Sometimes, you need to give customers a reason to keep buying from you. To build customer loyalty, some businesses will offer special discounts to customers who make regular purchases. This strategy is known as a loyalty programme.
If executed well and with the customer at the centre, loyalty programmes can help your customers feel good about purchasing from you. There are many different types of customer loyalty programmes you can use to increase customer engagement. What you choose depends on your mission, your product and your goals for the reward programme.
Read on to learn how and why customer loyalty programmes work, plus see examples from popular brands.
- What are customer loyalty programmes?
- Benefits of customer loyalty programmes
- How do loyalty programmes work?
- Types of customer loyalty programmes
- Customer loyalty programme examples
- How to create a customer loyalty programme
- Tips for a successful customer loyalty programme
What are customer loyalty programmes?
A customer loyalty programme (or rewards programme) is a customer retention strategy that motivates customers to continue buying from you instead of competitors.
Benefits of a customer loyalty programme
Like personal relationships, customer relationships are successful when both parties feel they’re getting something beneficial from the relationship. Customers give you their support when they buy from you and loyalty rewards like discounts and freebies ensure they get something in return.
According to Accenture, more than 90% of companies have some sort of loyalty programme, so it’s advantageous to implement one if you haven’t already.
Here are several benefits of a customer loyalty programme:
Customer loyalty programmes can boost your business’ revenue. The more a buyer loves your brand and the longer they stick around, the more they’re likely to spend. For example, many shoppers will purchase more to obtain a higher tier in a programme or receive a discount.
Customer loyalty programmes increase customer lifetime value and repeat business – rewarding your frequent customers for their purchases is an effective way to keep them coming back for more. Plus, by giving buyers an enjoyable experience, they’ll be more satisfied with your brand. This can help you forge connections with new customers as well.
According to the Zendesk Customer Experience Trends Report, 75% of customers make purchasing decisions based on their experience with a brand. Half of the consumers we surveyed also said that customer experience is more important to them now than it was a year ago. Customer loyalty programmes can help you build a more engaging experience and improve customer relations.
Implementing a customer loyalty programme is a great way to stand out from other brands that may not already have one. A loyalty programme can:
Give customers another reason to engage with your brand
Provide rewards that allow customers to purchase products at a lower price than your competitors
Companies with successful customer loyalty programmes increase revenues up to 2.5 times faster than competitors and generate 100% to 400% higher returns to shareholders, according to HBR.
Customer loyalty programmes can also encourage word-of-mouth marketing, especially when customers get rewarded for telling others about your brand. For instance, you can reward customers with a discount for providing a review on Google.
This also plays into refer-a-friend customer loyalty programmes. When a customer refers a friend, for example, you can reward the customer with a free month of service if their friend makes a purchase.
A customer loyalty programme is one of the best ways to show customer appreciation. These programmes reward repeat customers with discounts and services – essentially thanking them for their business.
A customer loyalty programme can encourage your customers to take certain actions. For example, you can motivate customers to sign up for a newsletter or text alerts by enticing them with a discount code in exchange.
How do loyalty programmes work?
Loyalty programmes work by offering customers incentives to purchase from or engage with the company. The aim is to retain customers, increase customer lifetime value and show customer appreciation.
Although each type of loyalty programme works differently, here’s the general process:
Customer makes a purchase or engages with a company
Company prompts the customer to sign up for its loyalty programme
Customer signs up using their information (phone number, email, etc.)
Customer receives rewards for purchases or through promotional materials
Customers can redeem points for discounts or gifts in a points programme, whereas subscription programmes reward customers when they subscribe. Many businesses use a combination of different types of customer loyalty programmes. Learn more about each type and how they work below.
