These stamps were one of the first loyalty programs. They kept customers loyal to a particular product or merchant because they offered an incentive that encouraged the customer to keep coming back – and spend more money.

While trading stamps are a thing of the past, a wide range of industries still uses loyalty programs to establish long-term relationships with their customers. By far the most successful and well-known is the frequent flyer program.

On the surface, frequent flyer programs appear to be all about rewarding customers with free flights just because they choose to fly with a particular airline – the more miles you fly, the more free miles you get. But, if you asked the airlines who benefit from these programs, chances are you’d hear a resounding, “We do.” Ask them to explain and they’ll likely tell you that frequent flyer programs allow them to collect data on individual customers, help them tailor their mailings and special offers to the customer’s specific needs, allow them to promote higher fares, and ultimately increase their sales.

But, as popular as frequent flyer programs have become, they only work if the service offered by the airline is good enough to earn the customer’s trust. And that means not only offering a quality flying experience but great customer service and ongoing communication.

For smaller businesses, the benefits of establishing a loyalty program are no different from those enjoyed by the major airlines. And equally, the program’s success depends on first establishing the three most important elements of building that loyalty:

1. Treat your customers right, and they’ll be yours for life.

Your customers will not only judge your company by the quality of your product, but also by the level of service you offer. Offer one without the other, and you may as well give up now.

Great customer service includes, among other things:

Credibility: Your customers should be able to trust you. No one wants to be on the alert for the small print or hidden charges. They want to know that your company can be trusted and has their best interests at heart.

Flexibility: Never use the words, “I’m sorry, but it’s not our policy.” Always solve your customer’s problems, even if it means losing the sale. There’s nothing worse for a customer than a company that will not go out of its way to accommodate their needs.

On-time Deliveries: If you’ve ever ordered a product and been told that the delivery time is 6-8 weeks, you’ll understand the frustration a customer experiences. Unless the product is out of stock or is an international delivery, there’s no earthly reason why a product should take 6-8 weeks to deliver. Similarly, if you promise a certain delivery time, you must abide by it. If you say the product will be shipped within 72 hours, then ship it within 72 hours. If, for some reason, you find you can’t meet the delivery time, notify the customer and give them the option to cancel their order.

Accurate Billing: We all know mistakes happen. But when you make a billing error, or you overcharge, you immediately lose credibility. Add to that the time it takes for a customer to contact you to complain or get you to adjust the bill, and you may well have lost a future sale – and the potential sales of friends and family they’ve complained to.

Hassle-free refunds: We’ve all been there. For some reason, we change our minds about a product, or it doesn’t work properly or it’s not quite what we expected. And we want our money back. Make sure your customers know this is an easy process, upfront.

2. Obtain Customer Information

If you want your loyalty program to succeed, you must obtain background information from your customers. A program that only requires a name, address, and proof of purchase isn’t building a long-term knowledgeable relationship with them. And it makes sense that a customer who will take the time to complete an enrollment form will be more interested in the product than a casual purchaser. When designing your enrollment form, make sure you get information on product usage, purchasing habits, attitudes, etc. That way, you can tailor your products and services to your customer’s specific needs. And build a database of customers who want a long-term relationship with your company.

Keep Communicating

One of the easiest ways to keep customers loyal is to establish ongoing communication. This can be in the form of emails promoting special offers, letters announcing new products, electronic or print newsletters, or even offering educational materials. Another good way of continuing communication is to send them something useful with your company name on it. These simple, inexpensive gifts keep your name in front of a customer and help to keep them loyal.

Need some help thinking up a loyalty program for your business? Here are some suggestions.

Gift certificates: Offer your customers a gift certificate when they spend a certain amount of money. For example, if they buy $200 worth of goods during six months, offer them a $25 gift certificate.

Offer point programs: Give your customers points for every $10 or so they spend. When they’ve acquired a certain amount of points they can exchange them for selected goods or services.

Free Shipping: This incentive is a sure-fire winner for mail orders and online companies. Offer free shipping on orders over a certain amount or on future orders.

