7 Best Customer Loyalty Program Strategies (With Examples)
Did you know that over 83% of consumers say belonging to the right loyalty program makes them buy again. Of course, if applied correctly.
If you choose the strategy that suits your business strategy the best, you can see your one-purchase clients turning into super loyal brand enthusiasts. But not every loyalty program equals customer loyalty.
From exclusive access to products to gamification, in this article, we’ll review different strategic approaches to customer loyalty programs, along with the scenarios in which they work, and demonstrate the real-life success cases. You’ll learn which customer loyalty strategies suit your business model best and can turn it into a customer magnet.
FYI: Remember that even the best strategy will not work without exceptional loyalty program management. Sign up for a call to learn how to build loyalty through personalized interactions and expert resolution of program inquiries with EverHelp customer support outsourcing.
7 Popular Strategic Approaches to Creating a Loyalty Program
Customer loyalty programs vary depending on your business model, market, target audience, and budget. Here are the most popular approaches to loyalty programs, with real-life examples:
Creating points-based rewards program
This one is classy. Customers are very interesting beings. Most are willing to buy more if you offer them one item for free. You just ensure your customers earn points every time they buy from your business. Later, once a certain number of points is achieved, they can be redeemed for discounts or even free items. It depends on your business model.
- Pros: Easy to understand, flexible rewards, trackable engagement.
- Cons: Can incentivize low-value activities, potential devaluation of points.
- Best for: Encouraging repeat purchases, wide range of products/services. Used widely as an ecommerce loyalty program (to encourage repeat purchases across diverse products/services), travel & hospitality (hotel upgrades, flight discounts), and SaaS tools (for continued subscriptions and engagement).
Loyalty program best practice: It's easy for customers to forget about all the reward apps and programs they signed up to. Give your customers regular reminders to ensure they remember about the points.
Success Case: Starbucks’ Stars Rewards Program
Loyalty programs: Point-based (with the elements of gamification, exclusive access, and holiday rewards)
In brief, Starbucks' Rewards program uses gamification with points ("stars") and tiers to incentivize frequent app use and purchases. Its customer retention rate is 44% (almost twice as high as the industry average of 25%).
- Starbucks leverages its mobile app to integrate the loyalty program seamlessly into the customer experience, making it easy for customers to join, track their rewards, and make purchases.
- The tiered structure of Starbucks' program incentivizes continued patronage by offering greater rewards as customers reach higher levels of spending.
- By offering exclusive benefits such as free birthday items, mobile ordering, and free Wi-Fi, Starbucks creates a sense of belonging to a privileged group.
Making exclusive discounts for members ONLY
Customers, inherently value-driven, often feel a sense of reward and recognition when they receive special offers tailored just for them. To implement this effectively, track customer purchases and reward frequent shoppers with exclusive discounts that escalate with their shopping frequency or volume. Additionally, personalizing these discounts based on customer preferences can significantly enhance their shopping experience.
- Pros: Increased customer loyalty, higher purchase value, improved brand perception, lead generation success
- Cons: Potential resentment from non-members, program administration costs, risk of devaluing the brand
- Best for: SaaS businesses with repeat customers, companies looking to build a community, businesses facing competition, businesses with diverse product lines.
Loyalty program best practice: Communicate these exclusive offers through direct channels like email or SMS, ensuring that your valued customers are aware of the benefits awaiting them, thereby reinforcing their connection to your brand.
Success Case: Kundalini Yoga’s Membership Benefits
Loyalty programs: Exclusive access for members
The success of Kundalini Yoga's membership discounts illustrates how targeted loyalty programs can significantly enhance customer retention and engagement. Offering various membership tiers, with increasing discounts and benefits at higher levels, incentivizes customers to commit for longer periods or to more premium offerings. For example, a basic membership might offer 10% off classes and workshops, while a premium membership could provide 20% off plus exclusive access to special events or online content.
Using cashback points as a customer loyalty strategy
In this model, customers accumulate points for every purchase they make, which can then be converted into cashback, effectively giving them a discount on future purchases. This method strikes a chord with shoppers, as it directly rewards them with tangible savings, making them more likely to return for subsequent purchases.
- Pros: Transparent value, perceived fairness, aligns with cost-conscious customers.
- Cons: Limited appeal beyond price-sensitive audiences, can be less engaging.
- Best for: Financial services (credit cards, rewards programs tied to spending), e-commerce (price-sensitive customers, competing on price), grocery stores (incentivize frequent purchases of everyday essentials).
