Coworkers discussing strategy to create a customer loyalty program.

Creating a Customer Loyalty Program

Updated June 1, 2018 . AmFam Team

Looking for ways to retain clients, increase revenue and design a system for success? Creating an effective customer loyalty program doesn’t have to be difficult. Follow these suggestions on how to start and maintain a successful program that’ll leave your clients coming back for more.

4 ways to retain clients, increase revenue & design a system for success.


Parents often face a dilemma: How do you give older children ample attention without neglecting your newborn? It’s a balancing act that takes a thoughtful mindset and strategy. The same can be said for entrepreneurs who strive to create a successful sales operation by cultivating a customer loyalty program that entices new clients without ignoring a faithful base.

Many companies use points programs to encourage loyalty, where purchases lead to points that customers redeem for discounts on later purchases. However, customer loyalty expert Jackie Huba (Opens in a new tab), author of Monster Loyalty: How Lady Gaga Turns Followers into Fanatics doesn’t believe points programs garner the best results.

“Points programs are there to bring customers back, based on the points and rewards they have available, but that’s not loyalty,” explains Huba. “They are just incentives for customers to return. Loyalty is at a higher level and involves engaging loyal customers who keep coming back to also help them find new customers through word of mouth or referrals.” A winning loyalty program will inspire a small business’s most faithful shoppers.

Here are four suggestions on how to start and maintain a successful program that will leave your clients coming back for more.

Understand your base. A return customer program must identify who and what you’re dealing with. Huba suggests small business owners use a survey technology like Net Promoter Score, found in various customer experience management software programs. This calculation measures a customer’s willingness to recommend a company’s products or services and gauges their overall loyalty to your brand. The metrics will provide you with customer insights including areas of improvement, benchmarks for growth and a better understanding of how to direct your customer engagement.

Identify your VIP customers. Customer incentive programs should make your clientele feel extra special, especially those who spend the most and keep coming back. Invest in software that will identify and monitor “VIP” customers and communicate with them often through direct mail or email to ensure they know your mission and intentions. Then consider inviting them to join a customer advisory board or exclusive ambassador club. Take Loretto, Kentucky-based premium bourbon company, Maker’s Mark, for example. Their Ambassador program offers loyal customers invitations to exclusive events, personalized elements for their bottles and holiday gifts in exchange for providing feedback and sharing their preferences with others. “These folks will become loyal advocates for your business just because they were asked for their opinion,” says Huba.

Get social with it. Don’t be afraid to engage with customers. Huba has seen success when smaller retailers ask customers to take a photo using or wearing a company’s product and post it with a customized hashtag. “Whoever has the most creative photo gets a discount,” says Huba. “These customer engagement programs will increase loyalty because you can see the people who are out there talking about you. Any customer who takes the time to do something for you is your most loyal fan. Social media can be a great way to identify these customers.”

Assign a team to own it. After you’ve chosen a customer loyalty program that fits your needs, make sure you have employees or contractors to produce, execute, promote, and maintain it. Launch in a trial stage to a segment of your customer base to see how things work, which will allow you to fix any potential problems that may arise. “Make sure you have the resources and personnel to manage the program because the last thing you want is to roll things out, something goes wrong, and there’s no one to help customers resolve their issues,” says Huba.

Your customer loyalty program should be tailored to your base’s needs. Think outside the box and discover more meaningful ways to engage your clients, especially those who have been with you since the beginning. They can be the secret sauce not only in acquiring new customers but in taking your business to the next level.

Related Articles

Related article test
  • Man sipping coffee taking a break from work to recharge.
    Man sipping coffee taking a break from work to recharge.
    Avoiding Burnout as a Small Business Owner

    It’s natural to anticipate pursuing all of the goals you have for your business. But, instead of readying yourself and your company to ramp up, consider taking a pause. A good break can help you reset, start looking towards the future and help you avoid burnout.

  • Image of an apartment complex in early autumn.
    Image of an apartment complex in early autumn.
    When Should You Invest In Rental Property?

    As a landlord, you know that an investment property has great potential. When everything goes according to plan, it can be an exceptional source of income. But seeing a consistent return on investment means you’ve got to keep a close eye on the numbers before you close on a property.

    Although there’s a fair amount of risk involved in making a purchase, you can lean on a few key rules, formulas and indicators to help guide your decision. Next time, when you’re wondering “Should you invest in this rental property?” refer to these important purchasing tips to help make the right choice — and quickly rule out real estate that may not be worth the investment.

