keep up with your customers’ evolving needs, it’s important to create a versatile digital loyalty setup that spans brick-and-mortar, ecommerce, social media and other brand touchpoints.