How to Start a Loyalty Program

Step 1: Decide what the program is actually for

Before choosing any mechanics, name the problem. Do you need customers to visit more often, spend more per visit, come back after a first purchase, or simply stop drifting to a competitor? These call for different designs, and a program built to reward big baskets will do nothing for a frequency problem.

Write the goal in one sentence — "get first-time customers to a second visit", "increase weekday lunch traffic", "keep our top 10% engaged". Every later decision gets measured against that sentence. A program without a stated goal defaults to a generic discount, which is the most expensive kind.

Step 2: Choose a model

Step 3: Set the earn rate backwards from what you can afford

This is the step programs most often get wrong. Do not start by picking a nice-sounding rate like "one point per dollar" and hoping. Start from the discount rate your margins can absorb — say you can comfortably give back 2% — and work backwards to the mechanics that produce it.

If one point is worth $0.01 (the Sopoints value, and a common one), then a 2% giveback means two points per dollar. If you want to run a punch card, decide what the free item costs you and how many visits should earn it, then check that the implied discount rate is one you can sustain permanently, because that is what it becomes. Set the rate this way and the cost is a decision; set it the other way and the cost is a surprise you discover at the end of the quarter.

One more guardrail: make the first reward reachable early — two or three visits, or a low point threshold. A first reward that takes eight visits loses most customers before the program does any work.

Step 4: Handle the Canadian privacy basics before you collect anything

A loyalty program means collecting personal information, which puts you inside PIPEDA — the federal privacy law covering commercial activity across most of Canada — plus provincial laws in Alberta, British Columbia and Quebec, and CASL for any marketing messages you send. You do not need a compliance department, but you do need to get a few things right from day one.

Step 5: Work through a launch checklist

Step 6: Measure the two numbers that matter

Ignore enrolment counts and points issued — those are vanity metrics that go up whether or not the program works. Two numbers tell you the truth.

The first is repeat visit rate among enrolled customers compared with unenrolled ones. If enrolled customers do not visit more often, your program is a discount, not a loyalty program, and something in the design needs to change. The second is redemption rate. If almost nobody redeems, the reward is too far away to motivate anyone, and you are carrying a liability that buys you no loyalty. Watch those two, adjust the earn rate and reward thresholds against them, and let the rest of the dashboard be background noise.