Customer Loyalty Programs 101

Implementing a customer loyalty program is a simple yet highly effective way for retail businesses to increase their number of returning customers. Of course, this translates into more sales and ultimately higher profits. If you shop around at some of the nation's leading retail shops, you'll probably notice that many of them have a customer loyalty program in place. Whether it's an electronics, grocery, sporting goods, apparel, pet supplies, or practically any other store, these programs offer too many benefits for retail businesses to pass up. But what exactly is a customer loyalty program? And how do you implement one in your retail business? To learn the answers to these questions and more, keep reading.

By definition, a customer loyalty program is a form of reward-based marketing that encourages customers to come back for future purchases. Rather than crossing your fingers and 'hoping' that a customer chooses your store for their future purchases over your competitor's, you can persuade them to come back with a rewards program. If a customer knows he or she will receive an incentive for shopping at your store, there's a good chance they'll choose it over your competitor's.

There are dozens of different types of customer loyalty programs out there, but the most basic is a point system attached to the customer's unique account. Each time a customer makes a purchase, they'll swipe their loyalty card to gain points. Some stores offer 1 point per dollar spent, while others offer more. As the customer builds their points, they can eventually spend them on various goods, services or coupons.

One of the nation's largest grocery stores, Kroger, has a customer loyalty system in place known as Kroger Plus. Members of the Kroger Plus program reap the benefits of lower prices along with savings on gas. When you're shopping for groceries at Kroger, you'll see a 'normal' price along with a Kroger Plus price. The savings shoppers receive for being a Kroger Plus member keeps them coming back for grocery purchases in the future.

If you're going to implement a customer loyalty program in your retail store, you should weigh the pros and cons beforehand. Launching a full-scale loyalty program costs money, time and resources. Small retail stores may not have luxury of investing their resources into programs such as this. With that said, customer loyalty programs are fairly easy and inexpensive.