How to Make a Loyalty Program In 3 Refreshingly Simple Steps

In 2024's restaurant and c-store marketplace, customer loyalty is more essential than ever for businesses aiming to maintain market share. With over 152,396 convenience stores in the U.S. alone—a number that continues to rise—businesses face constant pressure to stand out and retain loyal customers (NACS Magazine).  

The restaurant industry mirrors this trend. According to the National Restaurant Association, 45% of operators anticipate even tougher competition in 2024, with an estimated 30% of new restaurants failing within their first year (University of Central Florida). 

Against this backdrop, customer loyalty programs have emerged as a critical tool for keeping customers engaged and driving repeat purchases. But what makes loyalty programs work? 

A successful loyalty program goes beyond rewarding customers—it crafts experiences that align with their needs and keeps them returning. This article will walk you through how to create a loyalty program that attracts new customers and turns existing customers into brand advocates.

4 Key Components of Effective Loyalty Programs 

At its core, a customer loyalty program incentivizes repeat business. Yet, the most effective programs go further. They deliver real value and create an emotional connection with guests.  

Here are the four characteristics that make the biggest impact:

1. Value Proposition: Your loyalty program must offer benefits that resonate with your target customers. Programs like Chipotle Rewards and Panera Bread’s MyPanera have proven that exclusive perks can capture customer interest. Is your offering compelling enough to encourage customers to sign up and stay engaged? 
2. Ease of Use: The best loyalty programs are easy to join and use. Did you know that between 45 to 70% of customers avoid loyalty programs they find difficult? A seamless experience retains regular customers and attracts new ones. 
3. Emotional Connection: Beyond tangible rewards, successful loyalty programs create emotional bonds with members. Studies show that customers with such a connection have a 306% higher lifetime value, spending more and returning often. How are you leveraging personalization to build these bonds? 
4. Continuous Adaptation: Customer preferences evolve, and your loyalty program should, too. Starbucks Rewards program is an example of how tracking and feedback can help refine offerings and keep programs relevant. 

Each element is crucial for ensuring that loyalty programs build customer loyalty over the long term. 

The Importance of Loyalty Programs in Today's Market 

In a world brimming with options, loyalty programs are more than perks; they are vital tools for customer retention.  

A well-designed loyalty program can increase customer lifetime value and build lasting brand loyalty. It does so by: 

• Increasing Customer Retention: 84% of customers are more likely to stick with brands that offer loyalty programs (Korona POS).  
• Enriching Customer Experience: Tailored rewards and offers improve satisfaction. Yet many c-stores and QSR brands still rely on basic personalization. Advanced techniques like behavior-based offers and preferred channel marketing can make a significant difference: 
  • Behavior-Based Offers: Target customers based on recent actions. For instance, offer a discount on coffee to a regular customer who hasn’t visited recently. 
  • Preferred Channel Marketing: Let customers pick their preferred communication channel—email marketing, text marketing, or push notifications. 
  • Win-Back Offers: Use purchase history and visit frequency to identify lapsed customers through win-back offers and offer exclusive benefits for staying active in the program. 
  • Driving Revenue: Loyalty incentives boost sales by increasing the average spend per visit. Research shows loyalty program members spend nearly 40% more than non-members.  
• Gathering Valuable Customer Data: Loyalty programs provide invaluable data about customer preferences and behavior. Here are some tips to make the most of your loyalty program data: 
  • Track Top Purchases and Visit Frequency: Start with basic metrics to understand what draws customers back. This allows you to promote top-selling items during slower times or create offers around popular products to boost frequency. 
  • Leverage Simple Customer Segments: Tailor offers based on behavior, such as rewarding high spenders or attracting weekend-only customers. 
  • Automate Specific User Behavior Triggers: Use automated messaging for key customer actions like first-time visits, birthdays, or long gaps between visits. 

3 Steps to Smooth Loyalty Program Implementation

Implementing a loyalty program in your restaurant doesn’t have to be complicated; with a few key steps, you can set up a system that drives customer retention, boosts sales, and keeps diners coming back. 

Step 1: Define Your Goals 

Every loyalty program should start with clear objectives. You may want to increase average order value, boost customer retention, or attract new guests.

To better understand your target customers and tailor your program to meet their needs, consider these questions: 

• What are my customers’ favorite products and visit patterns? Use your restaurant POS or c-store POS system to track top items and peak times.  
• Why do customers choose my business? Quick checkout surveys or digital follow-ups can reveal why people return.  
• What motivates return visits? Use loyalty data or informal chats with regulars to uncover drivers, such as quality, rewards, or convenience. 

