How to Develop a POS Loyalty Program: Step by Step

Customer satisfaction and retention are critical aspects of ensuring your customers return to you for repeat business.

In fact, research indicates that approximately 20% of your customers are responsible for about 80% of your total sales.

Therefore, doesn’t it make sense to encourage your customers to return and reward loyalty so that your business thrives and flourishes?

In this blog post, we’ll explore effective strategies for creating your own POS loyalty program that boosts repeat business, increases sales, attracts new customers and brings a whole host of other benefits.

What is a POS loyalty program?

POS (Point of Sale) loyalty programs, also known as customer loyalty programs, enable shoppers to earn and redeem rewards at checkout. 

This typically involves enrolling customers in loyalty software integrated with a POS system to create customer profiles and track purchase histories. When a registered client makes a purchase, the system automatically updates their profile with earned rewards. 

The incentives of POS loyalty programs can vary—from points and tiered rewards to cashback and exclusive member offers—all designed to show gratitude to customers for their repeat visits. Each has its own benefits and can suit different business models. You can even create your own unique rewards program that works best for you.

Today, there are many modern, affordable systems available for small businesses that automate the management of customer transaction history and loyalty points. This helps save time and reduce manual work. Some even offer a free version that includes the necessary loyalty functionality, along with advanced features to further enhance the process.

Why is a POS loyalty program important for a business?

A customer loyalty program acts like a domino effect, triggering a series of benefits for both your business and your customers. Once implemented, it enhances customer engagement, encourages repeat visits, and increases the likelihood of more purchases. 

As a result, businesses experience higher sales and better cash flow. This cycle creates stronger brand loyalty and customer satisfaction, further reinforcing the benefits. Additionally, it provides a competitive edge, helping you stand out in the market.

While many businesses can benefit from a POS loyalty program, it’s particularly effective for those with repeat clients or those focused on building long-term customer relationships. This includes retail stores, restaurants, cafes, fast food booths, e-commerce platforms, subscription-based services, hotels, beauty salons and more.

In short, implementing a loyalty program is particularly important for businesses that depend on repeat customers or have frequent interactions with their clientele. 

How to develop a POS loyalty program: Step by step

We understand that implementing a loyalty program may seem complicated and overwhelming, especially for small businesses with limited budgets and resources. However, the process is actually not as difficult as it may seem, as long as you know what you’re doing. 

To help you create your own customer loyalty program with ease, we’ve outlined the steps to follow below.

1. Analyse your existing clientele

Studying the habits of your current loyal customers is a great starting point for your loyalty program, as it will give you insights into their purchasing preferences.

Here are some aspects and questions to consider when doing so:

• How much does a customer purchase from you in a year?
• What types of products do they buy and how often do they make these purchases?
• How long have they been your customers? 
• Can you cross-sell other products to them?
• Do they use other suppliers, and if so, who are they?
• What is your profit from their purchases?
• Are they regular buyers?
• How satisfied are they with your business?
• How can your relationship with them be improved?

Answering these questions will help you tailor your loyalty program to meet your clients’ needs.A well-designed program can reward customers for their loyalty while strengthening the connection between them and your small business. 

2. Set measurable goals and a budget

Once you’ve identified your customer personas and know who you’d like to target, the next step is to set clear, measurable goals.

This could mean that if, on average, your customer purchases five times from you in a year, you may want to make this seven. Alternatively, you could choose the price route and set a target for how much you’d like each customer to spend at your business. 

Determine what you want to achieve with your loyalty program—whether it’s increasing repeat purchases, boosting customer retention or driving higher sales. Setting clear, measurable goals will guide your strategy and help you implement the program successfully.

Whatever goals you set, you’ll also need a budget. Whether for software, freebies, or other customer-retention expenses, having a defined budget for this purpose is crucial.

3. Choose the right customer loyalty program for your business

Next, you will need to choose which type of loyalty program you will use to retain customers.

