How customer loyalty software works

April 01, 2024

Tags: IT staff augmentation

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In an increasingly competitive business world, retaining existing customers is critical to the long-term success of any business. This is where customer loyalty software comes into play, a powerful tool designed to strengthen customer relationships and maintain their loyalty.


“Loyalty programs reward a company's repeat customers with discounts, free offers, and other incentives to encourage customers to return. With a loyalty program, companies can offer points or benefits to customers. In exchange, customers redeem points for discounts, free products, rewards or internal benefits”, Shopify explained on its portal.


Additionally, according to a McKinsey study, customers who are members of a loyalty program are 59% more likely to choose one brand over a competing one.


In this article, we will talk about how this type of software works and how it can benefit companies in different sectors.


loyalty program


How customer loyalty software works

There are many types of loyalty programs, and typical incentives offered include the following:


  • Prior notice/early access to new products, they noted on the Investopedia portal.
  • Early access to sales
  • Free merchandise or improved services
  • Special services, such as free or express shipping
  • Member Only Discounts


“To join a loyalty program, also known as a rewards program or points program, customers typically register their personal information with the company and receive a unique identifier, such as a numerical ID or membership card. They use that identifier when making a purchase”, they added on the portal.


What companies achieve with a loyalty program

1. Customer data collection and management

Thanks to the customer loyalty program, companies can collect and manage customer data. This information includes demographic details, purchase history, product preferences, previous interactions, and any other relevant information that can help the company better understand its customers. The software collects this data from various sources, such as online transactions, social media interactions, surveys, and registration forms, and stores it in a centralized database.


loyalty program


2. Customer segmentation and analysis

Once customer data is collected, the loyalty program uses advanced algorithms to segment customers into groups or categories based on similar characteristics. This allows companies to more effectively target each segment with personalized marketing strategies and specific offers.


Additionally, the software analyzes customers' past purchasing behavior and interactions to identify trends and patterns that can be useful in predicting future behavior and adjusting loyalty strategies accordingly.


3. Automation of marketing and communication campaigns

One of the key features of customer loyalty software is its ability to automate marketing and communication campaigns targeting specific customers or customer segments. This includes sending personalized emails, text messages, push notifications on mobile apps, and social media posts.


Automation ensures that companies can stay in constant contact with their customers, offering promotions, discounts and relevant content at the right time and through the channel preferred by each customer.


loyalty program


First steps to create a customer loyalty program

  • Choose a great name

“The first step to a successful customer loyalty program is choosing a great name. It should incite curiosity and interest and encourage customers to participate. The most important thing is that it must distinguish it from the large number of other loyalty programs that they may already be a part of”, they explained on the marketing portal HubSpot.


  • Reward a variety of customer actions

Customers who view product videos, engage with your mobile app, share content on social media, and subscribe to your blog continue to be valuable indicators of customer engagement with your brand. Therefore, it is important to reward them for this commitment.


  • Offer a variety of rewards

Although offering discounts to customers is the most common reward, it is also possible to offer accumulation of points to be exchanged for tickets to events, movies or concerts, as well as free subscriptions to services.


  • Structure non-monetary rewards around your customers' values.

“Two-thirds of customers are more willing to spend money on brands that take stances on social and political issues that matter to them. So, be sure to leverage those values as part of your rewards program as well”, they added on HubSpot.


loyalty program


  • Explore partnerships to offer even more attractive deals.

A very attractive option to achieve customer loyalty is to associate your company with a brand, in order to reach more potential customers and add value to the service you offer. For example, your company may partner with a streaming service to offer a free subscription to the customer.


Customer loyalty software is an invaluable tool for businesses that want to maintain and strengthen relationships with their existing customers. By collecting and managing customer data, segmenting and analyzing customers, automating marketing and communication campaigns, managing rewards and benefits programs, and analyzing results and ROI, this type of software provides companies with the tools necessary to create personalized and engaging experiences. that foster customer loyalty and drive long-term business growth.


Do you need to develop a customer loyalty program? At Rootstack, we have +14 years of experience supporting companies in their digital transformation. Contact us.


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