Gathering and Applying Data Efficiently

1. Start Simple: Use POS reports and loyalty software to monitor purchase frequency and preferences. 
2. Automate Where Possible: Set up automated reports or notifications to regularly receive insights. 
3. Delegate to Your Staff: Train a trusted team member to review and act on this data. 

By focusing on these metrics and using basic tools, even small businesses can leverage loyalty data effectively. 

Step 2: Choose the Right Technology 

Your loyalty app should be scalable, user-friendly, and data analytics capable. Paytronix stands out by offering: 

1. Comprehensive Integration: We offer seamless integration with a wide range of technologies. These include POS systems, mobile applications, and other digital interfaces.  
2. Advanced Data Analytics: Paytronix offers businesses deep insights into customer behaviors and trends.  
3. Flexible and Scalable: Whether you're a small cafe or a large chain, our solutions grow with your business. This scalability ensures your loyalty program can scale as needed. 
4. Innovative Features: Paytronix continuously evolves, integrating the latest trends and technologies. These include AI-driven marketing tools and mobile-first strategies to keep your program on the cutting edge.

Selecting Paytronix as a technology partner ensures you have the tools to build a successful customer loyalty program.

Step 3: Set Up Reward STructures and Benefits 

The structure of your rewards is a fundamental aspect of your loyalty program. It’s instrumental in driving customer engagement and retention. Here are four popular reward structures to learn from: 

1. Points Based Loyalty Program: Customers earn loyalty points with each purchase—often one point per dollar spent—which they can redeem for discounts, products, or other perks. This system offers clear goals and keeps customers engaged. 
2. Tiered Loyalty Programs: In a tiered system, customers earn status levels based on their spending or engagement. Each tier offers increased benefits, motivating customers to ascend through the ranks. Here are three examples: 
   1. Starbucks Rewards: Customers start at the “Green” level, gaining stars per dollar spent. Upon reaching “Gold” (300 stars), they unlock extra perks like free refills and birthday treats. 
   2. Chipotle Rewards: Members earn points with each order, progressing from "Tier 1" to "Tier 3" as they accumulate points. Higher tiers offer exclusive menu items and faster access to rewards. 
   3. Dunkin’ DD Perks: Members climb tiers with points, earning free drinks faster at higher levels, with special rewards for high-frequency customers.
3. Paid Loyalty Programs or Subscription Membership: In a subscription-based loyalty program, customers pay a fee to join or stay in the loyalty program or unlock premium benefits. Here’s what paid loyalty programs look like in practice:
   1. Panera Bread’s “MyPanera+” Coffee Subscription: Members pay $11.99 monthly for unlimited coffee, which could drive daily visits. This program works well for Panera because the cost of coffee is low, and the frequent visits lead to add-on sales (such as pastries or meals), boosting overall profit margins.
   2. Sweetgreen’s Sweetpass: Sweetgreen offers a subscription where customers pay around $10 a month for discounts on salads and priority ordering. This strategy encourages frequent purchases, with the subscription cost covering discounts and driving repeat visits.
   3. Pret A Manger’s Coffee Subscription: In the UK, Pret offers unlimited coffee and tea for £25 per month. The high-frequency visits boost Pret’s sales of higher-margin items, like food, even if the coffee itself has a lower profit margin.
4. Value Based Loyalty Programs: These programs reward customers not just for spending but also for brand engagement, such as social media interactions or referrals. For example, some brands offer points for following their social accounts, sharing content, or referring friends. This approach fosters a sense of community and loyalty while promoting the brand organically. 

Examples of Successful Loyalty Incentives 

Programs like 7Rewards and Chick-fil-A One show the power of flexibility and personalization. What can you learn from their success? Let’s look closer: 

• 7Rewards by 7-Eleven: This program allows customers to earn points on almost every purchase, which can be redeemed for free food and drinks. Also, their members receive personalized deals and promotions based on their purchasing behavior. 
• Chick-fil-A One: This loyalty program is tiered, offering different reward levels based on customer spending. Higher-tier members receive additional benefits, such as the ability to gift rewards to others. This program not only rewards frequent customers but also fosters a sense of community and exclusivity. 
• Circle K Inner Circle: This loyalty program features two levels. The free version allows members to receive discounts on fuel and in-store purchases. The paid membership gets additional discounts and exclusive offers along with early notice of new brand products and promotions. 