There is a wide variety of options and we briefly discuss each one below, so you can take your pick:

• Partner rewards: Well-suited for service-based businesses, partner rewards are a great tool for boosting customer loyalty. You can take advantage of your partnerships by offering your customers special deals if they purchase from your partner or vice versa.
• Membership fee system: If you choose to charge a membership fee for your loyalty program, make sure that the benefits for your customers are worthwhile. Charging a membership fee is an excellent way to offset your costs.
• Tiered rewards: Often free for customers to join, tiered rewards programs are useful for cross-selling or up-selling a more expensive item. These types of rewards work similarly to tiers in an online game. The more your customer purchases or participates, the higher the reward percentage becomes. Ultimately, it’s a win-win situation for both parties. 
• Buy 5 get 1 free: Ideal for coffee shops, bistros, bars and restaurants, this type of reward program offers a customer a free item from your shop after reaching a certain purchase amount of items. This leads to almost instant gratification and encourages customers to return to your business. 
• Point system: Common in supermarkets, with the point system, your customer can earn points based on the value or quantity of their purchase. The customer can then redeem these points for cash or use them to make thor next purchase at your store for free.
• Earn & burn: This is a reward redemption method of retaining customers. Through this system, your customers purchase items or services from your business and get a reward for free. Ranging from a complimentary item to a free service, you can choose the rewards you offer your customers,as long as they fall within your budget, which was discussed above.
• Perks: Perks like free services or discounted prices can be another great way to encourage customers to return. By offering these incentives, you’ll not only meet your margins, but you’ll also have a solid clientele that keeps coming back for more.
• Gamified programs: We all love to play at heart and games are a proven method of incentivising customers to come back. By playing games, striving to meet challenges, earning badges or other forms of gamification, your customers will feel engaged and this will boost their loyalty. 
• Contests: People, by nature, love to win. And that’s why holding contests for your loyal customers could encourage them to come back for more. Set a suitable prize, establish clear terms for the competition, and you’re ready to go!
• Email promotions: Email marketing is the way to go if you want to reach your customers. Through emails, you can offer discounted products or services, update customers on developments at your company, increase brand loyalty by keeping them engaged and informed, and so much more!
• Referrals: Word-of-mouth advertising is one of the best methods for gaining new clients. Nothing is more powerful than a positive (or negative) review as people seek other people’s opinion before proceeding to buy a product or service. Offering incentives to both parties, the referrer and the referee, will not only gain you a new customer, but also keep your existing ones.
• Hybrid loyalty programs: These programs are a combination of two or more of the loyalty program types discussed above. By offering the best of both worlds to your customer, they’ll be engaged and will keep coming back for more.

Choosing the right loyalty program will help you manage your customer relationships effectively, attract more customers, and ensure they feel their contributions pay off through meaningful rewards.

4. Integrate loyalty software with your POS solution

Now that you’ve decided on the program you want to offer your customers, it’s time to implement it. Fortunately, most modern loyalty program software is designed for easy integration with other systems, so all you have to do is follow the supplier’s instructions.

Connecting a loyalty program to external POS systems is key, as it automates what would otherwise be complex manual work and streamlines checkout and customer enrollment. Such an integration enables easier data collection and customer behavior tracking. As a result, you, your staff, and your customers benefit from a smoother process.

For businesses focused on customer loyalty via card machine, linking your program with the POS system ensures rewards are applied seamlessly during transactions. Whether you’re looking to implement simple POS rewards programs or add a loyalty program for your business, integrating these tools enhances customer satisfaction while simplifying operations.

5. Implement the program across multiple channels

Most customers today shop across various channels, and research shows that they prefer an omnichannel experience. In fact, shoppers are more likely to engage with businesses that offer multiple options, whether online, in-store, or via mobile apps.

Omnichannel integration ensures that customers can earn and redeem loyalty rewards regardless of how they interact with your business, enhancing both convenience and engagement. Programs tailored for POS customer loyalty can help track transactions in real-time and provide immediate rewards, whether purchases are made in-store or through digital platforms.

This means it’s important to expand the reach of your loyalty program by making it accessible across all customer touchpoints. This includes ensuring that customers can earn and redeem rewards, no matter how they interact with you. For businesses managing diverse customer bases, implementing a hybrid loyalty program can combine multiple reward methods, such as tiered rewards and partner offers, to increase engagement.