Communications: Newsletters, pamphlets, direct mailings, postcards, magazines, white papers, etc. All these can be used to increase customer loyalty. They don’t need to include a special offer or discount, but it will help.

Properly implemented loyalty programs are a long-term marketing strategy that takes a lot of work and commitment. But, getting new customers takes a lot of work too. So, it makes sense to do everything you can to make sure that every one of those customers keeps coming back time and time again and recommends you to others.

Here are four reasons customer loyalty is vital to your business:
1. First and foremost is the fact that a loyal customer is a repeat customer. This person will know about your business practices, about what to expect from your goods or service, the advantages and the disadvantages, and she or he will do business with you in such a way that it is a mutually satisfying transaction.

2. As you establish a relationship with your customer, you are also establishing a relationship with the customer’s family. Thus, it is not uncommon to have the wife bring in the dry cleaning for the family and turn her mother, mother-in-law, aunt, and best girlfriend on to your business. As the husband is sent one day to pick up the dry cleaning, he becomes familiar with the business, and he will tell his brother, business associates, and others who are looking for a dry cleaner. Thus, you are suddenly becoming a commodity that is being shared with others.

3. While family referrals are great, business referrals are even better. If you are a dry cleaner, you will want the dressmaker down the street to recommend your services to its customers. Similarly, if there is a bridal shop with which you may have some professional ties, then these business referrals are simply priceless! Customer loyalties – when you have other business owners or clerks shopping at your store or utilizing your service – are quite often the gateway to a great number of new walk-in customers.

4. Yet the fourth and perhaps most important reason why customer loyalty is vital to your business rests in the fact that many major purchases are not made during the initial contact. For example, if you are at a furniture store, someone might come in looking for a computer desk. While these may be expensive – depending on the materials – by and large, these items are small fish. Yet if the consumer is satisfied with the product, the delivery, the setup, and also the price, the odds are good that she or he will be back when it is time to furnish the nursery, buy that new wall unit, or acquire that bedroom set that was saved up for!

So, customer loyalty is one of the many foundation stones you have to put in place in building a successful business.

When your company decides to implement a program to boost customer loyalty, they are doing several things. They are going to immediately boost sales almost instantly. You will secure customer behaviors and secure dealer loyalty to your business from your customers. Your business does not have to be a large chain of stores to use a Customer Loyalty Program, even small businesses will profit.

Offering special promotions to only those part of your program will encourage others who may only select your company occasionally to consider you on a more permanent basis. Newsletters can improve your sales. If a customer knows when a particular item may be on sale, that they enjoy buying or using, they may make a special trip to secure this item. You can even make your customers feel special as individuals by sending birthday cards or holiday greeting cards. For an extra special touch, you can enclose a gift certificate for a few dollars with the cards.

Many companies who use the card membership programs have sales where the customers receive an extra 10 or 15 percent off of their sales total, just for being such a loyal customer. Another option is to offer the frequent buyer program. You can give one item free when the customer buys so many of the same products. If you are a smaller company, you can always send thank you notes to your customers for being such wonderful guests.

If taking on this kind of project may be too much for you or a group of your employees, you can always hire a third company to implement the program. They may want to come in and interview your current customers on what they like or dislike as far as your current sales and promotions. They may want to survey to see what the customers feel could or should be improved upon, and even possible products that they would like to see you carry and sell. This third-party company can help your company decide which form of loyalty program may be best for your company and customers.

Making your customers feel like you value them and their opinions will secure their frequent returns to your store. Giving them little bonuses for being a shopper can ensure that they feel wanted and appreciated when they enter through your doors.

Loyalty programs are taking off. If you have a retail website and you don’t have some kind of loyalty program…chances are that by the end of next year, you will. Jupiter Research expects that by the end of 2007, 78% of retailers doing business online will have a loyalty program, compared to 24% now. So what’s the big deal?

It costs a lot more to generate a new customer than to sell to a repeat customer. Loyalty programs allow you to build a customer base that is loyal to your products and will continue to purchase from you, rather than your competitors. A loyalty program is a program that allows your customers to build up credit to apply to further purchases or to redeem for cash. For example, a retail website could grant a customer “points” for every purchase he makes. When he has enough points, he can redeem them for a discount on more merchandise or possibly redeem them for cash.