Step 4: Integration and Long-Term Success 

For a loyalty program to be effective, it must integrate smoothly into your existing operations. Here are six tips: 

1. Compatibility with Existing Systems: Ensure your loyalty software integrates well with your current POS, CRM, and other operational tools to minimize disruptions. Popular POS systems like Square, Toast, and Clover are widely used and often offer built-in loyalty features or integrations with loyalty platforms like Paytronix. When onboarding, most loyalty software providers offer a step-by-step setup guide and ongoing support to help align data, enabling easy customer tracking and reward redemptions across channels. 
2. Omnichannel Experience: Designing an authentic omnichannel experience for loyalty programs takes strategy but can boost engagement. The next step details what an omnichannel loyalty program may look like.
3. POS and App Integration: Make sure your POS connects to your website and a mobile app, allowing customers to earn and redeem rewards no matter where they shop. A mobile-first design lets customers track points, redeem offers, and receive notifications about rewards from their phones. 
4. Geo-Targeted Offers: Use location-based marketing to send push notifications with exclusive deals for loyal members near your store. For instance, a c-store could offer a "5 cents off per gallon" fuel discount to app users within a certain radius. 
5. Multi-Channel Communication: Engage customers based on their preferred communication channels. For example, you might use SMS for time-sensitive offers, email for monthly point summaries, and push notifications for exclusive deals.  
6. Data Synchronization: Regularly syncing customer data across all platforms is essential to maintain accurate profiles and reward statuses. Set up automatic synchronization between your POS, CRM, and loyalty program to keep customer information consistent.

Training Your Team for Success 

Training empowers your staff to manage the program confidently. Regular training and feedback loops can reveal customer pain points and operational insights. Take these three steps:

• Comprehensive Training Sessions: Promote hands-on workshops or online training modules that cover key functionalities, like enrolling customers, applying rewards, and troubleshooting.  
• Ongoing Support: Offer refresher training sessions quarterly to keep your team’s skills sharp. If resources are limited, you can provide video tutorials that team members can review as needed or use free training resources from your POS or loyalty provider. 
• Feedback Mechanism: Implement a feedback loop for your team to share insights and challenges with the loyalty program. Staff insights can highlight operational issues, customer pain points, or opportunities to improve the program’s effectiveness.

Using Feedback to Improve the Program 

Customer feedback is crucial for refining your loyalty program. Here are two low-cost ways to gather this data: 

• Surveys at Checkout: Ask customers to rate their loyalty experience at checkout. Offer a small incentive, like bonus points, for completing the survey. Free tools like Google Forms or SurveyMonkey can be set up in minutes and shared with customers via QR code. 
• Digital Feedback: Send brief post-visit surveys to customers through SMS or email to gather insights on their program experience. Simple questions like “How easy was it to redeem your reward?” can uncover areas for improvement and ensure the program remains valuable. 

Step 5: Marketing Your Loyalty Program 

Marketing your loyalty program is key to maximizing sign-ups and engagement. Here are strategies to ensure your program gains traction: 

• Launch Campaign: A strong launch requires precise planning and targeted communication. Here’s what to consider:  
  • Audience Targeting: Focus on your most engaged customers first. Additionally, consider targeting lapsed customers with re-engagement messaging. 
  • Messaging and Language: Emphasize the unique benefits of your program with specific, action-oriented language. Make it clear what they’ll gain by joining immediately. 
  • Launch Offer: Offer an enticing incentive, such as double points on the first purchase, a one-time discount, or a free item for new sign-ups during the first week of the program. A limited-time offer encourages immediate action. 
  • Measuring Success: Track sign-up rates, initial engagement, and redemption rates. Set specific targets for each metric to evaluate your campaign’s impact. 
• Multi-Channel Approach: Reach customers across multiple touchpoints. For example: 
  • Website & Social Media: Announce the program on your homepage and feature posts on social media with visuals that highlight key rewards. Use targeted ads to reach nearby customers and increase sign-ups. 
  • Email & SMS: Use email to inform existing subscribers about the loyalty program, and SMS for timely reminders about sign-up bonuses or special rewards. 
  • Incentivize Sign-Ups: Create urgency by offering a sign-up incentive valid for a limited period, typically seven to 14 days. A well-defined time frame encourages quick enrollment while maintaining flexibility for customers. 
• Employee Advocacy: Equip your team with the right knowledge so they can confidently promote the program. Here’s how: 
  • Knowledge Threshold: Ensure that each employee understands the basic mechanics—how customers earn and redeem rewards, the main benefits, and how to sign people up. Conduct role-playing exercises so employees can explain the program during customer interactions. 
  • Training Depth: For managers or key staff, offer deeper training on troubleshooting issues, accessing customer point balances, and understanding data insights. Regular refreshers and FAQ sheets can help keep information accessible. 

