What Is the Best Customer Loyalty Program?
💡 Quick Answer: Globally, points-based rewards programs are the most popular. Shoppers can earn points on purchases that can be redeemed for discounts and other perks. But there are several different types of customer loyalty programs, and the best option for your store will depend on your business goals, target audience, and available resources.
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Introduction
Imagine a customer that loves your brand so much that they keep buying from you over and over again. This type of ‘golden’ customer is what we all want as eCommerce business owners - a repeat buyer.
So how do we go about finding these types of ‘golden’ customers?
It’s all about customer loyalty and creating a program that keeps them coming back for more.
You can implement a structured marketing approach to build customer loyalty by rewarding them for their purchases. Customer loyalty programs have been proven time and time again to increase sales and profits for any type of business.
According to a recent study, consumers are 82.4% more likely to shop at stores with customer loyalty programs:
Starbucks Rewards is an example of just how powerful a customer loyalty program can be. The coffee chain recently attributed 40% of its total sales revenue to its loyalty program.
And it’s not just brick-and-mortar stores that can benefit. One Shopify Plus footwear retailer increased monthly revenue by 226% by revamping its customer loyalty program.
In this article, we give you the ultimate guide on customer loyalty programs. We’ll examine the different types and provide real-life examples that have already been proven to work with existing brands. We’ll also reveal how you can implement every kind of program and how to decide which is the best option for your business.
Let’s get into it.
What Are Customer Loyalty Programs, and Who Can They Benefit?
Customer loyalty programs are marketing strategies designed to retain customers and increase spending by offering incentives, rewards, or exclusive benefits. Programs typically reward customers for their repeat business or brand advocacy, which fosters a closer relationship between the company and the customer.
Launching a loyalty or rewards program can be one of the best ways to thrive and grow your eCommerce business during a recession.
Many different types of businesses can benefit from customer loyalty programs:
- Retail stores (clothing, electronics, and home goods stores)
- Online retailers and eCommerce websites
- Airlines and travel companies
- Hotels and resorts
- Restaurants and cafes
- Grocery stores and supermarkets
- Software companies
- Fitness and wellness businesses (gyms and yoga studios)
Customer loyalty programs can benefit any business that wants to incentivize repeat business and increase customer engagement and retention.
Types of Customer Loyalty Programs
Loyalty programs create incentives to encourage customers to keep coming back to your store and make repeat purchases.
But there are several types of customer loyalty programs, and some are more suited to some businesses than others.
Here are the six best types of loyalty programs:
1. Point-Based Program
With a points-based program, customers earn points for every purchase and can redeem them for rewards such as discounts, free products, or exclusive experiences.
Successful Example: Ulta Beauty Rewards
Ulta Beauty Rewards is a point-based loyalty program where customers earn points for every dollar spent. Customers can then redeem their points for discounts on future purchases.
In addition, the program offers various perks, including free birthday gifts and exclusive event access.
Why Point-Based Programs Work
Point-based reward systems tap into the human psychological need for recognition and achievement.
They provide a clear sense of progress toward a goal.
When individuals see their reward points accumulate over time, they are motivated to continue working towards earning more rewards.
Point-based reward systems also provide immediate gratification. As soon as they earn points, shoppers can see the results of their efforts in the form of rewards or benefits.
How to Implement This Program
Step 1: Determine the Point System
First, you must determine the point system. This involves deciding how many points will be awarded for each desired action or behavior and how many points are required to redeem rewards.
Step 2: Choose the Rewards
The next step is to choose the rewards. This could be anything from discounts on future purchases to exclusive access to special events.
Step 3: Promote the Program
You can use multiple channels like email, social media, and in-store signage to inform your customers about the rewards program, how it works, and what rewards they can earn.
Email marketing is one of the best ways to boost customer loyalty. Learn more in our guide, Get Repeat Sales with Email Marketing.
Step 4: Track the Points and Rewards
You need a system to track the points earned by each customer and the rewards redeemed. If you use Shopify to host your eCommerce store, there are a bunch of customer loyalty program apps you can use to help track and manage your points-based loyalty program.