Types of customer loyalty programmes
There are several types of customer loyalty programmes that your business can take advantage of:
Points programmes
Tier-based programmes
Mission-based programmes
Spend-based programmes
Gaming programmes
Free perks programmes
Subscription programmes
Community programmes
Refer-a-friend programmes
Paid programmes
Cashback programmes
Points programmes
Points programmes are among the most popular types of customer loyalty programmes. They’re useful because points are easy to earn and redeem. Customers can redeem points for:
Credit towards their next purchase
Discounted services
Giveaways
Customers can track points with a loyalty card, online account or mobile app.
Because so many brands employ a points programme, it’s a recognisable format for customers – they understand how to take advantage of it and enjoy the experience.
Tier-based programmes
Tier programmes are like video games: once they complete one level of spending, customers can unlock the next level for access to additional benefits or perks.
For example, you could have a tier of “diamond level” clients. Customers at this level could earn exclusive pricing for your most expensive products and services.
This will motivate customers in lower tiers to make an effort to reach the next level of spending. The more exclusive the reward, the greater the customer appeal.
Mission-based programmes
Not every rewards programme focuses on tiers and discount codes. If your company is highly mission-driven, you may want to try a customer loyalty programme with a cause.
Aligning with a mission allows you to build customer engagement and drive repeat purchases through your shared values. These programmes can be more effective when you partner with a non-profit organisation that has a strong connection to your company’s mission.
Spend-based programmes
Spend-based customer rewards programmes allow businesses to recognise high-spend customers. Airlines, in particular, are transitioning from points programmes to spend-based systems. It allows them to engage deeper with travellers who pay more for fewer flights.
Gaming programmes
Gaming programmes inject an element of fun into the act of making a purchase. This type of programme incorporates a simple game – like spin to win – that customers play to obtain a prize. It can include a discount or free item when they purchase a product or service.
Free perks programmes
Who doesn’t love gifts? Free perks programmes give loyal customers complimentary products and services. In many free perks programmes, shoppers can redeem points for things like free food or a free make-up sample.
Subscription programmes
A subscription programme, also known as a premium loyalty programme, is where customers subscribe and pay an upfront fee for a product or a service and receive rewards in return. These rewards can be redeemed and used for future purchases.
Community programmes
Community customer loyalty programmes foster customer engagement and can spring from an existing loyalty programme. For example, online clubs and groups may form within a loyalty programme, such as Sephora’s Beauty Insider Community.
Brands with this type of programme can allow customers to post questions, share photos of themselves wearing a product and interact with one another.
Refer-a-friend programmes
Referral programmes reward customers for referring their friends and family. This word-of-mouth strategy can help turn loyal buyers into brand advocates – and on top of that, the referral may refer someone else in the future.
Referral programmes may also reduce your customer acquisition cost because your customers will be doing the work for you.
Paid programmes
A paid loyalty programme requires customers to pay a fee for loyalty perks and provides instant, ongoing benefits for participating. For example, customers can sign up for a £5 monthly membership that gives them access to 50% off their purchases every month.
Cashback programmes
Cashback rewards programmes give customers cashback or money to spend with your business. This helps customers feel that, even though they’re spending money, they’re also getting something in return. This type of loyalty programme is common among financial companies.
16 successful customer loyalty programme examples
Looking to implement a loyalty programme but need some inspiration first? Check out these examples of 16 innovative customer loyalty programmes from well-known brands such as Marriott, Sephora, Amazon and more below.
1. Marriott
Marriott’s rewards programme, Marriott Bonvoy Benefits, allows members to redeem points for free hotel nights, dining and other experiences. They can also earn points with car rentals and flights, share points with friends and family, and get free Wi-Fi and special rates.
Programme type: points programme
Why it works: Marriott is able to analyse customer behaviour and use that data to create a better experience tailored to each guest. The more they know about a customer’s preferences, the more personalised rewards the company can offer.