Providing employees with concise talking points—such as, “Our loyalty program gives you points with every purchase, and you can redeem them for exclusive rewards”—makes it easy for them to promote the program naturally. 

Utilizing Data for Personalized Marketing 

The data collected from your loyalty program is a gold mine for personalized marketing. First-party data, when used wisely, increases customer engagement and program effectiveness: 

1. Segment Your Audience: Use the information to segment your audience based on purchasing behaviors and preferences.  
2. Tailored Promotions: Create promotions and offers tailored to individual customers. Incorporate their interests and past purchasing behavior, improving the relevancy of your communications. 
3. Engagement Metrics: Monitor engagement metrics from your loyalty program and use them to refine and improve your marketing strategies. Understand what types of rewards and communications yield the best results, then adjust and evolve accordingly.

Frequently Asked Questions About Making a Loyalty Program 

How much does it cost to develop a loyalty program?  

The cost to develop a loyalty program varies greatly based on its complexity and features.  

Small businesses might spend a few hundred dollars, which could cover a basic points program or a simple punch card system. These options reward customers with discounts or free items after a certain number of purchases.  

Larger companies may invest tens or even hundreds of thousands of dollars in more sophisticated programs that include mobile apps, personalized rewards, and advanced analytics dashboards. These comprehensive programs provide deeper insights into customer behavior and offer tailored incentives, driving higher engagement and loyalty. 

How profitable are loyalty programs?  

The benefits of loyalty programs include being highly profitable for businesses, especially when used well. They engage and retain existing customers, which is more affordable than acquiring new customers.  

Research shows loyal customers tend to spend more and buy more frequently. For example, Starbucks Rewards members now represent 53% of the spend in their stores (Queue-it). While the initial costs may be high, a well-implemented loyalty program leads to significant long-term profits and higher customer lifetime value (CLV). 

How do you monetize a loyalty program?  

Here are five ways to monetize a loyalty program: 

1. Membership fees: Charge customers a fee to join the loyalty program, offering exclusive benefits or rewards in return. 
2. Tiered rewards: Create levels within your program, where higher tiers offer better rewards. Encourage customers to spend more to qualify. 
3. Upselling: Encourage customers to spend more by offering limited-time promotions or bonuses for larger purchases within your program. 
4. Encourage referrals: Allow existing members to invite friends and family through personalized invitations, providing benefits for both the referrer and the new member. As more customers make purchases, it leads to increased revenue. 
5. Partnerships: Collaborate with other businesses in coalition loyalty programs to offer joint promotions to members. This results in revenue from new customers gained through the partnership. 

What percentage of loyalty programs fail?  

Research suggests that around 77 to 79% of loyalty programs fail within the first two years. Common reasons for failure include lack of customer engagement, unclear benefits, and failure to adapt to changing customer needs. To improve your chances of success, you must design a program that resonates with your target audience and adapt the program based on customer feedback. 

What are the five criteria for a successful loyalty program?  

Here are five criteria for a successful loyalty program: 

1. Clear Value Proposition: Showcase benefits clearly to motivate customers to join. 
2. Flexibility and Variety: Offer a range of rewards so customers can choose what they prefer. 
3. Personalization: Customize rewards and messages based on what customers like to make them feel more valued and engaged. 
4. Easy to Use: Make it simple for guests to sign up and earn their rewards. 
5. Stay Engaged: Engage members regularly to remind them of your program and benefits. 

Take the Next Step Today 

With the insights and strategies provided in this guide, you’re now equipped to create a customer loyalty program. You'll develop one that not only attracts but also retains customers. 

Remember, the success of your loyalty program hinges on continuous improvement and adaptation. You'll need to understand, anticipate, and fulfill the evolving needs and expectations of your customers. 

Embrace the journey of fostering lasting relationships through your loyalty program. Book a demo now to learn more and watch as your business grows.