Step 5: Monitor and Adjust
After implementing the program, you should regularly assess its effectiveness. For example, you can use customer retention rates, purchase frequency, and average order value metrics to determine whether the program drives desired customer behaviors.
Then, you can improve it to make it more effective and appealing to your customers. This may involve adjusting the point system, changing the rewards, or introducing new features to the program.
2. Tiered Program
Customers are rewarded with different perks and benefits as they move up through different levels or tiers of the loyalty program based on their level of engagement or spending.
Successful Example: Delta SkyMiles
Delta SkyMiles is a tiered loyalty program for airline customers. Customers start at the lowest level and can move up the tiers by earning qualifying miles or spending a certain amount of money.
Higher tiers offer benefits such as free checked bags, priority boarding, and access to airport lounges.
Why Tiered Programs Work
A tiered customer loyalty program works by offering rewards or benefits as a customer moves up through the program’s tiers. This encourages shoppers to continue to make purchases and engage with the brand.
There is also the appeal of exclusivity. Customers access more exclusive rewards or benefits as they move up through the tiers. It also incentivizes existing customers to spend more money or engage with the brand in other ways to reach the next tier.
How to Implement This Program
Step 1: Determine the Tiers
Decide on the program’s number and types of tiers. Common types of tiers include bronze, silver, gold, and platinum. The benefits and rewards offered should increase as customers move up through the tiers.
Step 2: Set Criteria for Moving up Tiers
Decide the criteria new customers must meet to move up to the next tier. This could include a minimum number of purchases or a minimum amount spent.
Step 3: Choose Rewards
Set the rewards for each tier. Rewards could include discounts, exclusive offers, free products, or early access to special events.
Step 4: Promote the Program
Spread the word to your customers and ensure they understand how the program works. This could include promoting the program on your website or including information in your email newsletters.
Step 5: Monitor and Adjust
Keep track of how the program performs and adjust the rewards and criteria as needed to ensure that the program effectively drives customer loyalty.
Looking for some more top tips to future-proof your eCommerce store? Check out our list of the 19 Best eCommerce Strategies for Today and Tomorrow.
3. Cashback Program
As you might expect, this type of loyalty program rewards customers with cashback on their purchases. They can use the cashback rewards on future purchases.
Successful Example: Rakuten (formerly Ebates)
Rakuten is a cashback loyalty program that rewards customers with cashback for their online purchases. Customers can earn a percentage of their purchase amount back in cash, which they can redeem as a check or PayPal payment.
Why Cashback Programs Work
Cashback programs are particularly effective because they provide tangible benefits to customers. Unlike other loyalty programs offering points or discounts, cashback programs provide customers with money they can spend on future purchases.
This creates a sense of immediate gratification and can be more appealing to customers than other rewards programs.
In addition, cashback programs can be structured to encourage customers to spend more to receive a larger cashback reward. For example, a program might offer a 2% cashback reward for purchases under $50 but a 5% cashback reward for purchases over $100.
This type of tiered system can motivate customers to spend more to receive a higher reward.
How to Implement This Program
Step 1: Determine the Program Details
Decide on the rules and regulations for the program. This includes determining the amount of cashback that customers can earn, the terms and conditions for earning cashback, and how cashback will be redeemed.
Step 2: Set up a System for Tracking Purchases
You will need to track customer purchases to calculate the cashback earned. This can be done through a loyalty card or an online account that customers can use to track purchases.
Step 3: Promote the Program
Make sure to promote the program to your customers through various marketing channels. This can include email campaigns, social media posts, in-store signage, and more.
Step 4: Monitor and Adjust
Regularly review the program to ensure it effectively drives customer loyalty. Consider adjusting the rules and regulations of the program as needed to improve its effectiveness.
4. Coalition Program
With a coalition program, customers can earn loyalty points or rewards across multiple brands or businesses that have partnered to offer a joint loyalty program.
Successful Example: Air Miles
Air Miles is a popular coalition customer loyalty program in Canada that allows customers to earn rewards points when purchasing at participating businesses. Members can earn points at grocery stores, gas stations, restaurants, and more.