Loyalty program best practice: Ensure the points system is simple and the conversion to cashback is straightforward, so customers can easily understand the value they're getting. Regular updates on point balances and reminders of how close they are to their next cashback reward can further motivate customers to keep shopping
Success Case: Amazon’s Ecommerce loyalty program
Loyalty programs: Cashback points (with some exclusive access rewards)
Amazon has a wide system of cashback rewards. In brief, it offers:
- Amazon Prime Rewards Visa Card.
- Amazon Flex Rewards for participation in the Amazon Flex delivery program.
- Limited-time promotional offers where customers can earn cashback.
- Some external companies offer cashback rewards for purchases made on Amazon
When it comes to exclusive offers, Amazon Prime membership includes special cashback offers as part of their membership, incentivizing both membership and shopping. Also, it provides exclusive access to features such as regular discounts for goods, free shipping, and others.
Providing exclusive access to products or features
Offering exclusive access to products or features is a powerful customer loyalty strategy to enhance customer engagement and loyalty, especially for SaaS businesses. This model capitalizes on creating a sense of exclusivity and privilege among loyal customers, motivating them to maintain their loyalty in anticipation of unique benefits. Here's how it works and the advantages it offers:
There are different options to implement this: early access to features, exclusive features, special events, and beta testing opportunities.
- Pros: Fosters a sense of exclusivity, increases perceived value, and incentivizes higher engagement.
- Cons: Difficult to scale, potential resentment from other users, requires valuable features.
- Best for: SaaS companies (early access to beta features, premium functionalities for high-value users), gaming platforms (exclusive in-game items, access to special events), luxury brands (VIP experiences, limited-edition product access).
Loyalty program best practice: Ensure the points system is simple and the conversion to cashback is straightforward, so customers can easily understand the value they're getting. Regular updates on point balances and reminders of how close they are to their next cashback reward can further motivate customers to keep shopping.
Success Case: Hubspot’s Private Beta Testing
Hubspot, for instance, offers priority support and exclusive beta testing opportunities for Enterprise plan users. Participating in beta testing offers valuable insights into upcoming features and allows users to shape the product's development. This fosters a sense of ownership and investment in the platform, strengthening the user-company relationship.
Building emotional connection with holiday-connected rewards
Holiday programs play on emotional connection. Think cozy vibes, gift-giving excitement, and a dash of FOMO. Programs dedicated to personal events leverage the power of personalization and recognition. It's a day dedicated to the individual, and receiving a special reward creates a positive feeling towards the brand. The birthday reward often comes with a limited redemption period, encouraging customers to make a purchase around the time of their birthday. This creates a sense of urgency and exclusivity.
Also, remember that holiday offers should be personalized, so the best ideas are giving rewards for birthdays, anniversaries of being your customer, or any other important milestone. Common holidays like St. Valentine’s Day don’t create such loyalty.
Pros: Personal touch, emotional engagement, drives seasonal purchases.
Cons: Requires strong brand identity, is limited in applicability, and poses potential logistical challenges.
Best for: Retail brands with strong seasonal appeal, travel & hospitality, food & beverage, fashion brands
Loyalty program best practice: Go beyond a generic discount and offer rewards tailored to the customer's preferences or purchase history. Think freebies related to their favorite items, double points on specific categories, or exclusive birthday-themed products.
Success Case: Levis’s Ecommerce loyalty program
Loyalty programs: Birthday Rewards
Customers typically need to be part of Levi's loyalty program, often requiring them to sign up for an account or join a mailing list to qualify for birthday rewards. As the customer's birthday approaches, Levi's would send a notification, usually via email or through their app, informing them of a special birthday reward. This could be a discount, a free product, or exclusive offers tailored for the occasion.
Trying a tiered system (gamification)
Imagine a pyramid with multiple levels, each offering progressively better rewards. That's the essence of a tiered system with the elements of gamification. Customers earn points, credits, or other achievements that propel them through the tiers, unlocking benefits tailored to their level of engagement. The tiered structure gamifies the experience, adding a sense of progress and achievement that motivates customers to climb the ladder.
By understanding the key elements of businesses’ success and adapting the learned insights to their business context, other companies can create their own successful loyalty programs that foster customer loyalty, drive repeat business, and ultimately boost their bottom line.
- Pros: increases engagement, rewards loyal customers, and encourages progress.
- Cons: Complex loyalty program management, potential unfairness with high tiers, risk of alienating lower tiers.
- Best for: Large customer bases, SaaS (rewarding long-term engagement), mobile apps.