That’s why you need to ensure your loyalty software tracks and records all customer transactions, whether they have been made through your online store or face-to-face. For merchants using POS loyalty programs, integrating these systems ensures rewards are applied seamlessly, boosting efficiency and customer satisfaction. 

Some businesses even choose to develop a loyalty app for customers to download and use, further strengthening omnichannel engagement.

6. Ensure added value

To truly differentiate your loyalty program, aim to provide added value to your customers.

For example, beyond offering your main rewards, you can provide discounts on select products, opportunities for bonus points, exclusive access to events, early product releases, or personalized recommendations. These additional perks not only enhance customer satisfaction but also encourage them to sign up and actively participate in your program.

By consistently offering meaningful benefits, you improve the effectiveness of your loyalty strategy, ensuring that customers feel appreciated and valued. This approach also strengthens their connection to your brand, fostering long-term loyalty and increasing the likelihood of repeat business in the future.

Added value, no matter in what shape or form it comes, strengthens the emotional connection with the brand and fosters long-term loyalty. You might also consider offering exclusive deals to your most loyal customers to further encourage engagement with your brand.

7. Build credibility through customer interaction

Consistent and positive interaction with clients helps build trust and credibility. Once customers enroll in your program, it’s important to deliver exceptional service to keep them engaged and excited to return. 

Engage with them in any way possible—through surveys and social media—to show appreciation for their loyalty. For businesses exploring how to create a customer loyalty program, incorporating a customer loyalty card machine solution can simplify enrollment and reward tracking to create a seamless experience for both staff and customers.

Also, you can use the data collected from surveys and feedback on social media to identify areas for improvement and adjust your strategy accordingly. There is always room for improvement, so make sure you listen to your customers.

Creating a transparent, responsive customer experience not only enhances loyalty but also promotes a positive brand image.

The benefits of customer loyalty programs

In the sections above, we discussed some of the ways you can engage your existing customers to keep them coming back for more. By now, you might be convinced that creating a customer loyalty program is exactly what your business needs. 

But if you’re not, here are some reasons why you might want to consider opting for such a strategy:

• Increase in revenue: There’s a direct correlation between retained customers and sales. When your customer trusts your brand, they’re likely to return, make more transactions, and ultimately contribute to more sales. The best part is that, depending on the loyalty program you choose to use, you’ll be enjoying the financial benefits from both existing and new customers.
• Better customer experience: Most modern consumers today are seeking a personalized experience that resonates with their values. If you cater to their needs by offering them great products and rewards, this will improve their experience and increase the likelihood that they will continue shopping with you.
• Attract new customers: As mentioned above, there are some POS loyalty reward programs that focus on attracting new customers while also helping existing customers gain benefits from using your product or service. A referral program is a great example of this. With the power of word-of-mouth marketing, you’ll have new customers and an increased revenue stream.
• Retain existing customers: You’ll also be able to retain your existing customers, as they’ll see the value in your business offerings. This means that your regular clientele will grow, and you’ll have an even more stable and consistent stream of income.
• User-generated content and positive reviews: Ultimately, your satisfied customers can create user-generated content and leave positive reviews online for your business. There’s nothing better than this, as it is one of the most effective (and free) forms of advertising.

By implementing tools like a reward point system for customers, a custom loyalty program, or a streamlined loyalty POS, you can enhance customer engagement and build long-term relationships that drive sustainable growth for your business.

A great example: The myPOS Referral Program

myPOS isn’t far behind when it comes to loyalty programs for our merchants. 

We offer both newly onboarded merchants and those who refer them a financial incentive for signing up and buying a card machine. This dual incentive helps create a mutually beneficial relationship between our existing and new merchants.

With a whopping 15% of all new merchants coming from our referral program, it’s safe to say that this is not only a great marketing strategy, but makes good business sense, as well!

Conclusion

Whether you’re just starting your business journey or you’ve already established a presence in your market, it’s definitely a good idea to engage with your customers and invite them to return for more by offering them special deals. 

These deals can come in a variety of shapes and forms, it’s completely up to you to choose the model that suits your business type the best.

In this blog post, we’ve outlined the most important steps to starting your own customer loyalty program, explored the types of programs available and shared the top reasons why you should consider implementing one.