They can redeem their points for various rewards, including travel discounts, merchandise, and gift cards.
Why Coalition Programs Work
A coalition loyalty program offers customers a wider variety of choices where they can earn and redeem their rewards. This flexibility increases the program’s appeal, as customers can find more opportunities to earn and redeem their points at various places.
They can also be more cost-effective for the participating companies.
By sharing the program’s costs, each participant can reduce its expenses on loyalty programs while still providing an attractive offer to its customers.
A coalition loyalty program can also help to create partnerships between the participating companies. By working together on a successful loyalty program, the companies can create mutually beneficial relationships beyond the loyalty program.
Partnering with the right third-party brands can be a great way to increase exposure and generate sales.
Discover more ways to drive sales in our guide, 18 Dropshipping Marketing Tactics PROVEN to Bring in Sales.
How to Implement This Program
Step 1: Select Coalition Partners
Choose partner companies whose products or services complement your own. The partners should share your target audience and brand values.
It’s also important to ensure the partner companies have a solid reputation, as their actions will reflect on your brand.
Step 2: Determine the Program Structure
Decide on the program structure, such as point accumulation, rewards, and redemption rules. You’ll need to consider factors such as the target audience, partner companies, and budget.
Step 3: Promote the Program
Develop a plan with your coalition partners to promote the new program. This plan should include the program benefits, how to enroll, and how to earn and redeem points and rewards.
Step 4: Monitor and Adjust
Monitor the program’s effectiveness regularly, track customer participation, and evaluate the program’s impact on customer retention and revenue. You can change the program as necessary to better meet your goals and customer needs.
Discover the metrics you should already be tracking in our guide, 9 eCommerce Metrics That Will Help You Run a More Profitable Online Store.
5. Paid Program
With paid loyalty programs, customers pay a recurring fee for access to exclusive products or services and are rewarded with additional perks and benefits for their loyalty.
Successful Example: Amazon Prime
Amazon Prime is a paid loyalty program offering members free shipping, streaming services, and other benefits.
Customers pay a monthly or annual fee to access these perks and are likelier to shop with Amazon. According to a recent study, 42% of U.S. Prime members spend $100+ per month with Amazon.
Why Paid Programs Work
Customers who pay to enroll in a paid loyalty program are more likely to actively engage with the program and take advantage of its benefits. This increased engagement of loyal members can lead to more frequent purchases and greater loyalty to the brand.
A paid loyalty program can also create a sense of exclusivity among members, increasing their loyalty. Customers feel like they are part of a select group, which can enhance their connection to the brand and their willingness to make purchases.
If you need help creating a strong and memorable brand, check out our guide on How to Create a Brand for Your eCommerce Store.
Charging a fee also generates additional revenue for the company, which can help fund more significant and effective loyalty program offerings.
This can create a positive cycle where the program’s success leads to additional revenue.
How to Implement This Program
Step 1: Determine the Rewards You Want to Offer
Before creating a loyalty program, you need to decide what benefits and rewards you want to offer your customers. This could include discounts, free products or services, exclusive access to events or sales, or other perks.
Step 2: Establish a Pricing Structure
Decide how much customers need to pay to join your loyalty rewards program. Will it be a one-time fee or a recurring subscription? Consider the value of your rewards and how much your customers will pay for them.
Step 3: Choose a Platform to Manage Your Program
There are a bunch of platforms and plugins that can help you manage your loyalty program. Choose a platform that fits your needs and budget.
Step 4: Promote the Program
Push your loyalty program to customers through social media, email marketing, and other channels. Highlight the benefits and rewards of the program to encourage customers to sign up.
Step 5: Monitor and Adjust
Use analytics tools to track the success of your program, including customer retention rates, revenue generated from the program, and customer satisfaction. Use this information to adjust your program as needed to ensure it continues to meet your business goals.
If you run a paid loyalty program, you must offer first-class customer service. Learn how to improve the experience you provide shoppers in our guide, 15 Ways to Provide Exceptional eCommerce Customer Service.