Success Case: Duolingo
Loyalty programs: Point-based Gamification
Duolingo is a free language learning app that uses gamification to make learning more engaging and fun. Users earn points for completing lessons, streaks, and other challenges. They can also level up and unlock new features, such as new languages and stories. Duolingo also has a loyalty program called "Duolingo Plus," which gives users access to ad-free learning, streak repair, and offline lessons for a monthly subscription fee.
Offering access to exclusive community
Building an exclusive community within a loyalty program can be a powerful tool for boosting engagement, brand loyalty, and customer lifetime value. However, it's not just about offering an "exclusive" label; the key lies in creating a valuable and meaningful experience for its members. While limiting membership can create a sense of desire, the real value lies in the unique experiences and benefits offered to community members.
- Pros: Fosters community building, enhances brand connection, and creates a sense of belonging.
- Cons: Requires ongoing community loyalty program management, may not appeal to all customers, potential exclusivity issues.
- Best for: Niche brands (cultivating a tight-knit community of dedicated fans), luxury brands (creating an exclusive and aspirational brand experience), and subscription boxes (building a sense of belonging and connection among subscribers).
Loyalty program best practice: Creating an exclusive community within a loyalty program requires more than just a "members only" sign. By focusing on authentic value, meaningful connections, and personalized experiences, you can build a loyal and engaged community that drives long-term business success.
Success Case: Lego Insiders Program
LEGO® Insiders is a free membership program designed for adults (18+) interested in the LEGO® brand. It serves as a central hub for various benefits and engagement opportunities (encompasses all of LEGO Group’s online experiences, including LEGO ID, LEGO VIP, LEGO Life, LEGO Ideas, and beyond, in one single account). It’s interesting that the program targets adults, a growing demographic in the LEGO® consumer base.
Quick Checklist: Answer These 8 Question To Know How To Create a Loyalty Program
Here’s a quick checklist so you can ensure your business is ready for creating a loyalty program you choose:
- What is the primary goal of your planned loyalty program?
Possible answers: Increase customer retention, increase sales, boost customer lifetime value (CLTV), enhance customer engagement, acquire more new loyal customers, increase brand advocacy, increase ROI, etc. For sure, you have a few goals at a time. However, we recommend focusing on one to track the effectiveness of the customer loyalty program precisely.
- What is your value proposition?
Define what makes your brand unique and how the loyalty program adds value to customers. This could be exclusive discounts, personalized recommendations, early access to new products, or other benefits that incentivize participation. Without a strong value proposition, customers won't see the point of joining.
- What are the external motivators you will use to make them join the loyalty program?
Identify what will initially attract customers to join. This could be a welcome bonus, a signup discount, or other introductory offers. Different motivators may work for different programs and target audiences. Discuss this with your sales and marketing teams to understand what resonates with your customer base.
- Who is your target audience for the program?
Knowing your ideal customer helps tailor the program's benefits and communication to their specific needs and preferences. Are you targeting new customers, high-value customers, specific demographics, or other segments?
- What is your current business ROI?
The answer to this question will help you opt for a program that suits your budget. For instance, if you’re making between $10k and $100k a month, it's worth giving it a try for cashback or points-based loyalty programs. However, if your business's monthly income is less than $10k, you might opt for exclusive access only programs.
- What is the quickest and easiest to implement, considering your current situation?
Do you have some issues right now, like customer support challenges? Be realistic about your resources and technical capabilities. Opt for a program that can be integrated with your existing systems and implemented efficiently to avoid delays and disruptions.
- What are your competitors doing with loyalty programs? How can you differentiate yourself?
Research your competitors' loyalty programs to understand their strengths and weaknesses. Look for opportunities to offer unique benefits or a more personalized experience to stand out in the market.
- How will you integrate the program with your existing systems?
Consider how the program will connect with your customer database, marketing automation tools, and other relevant systems. Seamless integration ensures smooth operation and data exchange for effective loyalty program management.
So, Which Customer Loyalty Strategies Are The Best?
Choosing the "best" loyalty program isn't a one-size-fits-all answer. But by answering the eight key questions we explored, you've gained a roadmap to identify the ideal fit for your unique business goals and audience. Remember, it's not just about offering rewards; it's about creating a compelling customer experience that fosters loyalty and drives sustainable growth.
Don’t know how to create a loyalty program? Unlock the true potential of your loyalty program with customer support outsourcing. We'll help you navigate the complexities, maximize engagement, and ultimately turn loyal customers into your brand's biggest advocates. Contact EverHelp today for a free consultation.
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