How Loyalty Programs Can Help Businesses in Post-Covid Economy

by Stephen Davis, VP, Integrated Insight

Published May 12, 2020

Businesses will face monumental challenges in the coming year as a result of the coronavirus outbreak. For many, this is their first time operating in an economic crisis. Unfortunately for some, it will also be their last and only.

The United States’ economy slumped in the first quarter of 2020. The economy will likely  be in a recession through the end of the year. Over 30 million Americans have filed for unemployment benefits since the start of the coronavirus pandemic. Historic double-digit unemployment rates are expected in the months to come. Economic uncertainty is spreading, and consumers are worried about short-term job prospects and financial security.

As Americans tighten their belts, competition for wallet share will intensify. Current business strategies need to focus on customer retention and low customer acquisition costs. This can be achieved through a customer loyalty program. Loyalty programs also increase customer engagement, frequency of engagement, and spending - all of which improves the bottom line.

For businesses without a rewards program in place, now is the time for action. For those with an existing program, now is the time to fortify the use of best practices and dive into customer loyalty program insights.

Successful loyalty programs do three things:

  1. Create a relationship.
  2. Engage with customers.
  3. Reward loyalty.

To implement these three strategies, businesses need to know the loyalty member, engage them, and reward them.


Let’s take a deeper look at how customer loyalty programs can help businesses in the Post-COVID economy.

1. Create a relationship.

Most businesses understand the importance of customer relationships. A loyalty program can deepen the relationship and provide a direct connection to customers. The relationship starts with a strategic membership sign-up process. Here is an example.

Dan’s Diner has five restaurants and has been hit hard by social distancing restrictions. Dan’s is popular among locals and has a solid existing customer base. However, the current climate has the restaurant owners worried about losing share to other local restaurants. They know competition for takeout is tough. Reopening at reduced capacity may not be enough to sustain the business.

To help retain customers and promote brand loyalty, Dan’s Diner implements a rewards program where members can earn points to redeem on future purchases. Members use their e-mail and provide basic information to sign-up. During the process there are a few questions that help the restaurant get to know the customer. This creates a direct line of communication to loyal customers and a tool to incent repeat visits.

2. Engage with customers.

Creating the relationship is just the first step towards a successful loyalty program. Next, companies need to engage with customers by leveraging the sign-up information to personalize messages. Consumers are bombarded with emails and notifications from businesses. In order to be engaging, companies need to personalize communication to stand out from the noise.

-  Dan’s Diner wants to find ways to announce their re-opening without spending more dollars on advertising. They decide to engage with their most loyal customers first. The diner provides tailored information to members with details on new operating hours and social distancing guidelines for their nearest location.

To engage the loyalty members further, the diner holds a contest among members with a prize. Loyalty program members who post the re-opening announcement have a chance to be the first patrons back at Dan’s. To spice it up, the winners also receive a free meal for them and three guests.

3. Reward loyalty.

The end goal of reward programs is to encourage customers to make incremental purchases. Creating incentives that reward loyalty without diluting current business requires a strategic approach.

-  Dan’s Diner has re-opened and is making ends meet but could use extra business. Their customer loyalty program has been popular, and they now have 2,000 members. Repeat customers show a high affinity for the program. Based on past purchase behavior, Dan’s finds that Tuesday through Thursday afternoons between 1 p.m. and 4 p.m. are the slowest periods that have the least amount of member purchases. Conversely, on Friday and Saturday nights the restaurant is constrained due to social distancing guidelines. On these nights, members make up the majority of customers.

Dan’s customer loyalty program is a tool the diner can use to shift member demand away from weekend nights and into weekday afternoons. In order to do this, the diner offers double reward points for members that visit from Tuesday through Thursday in the low-demand periods. On Friday and Saturday nights, Dan’s offers a free appetizer for members when purchasing a to-go or delivery order. By offering these bonus rewards to members, Dan’s Diner can free up capacity on the weekends and encourage purchases during the week.

Once businesses create customer loyalty programs, the work doesn’t stop there. Successful loyalty programs are dynamic. They continuously monitor usage and adjust reward structures to optimize behavior. Businesses that can execute effective loyalty programs will have a competitive advantage in the upcoming months of economic uncertainty.

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