6. Game-Based Loyalty Program
A game-based loyalty program uses game mechanics to incentivize customers to engage with a brand and earn rewards. The program usually involves a point system or virtual currency that can be earned by completing certain actions, such as making a purchase, referring friends, or sharing content on social media.
Successful Example: Starbucks Rewards
Starbucks Rewards is an excellent example of a game-based customer loyalty program. Customers earn points, or “stars,” for purchases they make at Starbucks. These stars can be redeemed for free drinks, food, and merchandise.
Starbucks also introduced Starland, which allowed customers to play a game on their mobile devices to earn bonus stars and other rewards. Players could earn stars by completing various challenges, such as ordering specific drinks or making a certain number of purchases within a specified time frame.
Why Game-Based Programs Work
Games are inherently engaging and can capture customers’ attention for extended periods. Using gamification techniques such as points, badges, and levels incentivize customers to continue engaging with the loyalty program to earn rewards.
They can also create a sense of competition among customers, which can motivate participation. Customers may feel compelled to earn more points or reach higher levels than their peers to feel a sense of accomplishment and recognition.
Game-based loyalty programs also provide immediate feedback through rewards, which can be a powerful motivator.
How to Implement This Program
Step 1: Choose Your Game Mechanics
First, you need to choose the game mechanics that will drive your program. Some popular game mechanics used in loyalty programs include point systems, badges, challenges, and sweepstakes.
Consider what game mechanics will appeal to your audience and help you achieve your objectives.
Step 2: Design Your Game
Once you have your game mechanics, you can start designing the game itself. This might involve creating a mobile app or online platform where customers can track their progress and earn rewards.
Make sure your game is easy to use and understand and that it aligns with your brand identity.
Step 3: Set up Rewards
A game-based loyalty program needs rewards to incentivize customers to participate. These rewards might include discounts, free products, or exclusive access to events. Make sure your rewards are valuable enough to motivate customers.
Step 4: Promote the Program
You need to promote your game-based loyalty program to get customers excited about it. Use social media, email marketing, and other channels to let customers know about your program and how they can participate.
You may also want to consider offering extra rewards for customers who refer their friends to your program.
Step 5: Monitor and Adjust
It’s important to measure the success of your program. This will help you understand what’s working well and what needs improvement. Consider tracking metrics such as customer engagement, sales, and retention rates to determine the impact of your program.
What Type of Customer Loyalty Program Is Right for You?
We’ve outlined the best customer loyalty programs that top brands use.
But how do you determine which one is right for your business?
Well, it depends on three key factors: your business goals, target audience, and available resources.
Your Business Goals
Before choosing a loyalty program, determine what you hope to achieve. Is your goal to increase customer retention, encourage repeat purchases, or reward your most loyal customers?
Once you know your objectives, you can choose a program that aligns with them.
Your Target Audience
Different loyalty programs appeal to different customer segments.
For example, a gamified loyalty program might be more appealing if you have a young audience. On the other hand, older customers might prefer a simpler points-based program.
Ensure you understand your customer’s preferences and behavior to choose the right program.
Your Available Resources
Consider your available resources when choosing a loyalty program.
Do you have the technology and infrastructure to support a complex program, or would a simpler program be more feasible?
Also, consider the cost and time required to implement and manage the program.
Once you’ve chosen a loyalty program, test it with a small group of customers and measure its effectiveness. Then, use customer feedback and data analytics to fine-tune the program and optimize it for your business goals.
Choosing the right type of loyalty program requires a willingness to test and adapt based on customer feedback.
Boost Sales With a Successful Customer Loyalty Program
A customer loyalty program can be a big asset for your eCommerce business. As you can see in our list above, you can implement plenty of different types.
With some great products and rewards, you can drive repeat purchases and boost revenue.
And if you’re looking for reliable suppliers and new products to expand your range, check out SaleHoo. You’ll find millions of products from thousands of vetted suppliers.
If you have any questions about customer loyalty programs or anything else eCommerce-related, contact our 24/7 customer support team.
