6 steps to create a loyalty program

6 steps to create a loyalty program


By: Normand Coulombe, President of PME Vente et Marketing

A good loyalty program can generate significant recurring revenue for your business while improving the performance of your sales and marketing budgets.

First, remember :

  • Keeping a current customer costs up to 5 times less than acquire a new one.
  • It's easier to convince a customer who already knows you to buy more or more.
  • Typically, 20% of customers bring 80% of your revenue

Is a loyalty program right for your business?

Before developing a loyalty program, you need to know if this is a good tactic for your company. Determine the value of a customer first and how much it costs to acquire it. This will help you decide whether it is more beneficial to invest more in acquiring customers or building loyalty and developing those you already have.

Calculate the value of your customers

Suppose a good customer of a B2B company purchases annually for $ 30,000 worth of products. If the $ 175,000 annual marketing and business development budget generates an average of 10 new clients per year, the average acquisition cost for each is $ 17,500.

If many current customers do not buy for $ 30,000 a year, why invest $ 17,500 to find a new clientele? An effective loyalty program is likely to increase sales to existing customers at a significantly lower cost.

The 6 steps to create a loyalty program

1. Study each of your current clients

  • What are the customer's purchases per year?
  • What type(s) of products does he/she buy and how often?
  • Since when did he/she become part of your clientele?
  • Can you sell him/her other products?
  • Do you know if he/she is dealing with other suppliers and, if so, which ones?
  • What profit does he/she bring you?
  • Does he/she pay quickly?
  • What is his/her level of satisfaction?
  • How could you improve business relations with him/her?

2. Prepare your loyalty program

Begin by estimating the current level of satisfaction of your customers by proven means: surveys, interviews and review of comments they have already sent to you.

You will need to target customers who often buy from you and can become even more profitable, depending on your analysis. If the purchase cycle is long (over 3 years), this type of loyalty program is generally not recommended.

3. Set goals and measure them with CRM software

For example, if your customers buy an average of 3 times a year, set an annual goal of 3.3 times. This will increase your sales by 10% for a small additional fee. Use Customer Relationship Management (CRM) software to manage this program.

4. Establish 2 budgets

Set a budget to manage customer loyalty and another to develop a new customer base. To do this, check your industry average and, if you are looking for more growth than the average, increase the amounts accordingly.

5. Determine which clients to target

Based on the results obtained in steps 1 and 2, categorize your clients according to evaluation criteria adapted to your needs and objectives. Examples :

  • Volume of purchases
  • Ability to buy more products and services
  • Quickness of payment
  • Customer profitability
  • Fidelity history

6. Choose tactics that will promote loyalty

Opt for loyalty improvement tactics related to a customer's purchases, as well as the quality of their business relationship with you. Examples :

  • Monthly visit of the representative
  • Annual visit and business lunch with the vice president of sales
  • Personal invitation to a seminar or a dinner of the president
  • Guaranteed service 24 hours a day, 7 days a week
  • Emergency line and secure access to the website
  • Additional discount when a maximum purchase is reached
  • Sponsorship of an annual event

Authors biography

A well-known expert in sales and marketing, Normand Coulombe has conducted hundreds of consulting assignments in numerous sectors. Before founding PME Vente et Marketing, he worked for Desjardins Group, in an advertising agency and as a senior partner at the Business Development Bank of Canada.


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