    Start with the “One Percent Rule”

    Answer a simple question: Will your monthly rent for the space equal at least one percent of the purchase price? If your answer is yes, then your place may be able to turn a profit in the years ahead. Congrats, you’re off to a good start. Be sure that the rental’s priced competitively for spaces of similar design. Here are few other factors to consider:

    Understand the formula

    If the total purchase price of the property is $200,000, rent should be no less than $2,000 per month or one percent of the total cost. Likewise, a $600,000 purchase price for a multi-unit rental property should meet or exceed $6,000 per month in total monthly rent earnings.

    Get the purchase price right

    When factoring in the purchase price, remember to include closing costs, property taxes and insurance. One way to better estimate these costs is to use an online closing costs calculator which can approximate appraisal fees, home inspection fees, application fees, prepaid interest among a host of other out-of-pocket expenses that can up your purchase price, sometimes by thousands.

    Factor in repair costs now

    Because real estate investing as a landlord requires the space to be “habitable” upon tenant occupancy, you may need to make certain repairs or upgrades before renting the property. As a result, you’ll want to add the total cost of these repairs into the purchase price.

    Consider the “Class” of the Neighborhood

    Neighborhood classifications help buyers understand the potential return on investment in a given area. If you’re new to being a landlord, you’ve got to pay close attention to what the neighborhood’s telling you.

    One good way to check out an area — specifically if it’s an investment that requires some traveling — is to use Google map’s street view. Is trash left out on the front lawn? Do neighbors maintain their property? What can the cars parked on the street tell you about the demographic? Here are details on the four distinct neighborhood classes real estate agents use to classify a region:

    Class A neighborhoods

    High income neighborhoods, combined with a home that is move-in ready will usually get an A class rating. Because homes are expensive in these neighborhoods, and their higher than average tax burden, real estate investors usually won’t buy a home there because the one percent rule fails the test. Tenants in these areas tend to be very reliable, high-quality renters.

    Class B neighborhoods

    Typically populated by those earning a moderate-to-high income, B class neighborhoods are frequently considered a good investment for landlords and fertile ground for tenants seeking rentals. Purchasing “as is” properties that can be cheaply updated and rented above the one percent factor is typically possible here with minimal risk. These areas will usually experience increased turnover and vacancy rates.

    Class C neighborhoods

    Because the risk is a little higher in neighborhoods that land in the C class category, the opportunity to see a high rate of return on fixer-upper places is good if you buy a For Sale by Owner property, or one not listed on the MLS (multi-listing service for real estate sales). Populated with blue collar workers with relatively low-to-average income, C class areas typically have higher crime rates and under-performing schools. Landlords should expect less-than-optimal tenants and periods of vacancy.

    Class D neighborhoods

    Areas riddled with crime, properties damaged upon a tenant’s exit and high costs for property upkeep can be anticipated in D class neighborhoods. Buyers usually consider these types of purchases high risk. It should be noted that many property management companies are reluctant to accept properties to service in these areas because the risks associated with the area. Investors tend to seek properties in more stable neighborhoods.

    Use the Capitalization Rate as a Predictor of Value

    Another key way of understanding the rate of return on an investment is the capitalization rate or “cap rate” for short.

    What is a cap rate?

    A cap rate determines a profit ratio that a property can generate. It’s best used as a quick way to compare investment opportunities to determine which one is the better value. Start by dividing the total of one year’s rent by the current market value of the home which should include costs and upgrades required to get the space habitable — you can’t rent the place if it’s not livable, right? The resulting percentage is your cap rate. The higher the rate, the better your annual profit margin.

    How to Calculate the Cap Rate for an Investment Property

    Although the cap rate’s a useful tool to quickly analyze the relative value of comparable real estate opportunities, it’s used as a rough guide to qualify properties for consideration, given the state of today’s current market climate. First, estimate your property’s overall purchase price:

    Figure the acquisition value

    Simply put, this is the total purchase price. It should include all upgrade costs, closing costs, taxes, business insurance, fees, points, etc. Let’s assume a property you’re considering has a total purchase value of $200,000.

    Calculate one year’s rent

    If you’re collecting $2,000 per month, you’ll have twelve payments at the end of the year, or $24,000. This figure is your gross annual income.

    Account for half a month’s vacancy

    Because turnover typically requires some painting and repairs, it’s fair to consider that half a percent (two weeks’ worth of rent) of your total annual income will be deducted to cover the mortgage payments. Assume that your new tenant will cover the remaining pro-rated rent for the other half of that month. Once the vacancy amount is deducted, the result is your gross operating income.

    • Gross annual rental income: $24,000
    • Less the cost of vacancy: -$1,000
    • Gross operating income: $23,000

    Factor in operational costs

    These costs will include money required to keep the property habitable, like paying for trash collection, making repairs, fees from property management, and landlord insurance. Let’s put that cost under fifty percent of the gross operating income, or $9,300. Some years it will be more, some less.