2. DSW
DSW’s customer loyalty tier programme helps create a vibe of exclusivity. The tiers are based on consumer buying behaviour and include rewards like free delivery and extra points for donating unwanted shoes. Tiers include:
- Club: the initial tier where all customers start
- Gold: achieved when the customer spends $200 on eligible purchases*
- Elite: achieved when the customer spends $500 or more on eligible purchases*
*Note: eligible purchases vary based on a business’ specifications but this added parameter can help drive customers to a desired product or category. In DSW’s case, eligible purchases are “purchases of DSW products such as footwear, handbags and accessories.”
Programme type: tier-based programme
Why it works: it offers a structure that customers can rely on for months or even years at a time and gives them something to strive for.
3. Azerbaijan Airlines
Azerbaijan Airlines, like many other airlines, utilises a spend-based programme that rewards frequent flyers with travel points based on each ticket’s base fare. Any travellers who reach elite status sooner get perks like complimentary lounge access, early boarding and additional checked baggage allowances.
This kind of programme benefits business travellers who pay more money for last-minute flights to their next meeting or scheduled event.
Programme type: spend-based programme
Why it works: it recognises how often customers buy and how much they spend.
4. Grubhub
Grubhub’s loyalty programme, Grubhub Points, allows customers to redeem ongoing offers, which can total more than $400 in free food at any given time. For every dollar spent, customers can earn 20 points.
The programme helps its restaurant partners promote their restaurants on the app by introducing customers to places they haven’t tried before.
Programme type: free perks programme
Why it works: it gives Grubhub customers an incentive to keep using the app to earn more points towards discounted rewards.
5. Dollar Shave Club
Dollar Shave Club offers a subscription-based programme – without membership fees. You become a member simply by making your first purchase. Instead of spending more to earn points, members automatically have access to new and exclusive products, personalised recommendations, member-only magazines and free delivery.
Programme type: subscription programme
Why it works: the programme follows a more community-like approach rather than enticing customers to spend more to get benefits.
6. Sephora
Sephora’s Beauty Insider programme gives customers a choice of gifts based on a points system. It also offers something unique: an online community.
The Beauty Insider Community is an online community where customers can ask questions, share their looks and swap tips.
Programme type: community programme
Why it works: it adds an emotional element and strengthens customers’ relationship with the brand.
7. Bank of America
Bank of America’s Preferred Rewards provides cashback rewards to customers when they use their debit or credit card to make purchases at certain national retailers, restaurants and other companies.
According to John Sellers, Rewards Executive at Bank of America, some of the benefits of the programme include:
Higher customer satisfaction – 8 out of 10 programme participants are likely to recommend Bank of America to friends and family
Greater customer retention
Increased customer spending, leading to higher profits
Programme type: cashback programme
Why it works: this programme gives customers the flexibility to use their rewards where they want, increasing overall customer satisfaction.
8. Freshly
Freshly’s referral programme gives an existing customer a $30 discount for every new customer they refer, while referred customers receive 12 free meals (totalling $120).
Programme type: refer-a-friend programme
Why it works: it helps encourage word-of-mouth marketing by rewarding customers who tell people they know about the business.
9. DoorDash
With DoorDash’s paid programme, customers can become DashPass members for a small monthly fee. In exchange, they get free delivery for a wide range of restaurants, so customers who use the app often ultimately save on orders.
The takeaway? Paid customer loyalty programmes work when the value outweighs the cost.
Programme type: paid programme
Why it works: regular customers only need to pay a small price to enjoy exclusive benefits with the brand.
10. Amazon Prime
Amazon Prime is a great example of a paid programme: for a set annual fee, Prime members get free next-day delivery. The membership also includes other perks, such as special deals on Prime Day and access to Amazon’s streaming service.
Programme type: paid programme
Why it works: this programme gives customers a reason to shop exclusively at Amazon and offers convenient and competitive delivery times.
11. Ben & Jerry’s
Ben & Jerry’s mission-based programme creates ice cream flavours with themes of social justice. For every purchase of these themed tubs, the company will donate profits to charities that support animals, the environment, social programmes and other good causes.
Before starting this type of programme, ensure your company values and mission are aligned. Then, identify organisations or causes that would resonate with your customer base.