To implement a loyalty program, you need some way to keep up with your customers’ accrued points (or whatever kind of measurement you use). This should be done by keeping records of a customer’s transactions in a database. Goldstein and Korotzer recommended tying the information to a customer’s credit card number. Every time a customer makes purchases with a particular credit card, a record of the purchase is recorded along with the credit card number. In this scenario, if a customer used a different card than in previous purchases, her existing loyalty account would not receive additional credits.

Try to make it easy for a customer to know how many points they have. Out of sight, out of mind, as the old saying goes, so make sure your customers are aware of how many points they have and how many more they need to redeem their rewards.

When you begin deciding on the details of your loyalty program (exactly what participants will receive and how much they have to purchase for redemption), Goldstein and Korotzer argue that you should explore your company’s economics as deeply as possible. Two important statistics to examine are the lifetime value and acquisition cost of your customers. This will better help you determine how much you can afford to give to your customers. Another critical consideration is exactly who gets to participate in the program. You may choose to only extend an invitation into the program to the top 20% (or whatever percentage generates the majority of your revenue) of your customers. If there is a segment of your customer base that represents the majority of your income, then it makes sense to concentrate your marketing dollars on that group.

Another point that Goldstein and Korotzer emphasized is that your loyalty program should be cross-channel. In other words, if you operate a physical retail location and take orders by phone in addition to your website, the loyalty program should extend to all of the channels. Avoid confusing your customers. Make it easy for them to gain credits and cash in on their loyalty regardless of what channel they use to make purchases.

Loyalty programs have been around for years in certain industries (i.e., airline frequent flyer miles) but are just starting to gain traction with a lot of retailers. If you sell retail, you should begin researching about the implementation of a loyalty program now – before your competition does. Feel free to contact Work Media for information on implementing a loyalty program for your website.

1. The Concept
Let’s further discuss the concept behind this customer loyalty program. With a rewards-based customer loyalty program, the customer will have fun spending more on your company due to your company’s promise that the bigger points the loyal customer receives from their purchases, the greater the rewards that they will soon get from the company. From having free expensive designer items to even an all-expenses-paid grand vacation trip, courtesy of the company. It doesn’t matter – the point is, it is a small amount to pay considering the years of loyal purchases that these customers have brought into your company. Of course, this all sounds good on paper. However, a truly excellent loyalty program doesn’t just pamper customers but also entices them to continue patronizing your business, tell their friends about it, offering your business some invaluable word-of-mouth advertising.

2. Rebate Programs
A less fancy customer loyalty program is the rebate program. A program wherein the customer will get a percentage back from the purchases as coupons that they can use to pay for more stuff from your company. It is a simpler customer loyalty program as compared to the rewards system. Not only will it be easier on your company’s pocketbooks but it will also give your business some added profits because, through the rebate customer loyalty program, your customers will, in the end, end up spending more on your company because the coupons cannot be exchanged for real currency or used anywhere else. In actuality, there is no real incentive for customers to use the program.

3. Loyal = Profitable?
Some people still view that providing your loyal customers with great service does not automatically ensure a company that their customers will stay. This is why there is a great need for an effective (but still profit-oriented) customer loyalty program. While great customer service can result in a repeat purchase, a well-designed customer loyalty program will ensure they wouldn’t even ever dream of going to your competitors, and in fact, would even recommend friends to use your services.

4. The What Ifs
The biggest concern that most CEOs have is a strong customer loyalty program can keep customers that are already loyal. But what about the next generation of shoppers? And even worse, an ill-planned loyalty program, built with little or no data about your existing loyal customers, will be doomed to fail. Find ways to collect these important data months in advance of launching your program. Invest heavily in a statistics specialist, and ensure he has the latest statistics software such as SPSS. Remember, even if you have an abundance of data, it will be completely useless if you can’t make sense of it. Worse is having data that were not collected scientifically to be an accurate representation of the population being sampled.