Strengthen customer loyalty with rewards programs

January 6, 2014 - Tags: Customers Sales Marketing

A customer rewards program can strengthen customer loyalty and add value to your brand. Rewards programs include things like a points system, discount cards, free shipping, special one-time offers, and VIP cards.

Take the first steps to develop your program:

  • Research your competitors. Create a program that either mirrors theirs or distinguish yours by offering something completely different.
  • Collect detailed information from your most loyal customers to analyze spending habits. This will help you select the appropriate type of incentive or reward and the right amount of points or purchases to get to this incentive.
  • Establish an open channel to communicate with your valued customers. Think social media or email to keep your customers informed on the latest deals.
  • Set a clear goal for your customers to work toward; give them a finish line to strive for. There should be incentive for advancement.

Make your rewards program more effective:

  • Use a rewards program with a tier system. Offer small rewards as a base offering, and then increase rewards points as time progresses to encourage repeat customers and repeat purchases.
  • Your employees can help with exposure; they can promote your rewards programs when interacting with customers. Your customers should be aware of and understand your programs completely; this helps encourage referrals. Consider offering incentives to customers who get others to join your rewards program.
  • Partner with another business to provide all-inclusive offers. Strategic partnerships can draw in more customers and give you another way to publicize your loyalty program.

If you sell goods or services online, web analytics can help you measure the effectiveness of your loyalty programs. Tools and software exist to help you also measure metrics such as a customer retention rate to see how long customers stay with you. With a well-thought-out loyalty program, these numbers should rise whether you sell in stores or online.

A customer loyalty program can help retain existing customers and attract new ones with special offers. Loyal customers tend to be more profitable customers. For more information, check out our sales and customer relationship management section.


Comments

Posted by Canada.ca on June 19, 2014
Hi Amlan,

Thank you for your question.

For GST/HST purposes, the Canada Revenue Agency generally treats loyalty points as coupons. Information on the GST/HST treatment of coupons is available on the CRA webpage, How to treat coupons and gift certificates. The CRA publication RC4022, General Information for GST/HST Registrants, also provides information on coupons in the section entitled Special cases.

Employees may collect loyalty points for business travel, such as frequent flyer points or air miles. If an employee receives rewards from points collected on business travel, the employer (or the employee) may have to include the value of the reward in the employee’s income.

Information on the income tax treatment of loyalty points for employees can also be found on the CRA webpage, Loyalty and other points programs.

For more general information on gifts and awards provided to employees, go to cra.gc.ca/gifts.

In addition, the Canadian Consumer Handbook can help you learn about your obligations to consumers in regards to reward programs, gift cards, refunds and exchanges, and more.

We hope this information is helpful.
Posted by Amlan on June 13, 2014
Is there any information available that summarizes the tax implications for both consumers and vendors with regards to loyalty programs, including income, sales, VAT, etc.?
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