Programme type: mission-driven programme
Why it works: it allows customers to feel like their purchase – whether big or small – helps improve others’ lives.
12. The North Face
The North Face uses a points programme to reward its customers. By joining the XPLR Pass, customers receive 10% off their first online order, access to exclusive gear, birthday gifts, specialised customer service and more.
Shoppers earn points for every pound they spend at the retailer, plus extra points for referring a friend, downloading the North Face app and checking in at a national park or monument.
Programme type: points programme
Why it works: this programme gives customers flexibility on how they can earn points. The North Face also speaks directly to its target audience by granting points for participating in outdoor activities.
13. Panera Bread
Panera’s free perks programme, MyPanera, gives customers an easy way to enjoy free items, free delivery and personalised rewards. All customers need to do is download the Panera app, sign up for texts and subscribe to the restaurant’s email newsletter.
Customers can also join the Unlimited Sip Club subscription for unlimited drinks. To sign up for this, create a MyPanera account, enter your payment information and select a store near you.
Programme type: free perks programme
Why it works: it’s simple and free to use – customers don’t need to purchase anything specific to receive perks.
14. Starbucks
Starbucks is known for its gaming programme that incentivises customers to make a purchase. For example, customers earn two “stars” for every pound spent, rewarding those who spend more money during shorter periods. However, it doesn’t stop with stars.
The coffee giant also introduced a tier component that expands the points programme, allowing customers to redeem their stars for items beyond cups of coffee, like an extra espresso shot or free merchandise.
Customers play the game on a mobile app, which Starbucks also uses to notify customers of opportunities to earn extra points.
Programme type: gaming programme
Why it works: it encourages future purchases by making the points process more fun and keeping customers hooked.
15. The Body Shop
The Body Shop’s Love Your Body Club is a mission-based loyalty programme that gives customers the option to donate their rewards to charitable organisations.
For every 100 points earned, shoppers get £10 to spend on products or donate to a charitable partner, such as:
Black Lives Matter
No More
World Land Trust
Born Free USA
Wires
Programme type: mission-based programme
Why it works: it helps strengthen The Body Shop’s ethical brand image and allows customers to contribute to a good cause.
16. Expedia
With Expedia Rewards, travellers can save around $35 per hotel or flight booking through points earned. The three-tier programme allows you to earn more perks and rewards depending on how often you travel:
- Blue tier: gain access to savings that include an extra 10% off hotels and receive double points when you book through the Expedia app.
- Silver tier: get two points for every £1 spent, plus free breakfast and spa credits after earning 10 Trip Elements.
- Gold tier: after earning 25 Trip Elements, you get 3 points for every £1 spent as well as late checkout and free room upgrades
*Note: Trip Elements refer to points you earn for each booking you make on Expedia.
Programme type: tier-based programme
Why it works: it incentivises customers to book all their travel through Expedia.
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How to create a customer loyalty programme
Now that you’ve learned about the different customer loyalty programmes and seen examples from popular businesses, you’re better equipped to implement one of your own. Here’s how to create a winning customer loyalty programme in seven steps:
Figure out your goals
The first step in developing a customer loyalty programme is to determine what you want to get out of it. This includes setting goals, such as the type of shopping behaviour you want to promote:
Newsletter signups
Referrals
- Leaving customer reviews
Purchasing a specific product
Repeat purchases/visits
Once you identify the areas of your business that you want to target, you’ll be able to decide on your programme type.
Choose the type of reward
Next, pick the reward you want to offer customers. Bear in mind that you’ll want to make your reward desirable enough to keep customers interested, encourage repeat purchases and foster brand loyalty. Types of rewards can include:
Gifts with a purchase
Discounts/discount codes
Exclusive products and deals
Select the type of loyalty programme
Choose the type of customer loyalty programme that best aligns with what you decide for steps one and two. The loyalty programme you pick will help you define the benefits you’ll reap and set you up for the next step.
