How to Start a Customer Rewards Program

how to start a customer rewards program consumer loyalty

Do the same customers often visit your business? Do you want to learn how to make and start a customer rewards program for your business? Below, we’ll show you how to use customer rewards programs to your advantage. 

You may be a member of a loyalty program for Starbucks, a local grocery chain, or others. You may also be thinking of applying the same strategy to your business. Keep reading to learn how to use a customer rewards program, why it matters, and how to start one.

1. What Is a Customer Rewards Program?

A customer rewards program or loyalty program is a strategy to encourage growth in the business. As the name goes, you’re encouraging loyalty from your customers. This can help you gain an edge over competitors in your industry.

How Does It Work?

Even if you aren’t a member of a customer rewards program, you likely already have an idea about how they work. In essence, a business will offer rewards to customers who do specific actions. The rewards offered and actions that the customers need to do will vary. 

The rewards you offer must encourage your customers to take action so they can claim them. Below are some of the common loyalty programs and rewards used by many businesses:

  • Buy 5 Get 1 Free program
  • Point system rewards
  • Tiered rewards
  • Membership fee system
  • Partner rewards

Each strategy has its pros and cons. For example, Buy 5 Get 1 Free cards can get faked or staff can punch the card an extra time. The point system is an easy choice to start with because there’s no barrier to entry and no commitment needed to start earning rewards.

2. Advantages and Disadvantages of Using a Customer Rewards Program

As all things in life do, reward programs also have their pros and cons. This section will discuss what you can expect from a loyalty program. That includes the benefits and drawbacks of using them.


When you use a loyalty program, you encourage return customers. If you plan it well, you’ll also get customers to feel that they are making progress toward a goal. You can push this further by encouraging “free points.”

With a rewards program, you also get to give back to valued and regular customers. The fact that they chose your business is a big reason to thank them. You can do this by giving them the chance to pick what they want to get as their reward.

If you have a hard time getting new customers, you can use your loyalty rewards program to gain referrals. It’ll help grow your customer base while encouraging new ones to refer your brand to others as well. A rewards program also acts as a platform to promote new items or push old stock out by the end of the season. 

Finally, you gain insight into customer buying patterns and product preferences. Your customers also gain a platform with which to reach you or contact you.


You can’t create a rewards program and offer low-quality rewards. To encourage customers to join your program, you need to entice them with good rewards. However, good rewards cost money and time. In the past five years, new customer acquisition costs have increased by almost 50%.

When the market becomes an overcrowded one, you may have to stop the program. This can anger or disappoint valued customers. Your good program coming to its end may cause customers to flee to your competition instead. 

3. How to Create and Launch a Loyalty Rewards Program

Creating a customer rewards program is easy. The first thing you want to consider is what customer rewards you want to offer. You can offer anything from discounts to free shipping to gifts.

The best custom reward programs have a variety of outputs for the consumers. An ideal loyalty program will offer customers the option to create or set their rewards. This way, your customers can choose and receive rewards that present or have value to them. Also, consider the demographics of your customers and what rewards they may expect from you.

The next step is to decide what customer behavior will get rewarded. Remember to go back to your goals each time you think about this. Is the simple act of buying during a time of day going to be enough?

Consider what you need to grow your business. Do you need more customers, more business during a slow day, or more brand awareness? Encourage your customers to take actions that will improve your store and then offer your rewards.

For example, you want more brand awareness on social media. Push customers to mention your brand or products on a social platform. Ask for proof of their post when they come in to get their reward.

Finally, consider how your customers will learn about your rewards program. Focus on how you’ll convince them that the program is a worthwhile investment in the long run. How will you make it appealing to your customers and keep them interested in it? 

4. Things to Consider When Starting and Launching the Program

A small business can’t offer rewards to the level of popular credit card companies. However, that doesn’t mean using a loyalty program isn’t going to help. Small businesses often use the Buy 5 Get 1 Free strategy with some customizations. 

Also, not all strategies or types of customer rewards program will work for your business. Find a method that fits your business goals. This way, you don’t waste time trying to market a loyalty program that doesn’t offer value to you.

Pitch your loyalty program to your regular customers first. Because they’re regular customers, they have the means to earn rewards. Statistics show that 52% of American consumers will join the loyalty programs of brands they often buy from.

Advance Your Relationship With Your Customers

That ends our guide on how to start a customer rewards program. We hope you found this guide on making a customer rewards program helpful and useful. Now, you can get more brand awareness, sales, and new customers for your business.

We hope this guide on how to start a customer rewards program proves to be educational and valuable. If you want to see more content on improving your business, check out our other guides. We have many more guides that can help you boost sales, customer loyalty, business strategy, and more.