Brands are constantly fighting for customer loyalty in a competitive market. 7 out of 10 Consumers consider loyalty programs to be a major driver of sticking with a brand.
Most loyalty programs fall into one of four categories: points, tier, pay-per-view, or value-based.
Learn how loyalty programs work, how they can benefit your business, and find examples to inspire your own loyalty strategy.
What is the loyalty program?
Loyalty programs offer a business’s repeat customers discounts, free offers, and other incentives to encourage them to make repeat purchases.
How does a customer loyalty program work?
Loyalty programs allow businesses to offer points and rewards to their customers. In return, customers can redeem their points for discounts, free products, rewards, or insider perks. The goal is to encourage repeat purchases and build trust between the customer and the business.
People will go to great lengths for their favorite brands, but they want perks in return. 60% of US shoppers They expected to receive discounts for joining a loyalty program. The same survey also found that respondents expected to earn points and rewards, and about 33% wanted exclusive or early access to products.
Running a customer loyalty program means offering something: a discount, a sale, early access, etc. The payoff can be huge. Benefits include:
- Increased customer referrals. People will tell their friends and family about your great program, and more referrals means more loyal customers.
- Increased customer retention. Once people find value in your customer loyalty program, they’ll likely stick around for a long time.
- Sales will increase further. I want something more expensive Average Order Value? According to a 2022 survey 79% of US consumers In a separate survey, 50% of respondents said that loyalty programs influence the likelihood of them continuing to do business with a brand. 80% insist on purchasing After joining a loyalty program, you can receive products from the brand more frequently.
- Brand endorsement. A successful loyalty program can turn regular customers into brand advocates who spread the word about your brand, which is a lower-cost marketing strategy compared to paid advertising.
Types of loyalty programs
Not all loyalty programs are the same. There are many different types of rewards programs you can use to build customer loyalty and get repeat business. Here are some of the most popular:
1. Points-Based Loyalty Programs
A loyalty program is the most common type of rewards program. Customers can earn reward points that can be redeemed for free products, cash back, perks, and more. Rewards customers don’t just earn points for purchases; they can also earn loyalty points through social media shares, review postings, birthdays, and gamification.
2. Tiered loyalty programs
A tiered customer loyalty program is a membership where customers receive different benefits depending on their rank. Often, businesses rank their membership into groups according to metrics like sales or engagement.
These customer rewards programs give customers goals: the higher the level, the more exclusive the rewards become.
3. Paid Loyalty Programs
Paid loyalty, or fee-based loyalty programs, offer immediate and ongoing benefits to customers in exchange for paying a participation fee, which can be recurring or one-time.
Paid programs may require proof of value to gain sign-up, but they can capture higher customer value from members. The most common example of a paid loyalty program is Amazon Prime. While it may seem like a difficult model to replicate, paid loyalty fits into a variety of business models.
4. Value-Based Loyalty Programs
The idea behind a values-based loyalty program is to connect with your customers on a deeper level. You donate a percentage of their purchase amount to a charity or benefit program. You can allow your customers to choose from a variety of charities or just one that aligns with their values.
Although the program does not actually reward customers, it holds a special place in their hearts because the rewards benefit society.
If you’re not sure where to start, ask your customers what they want from a rewards program. You can easily conduct a survey or poll among your customer base to find out. Then create your rewards program accordingly.
Examples of successful customer loyalty programs
Bloom
Body care retailer Bloom uses a points system called Bloombucks in its loyalty program. Blue Metopia.
It’s easy: Customers can earn Blume Bucks by following the brand on Instagram, placing orders, telling their friends about Blume, etc. These can then be redeemed for merchandise, free products, and other gifts.
Vibrant
Vibrant is a clothing and accessories brand with a tiered points program. Customers are automatically enrolled in the program when they sign up for a LIVELY account. Customers earn points through activities such as following the brand on TikTok (10 points) or purchasing products in-store (30 points).
Loyalty members can use their points towards purchases – for example, 100 points equals $10 – or redeem them for merchandise like tote bags, socks, clips, etc. LIVELY’s rewards program has different levels based on annual spending.
- insider: $1-$124
- Inner circle: $125-$324
- VIP: Over $325
The more you spend, the more perks you get, for example, VIP members get free express shipping, discounts on upgrade offers, and customer care text services.
Millennium
Millenesse is Australia’s leading sustainable and cruelty-free beauty brand. Their loyalty program: Love’s Rewardcontains two layers: gold and onyx.
Gold members earn 2 points for every dollar spent and receive the following benefits: free shipping You’ll earn double points on every order, double points for activity, get 200 points as a sign-up bonus, and convert 100 points into $5 in store credit. The Gold tier costs $18 per month but comes with extra perks like access to secret sales and the chance to be a tester for new products.
The Onyx level is free, members earn 1 point for every dollar spent, there is a 100-point sign-up bonus, and members receive a birthday surprise.
100% pure
100% pure is a popular skincare and beauty brand with a tiered rewards system: customers earn points by participating on their social media channels and writing reviews, which they can then redeem for products on the site.
The program has three tiers based on spending per calendar year.
- mania: $0
- Activist: $250
- Revolutionary: $750
Rewards include early access to new products, free shipping, redeemable vouchers, birthday gifts, etc. Loyal customers earn points for actions such as registering an account (50 points), leaving a review (10 points), and interacting with the brand on Facebook and Instagram (20 points each).
Anyone can join the Purist Perk program and redeem points for discount code vouchers. Customers can earn 15% off for 200 points at the Enthusiast level and $20 off for 200 points at the Activist level. Discounts can be used at checkout and cannot be combined with other offers.
How to add a loyalty program to your business
Every business competes for customer trust, and one of the best ways to build this trust is by showing appreciation and providing a unique experience. Instead of spending time finding new customers, you can start a loyalty program to strengthen relationships with your existing customers.
If you have a Shopify store, it’s easy to create a loyalty program online. You can use apps like Smile and Yotpo to Shopify App Store Get started today.
For example, in the following app: smilecan help you create loyalty and referral programs that attract customers to your store, from designing the program to setting up eye-catching widgets on your website that grab visitors’ attention and encourage them to sign up.
Customers will also have a rewards portal on their mobile phone to manage their account, earn rewards and redeem points.
Doing something different with your loyalty program
Over the past decade, customer loyalty and rewards programs have Improve customer retentionIncrease customer lifetime value, Excellent customer serviceinspiring brand loyalty.
A truly innovative approach to customer loyalty programs can create significant value for retailers.
Illustration by Rachel Tunstall
Loyalty Programme FAQs
What is the loyalty program?
A loyalty rewards program offers rewards and promotions to repeat customers. With every purchase, you earn some kind of reward. Rewards programs encourage future purchases, making them a great way to increase customer retention and loyalty.
What types of loyalty programs are there?
Loyalty programs can be referral-based, purchase-based, or both. Programs can be points-based, tiered, pay-per-click, or value-based. Loyalty programs can be run online or with a physical item, such as a punch card.
What is the purpose of a loyalty program?
The purpose of a loyalty program is to motivate customers to continually buy from your business instead of your competitors.