Decide how you want to run your programme
After you choose the type of programme you want, determine whether you want to run your programme manually or with software.
Running your programme manually would require you to track customer behaviour by hand and reward them based on your structure, e.g. with a stamp card. It’s much easier to track this data using automated software, especially one that integrates with other tools, such as your POS system.
Some customer loyalty programme software include:
Annex Cloud
Bazaarvoice
Kangaroo
Open Loyalty
Zinrelo
Infuse your branding
Inject your brand into all aspects of your customer loyalty programme and personalise it as much as you can. This includes:
Merchandise
Messaging (in email newsletters, texts, posters, etc.)
Interfaces (such as your website and/or rewards tracker)
Rewards “currency” (you can get creative with what you call “points” – make it unique to your brand)
Market your customer loyalty programme
Once your customer loyalty programme is in place, spread the word to attract your first rewards members. Consider doing this through:
Text and email campaigns
Physical signs in your shopfront
Word of mouth from shop assistants
Messaging on shop receipts
Pop-ups or banners on your website
Observe and modify
Lastly, be sure to monitor how your customer loyalty programme performs and adjust based on what you see and any feedback you receive. You can gather insights from your customer loyalty programme software or calculate the programme participation rate.
The participation rate shows you how many customers are interested in your programme. To calculate this metric, divide your number of loyalty programme members by your total number of customers.
Tips for a successful customer loyalty programme
Here are some helpful tips to keep in mind when creating and implementing your programme.
The key to a successful customer loyalty programme is ensuring that the rewards reflect what your customers want in a rewards programme.
Companies have to make a genuine effort to understand their most loyal customers and what would entice them to come back again and again.
It’s all about research – to gather insights into your customer base, you can use things like:
- Customer surveys
Customer service data
Customer interviews
You need to know who your customers are and what they’ll respond to if you want your rewards programme to succeed.
With any loyalty programme, you have to give customers something to work towards. For example, tier-based programmes incentivise customers to continue buying until they’ve reached a higher status or tier.
What’s more, make the type of reward a customer receives enticing enough for them to want to participate in the programme.
If your loyalty programme is more beneficial for your business than it is for your customers, they’ll see right through it.
It’s crucial to ensure customers are getting something in return for participating. For example, you might offer bonus points so customers can get more rewards the more they spend.
With so many brands offering loyalty programmes, adding a personal touch is one way to stand out – and customers increasingly expect it.
For example, a clothing company could look at customer behaviour and use that data to encourage customers to shop in different categories relevant to their interests and needs. If a customer always purchases dresses, you could target them with discounts on accessories to get them to buy in another section of your store.
If your loyalty programme isn’t a seamless experience, it won’t be worth it to customers. Smart use of technology helps foster that effortless experience customers expect.
Brands like Cost Plus World Market are incorporating an SMS component into their loyalty programme so they can send customers gifts directly via text. That way, rewards are already in customers’ pockets. With other channels like email, shoppers often have to sign in and click around to find their offers. But with SMS, you can send a link straight to their phone.
Data is key to measuring the success of your customer loyalty programme. Look at incremental sales. This measures how many sales happened because a coupon went out and measures that against what the base behaviour would have been without the coupon.
Another important metric is customer lifetime value. A rewards programme team should ask itself: “Did the customer return after they used a coupon?” In other words, did the coupon make people more loyal or are customers using it once and never returning?
To retain customers, add an emotional component to your loyalty programme. Keep your programme interesting and engaging so customers are more likely to come back and have good thoughts, feelings and memories about your brand.
For instance, Panera’s rewards programme goes beyond points and free food. Members can customise menu items however they like and then save their favourites. They’re also the first ones to see new menu items.
The best loyalty programmes are customer-centric
Listening to your customers enables you to improve your entire customer experience and build a loyal fan base.
So, listen and pay attention to your audience and let them be your guide as you build out the elements of your customer experience – from your loyalty programme to your customer support.