    • Gross operating income: $23,000
    • Less operating costs: $9,300
    • Net operating income (NOI): $13,700

    Divide the NOI by the total value of the property:

        $13,700 
    ---------------------  =  0.0685 or 6.85 % - That's your cap rate.
       $200,000 

    The capitalization rate for this investment is 6.85 percent annually. If another property under consideration returns a higher cap rate like 8.23 percent for instance, you may want to explore opportunity with the higher annual yield in order to maximize your profit potential.

    What is considered a good cap rate?

    Generally, a cap rate between 8% and 12% is considered good. However, an optimal cap rate is really going to depend on several factors including location, risk and current rental income. For example, in high-demand like big cities, a cap rate of 4% may be considered good.

    Reach Out to Your Agent Today

    With so many different ways to look at profitability when determining where to invest in rental property, it’s important you do your homework before you decide to buy. And while you’re making that big decision, remember to contact your American Family Insurance agent and discuss your upcoming purchase. When it comes time to close the deal, you’ll have peace of mind that your property’s insured carefully.

    This article is for informational purposes only and includes information widely available through different sources.

  • Person at desk using internet of things to reduce business costs.
    Person at desk using internet of things to reduce business costs.
    Reduced Business Costs & the Internet of Things

    You may have heard the term “Internet of Things” (also known as IOT) buzzing around a lot lately. Catchphrases such as predictive maintenance, retrofitted sensors, and reactive technologies are humming through newsfeeds and making many entrepreneurs curious. But, is it all hype or is there measurable business value in investing in the IOT?

    “The Internet of Things is going to be a big thing for small business,” says Tim Reid, a network systems engineer and consultant for private industry and government. Referring to the concept of billions of objects being connected to the Internet, Reid points out that smaller firms will be able to cut costs and become more competitive thanks to the new technology.

    While the IOT is not a new concept, it is evolving and becoming more relevant in our everyday lives and the way small businesses get ahead.

    A study by logistics service provider DHL and IT firm Cisco predicts that the IOT will save businesses $1.2 trillion in productivity costs alone.

    Are you ready to be one of those businesses? Here are some ways that the IOT can improve your company’s bottom line.

    Inventory management. You can keep track of costly inventory – even with it being in a remote location such as a warehouse. With inventory sensors on small items or large products, businesses can reorder stock as it runs low.

    Safety compliance. “There are many local, state and federal regulations, but small businesses often don’t have the funds to hire compliance teams internally,” says Reid. IOT allows small businesses to use sensors to measure air quality, temperature, and other conditions that may be governed.

    Potential revenue stream. “The big thing about the Internet of Things is that it can be a model for recurring revenue every month,” says Reid. For example, a small business can put sensors on a product that it installs and “offer to monitor it for customers for a monthly fee.”

    Security. For years, video surveillance has utilized physical tape that could be removed or damaged. With the IOT, videos are connected to the Internet and can be viewed remotely. “Business owners can track access to their building based on fingerprints and badges. This is inexpensive and easy to implement,” says Reid. Many people are choosing security systems for protection for their small business. From the alarm system to fire, smoke, window and door sensors, you’ll gain peace of mind knowing you’re proactively protecting your business.

    Wages and labor savings. If your business monitors or repairs products for customers, the IOT can be revolutionary. Traditionally, companies send out a person to repair a product or resolve an issue on site, which can be costly. With the IOT, data can be sent from the product directly to your company’s computer. You can troubleshoot, rule out problems and make decisions without leaving your office.

    Energy management. Gone are the days of the maintenance staff going from room to room and building to building to adjust the thermostat. “It is now connected to sensors that can be controlled remotely,” says Reid. Businesses can save on energy costs by powering down when parts of their facilities are not being used. Nest thermostat is a popular smart device for energy efficiency that can be controlled from your phone no matter how far your business takes you.

    “As small businesses continue to look for ways to reduce costs and gain agility, the Internet of Things can potentially level the playing field,” Reid says. “If you pay attention, small businesses can get ahead of larger ones.”

  • Image of a vacant commercial strip mall property and parking lot.
    Image of a vacant commercial strip mall and parking lot.
    14 Tips for Securing Vacant Commercial Property

    If you’re a business owner or a commercial real estate landlord, staying in business can be a difficult sometimes. There are a lot of reasons why a commercial operation might need to close for an extended period. And in today’s challenging times, some of those reasons are simply out of your control. If your business has been forced to shut down in response to the COVID-19 pandemic, you may be wondering how to keep your property safe while you’re away.

    Protecting your vacant commercial property is all about securing the perimeter. And by installing a smart security system, you can get real-time data on the condition of your business property, whether it’s occupied or not. We’ve put together some tips to help reduce the threat of serious damage to your commercial property if you’ve found yourself temporarily unable to run your business.