We all have brands that we love and the best thing they can do in return is… well, to love us back.
One of the ways a company can appreciate its customers is by creating a loyalty program that incentivizes each purchase/action and provides additional value to shoppers. The value clients get motivates them to continue buying from a specific brand, turning them into loyal customers, or, in other words, the ones to truly cherish.
As e-commerce competition continues to grow, it just makes sense to make customer loyalty one of your TOP priorities. Below you will find out why, go through different types of loyalty programs, and learn where to begin if you want to start one for your online store.
What is a loyalty program?
A customer loyalty program is one of the marketing strategies aimed at rewarding customers for their continuous interactions with a specific brand.
The rewards may vary depending on a loyalty program itself, business objectives and resources, and many other things. But usually, they come in the form of discounts, points that the customer can exchange for free products or some other perks (like free shipping), or get access to exclusive deals.
The key point of building customer loyalty programs is to motivate your existing customers to come back for more. A loyalty program can strengthen customer relationships with the brand, making it less likely for them to choose your competitor over you, and, hopefully, turning frequent shoppers into brand ambassadors.
Customer loyalty programs: benefits that are worth the effort
- Increase revenue. Loyal customers are the ones who return to purchase from you instead of your competitors, and that’s already good for your profits. Researches show that increasing customer retention by, let’s say, 5%, can result in at least a 25% boost in revenue. Not only that – an existing customer is more likely to try your new products and spend 31% more than a new customer, which can increase the average order value and directly impact revenue growth.
- Save money. Loyal customers need less convincing than new customers. They have already shopped with you, know your products, and trust your brand, which allows you to reduce marketing costs. Besides, remember the sales classic – it costs 5 times more to acquire a new customer than it does to retain an existing one.
- Collect valuable information. Online shopping is all about customer experience and loyalty programs can help you gather the important data that you can use to boost customer satisfaction. For instance, the data filled to sign up for customer loyalty programs can be used to create personalized offers or target a specific group of shoppers.
- Attract new customers. A well-made loyalty program can encourage a visitor to sign up for it if s/he sees that achieving the rewards is not that difficult and worth a try. Moreover, depending on a program, you can grow your subscriber lists by giving a reward in exchange for signup, for instance.
- Gamify the shopping experience. Let’s face it, collecting points or trying to complete any other task while shopping can be fun. Not only fun but also encouraging to reach the goal as soon as possible, therefore… shop more!
6 types of loyalty programs for inspiration
Below you will find 6 types of commonly used customer loyalty programs and examples of how brands implement them for their benefit.
Points loyalty program
The points program is one of the most commonly used customer loyalty programs in retail. The concept is pretty simple – customers collect points with each purchase and can later redeem them for some kind of reward, for example, discounts or gifts.
Such loyalty programs have their own systems on how the points are valued since it’s not necessarily “spend $1 get 1 point.” “Points” can also be adjusted to fit different businesses and appear in any other form, depending on the idea behind the loyalty program.
A good example of this could be airlines that offer to earn award miles.
Turkish Airlines, for instance, gives frequent flyers a chance to collect two types of miles, either by flying with Turkish Airlines or Anadolujet or for flights with many of their partners.
They also provide a branded credit card that can earn you more miles as you shop or use other services, like car rentals, hotels, insurance providers, etc. The saved up miles can be then redeemed on future flights to upgrade the cabin class, benefit from extra baggage allowance, seat selection, and so on, or take advantage of exclusive offers from partners.
By using a point program, you encourage your customers to continue shopping with you, achieving some kind of goal and then benefitting from it, which reduces the chances of them switching to your competitor.
Tiered loyalty program
Tiered customer loyalty programs allow customers to enjoy different benefits based on their rank or tier. Using this type of loyalty program, your customers get divided into several groups based on a specific metric, and as your customers progress, their rank improves, giving access to more benefits.
Take Uber, for instance.
Uber Rewards program lets users earn points with every eligible dollar spent either on Uber rides or with food orders. Those points categorize members into four groups – Blue (0pts), Gold (500pts), Platinum (2500pts), or Diamond (7500pts).
The benefits available within the Blue level are collecting the points and exchanging them for rewards that can be found in the Uber app and may vary. The Gold level has two additional benefits compared to the Blue one – priority support and flexible cancellations. The more points a customer gets, the higher their status is, and the benefits increase in value as the status grows.
What makes this system great is that it rewards return customers and motivates them to spend more at the same time. Tiered loyalty programs are based on behavioral science and inspire customers to seek a special status that makes them feel acknowledged and more invested in a brand. The goal of reaching a higher status also keeps them interested in your loyalty program longer.
Paid loyalty program
Paid loyalty programs are fee-based and give customers instant access to all available benefits. To join such a customer program, shoppers have to pay a one-time fee or commit to monthly payments. Paid programs are mostly used by larger companies as customers tend to sign up only if the value is clear, but can be adjusted to work for smaller businesses as well.
Amazon Prime is one of the best-known examples of such a loyalty program.
Amazon Prime members pay a monthly fee for a selected plan and can get unique benefits related to shopping (free delivery, special deals) and entertainment (access to premium TV shows, music, games).
It’s driven by exclusivity and perks available only to those who join the program which means that customers not only keep shopping with Amazon but also pay to be a part of the loyalty program.
Value-based loyalty program
Value-based customer loyalty programs don’t really provide any direct value to customers, but such programs allow shoppers to be a part of something bigger.
To start the value-based program, you have to choose an organization (a charity or non-profit), a group, or a program that you’d like to help. Preferably, it should be aimed at the same target audience as yours or just something universal for all.
Let’s take The Body Shop as an example.
The Body Shop's loyalty program provides the company's customers with different ways to collect points and several options when it comes to redeeming their rewards.
In addition to birthday gifts, special offers for members, sneak peeks at new products, and so on, The Body Shop rewards its loyalty club members with 1 point for every $1 spent. Once a customer reaches 100 points, s/he gets $10 worth of points to spend.
Those $10 can be spent on various products, but another option that The Body Shop offers its customers is to donate the voucher to one of their charity partners that range from help to the victims of domestic violence to protecting tropical forests.
A company that implements a value-based program and has a strong focus on some social mission can build stronger relationships with customers, appear more trustworthy, and enhance their image in the eyes of the consumer.
Refer a friend loyalty program
This loyalty program serves two purposes at the same time. It rewards your customers for spreading the word about your business and is also one of the most cost-effective marketing strategies.
The main idea behind it is to offer customers something in exchange for making a referral to your business. It’s kind of a win-win situation for everyone involved in this.
The one obvious con of a referral program is that it doesn’t keep customers engaged and interested for as long as other loyalty programs do. It’s usually a one-time benefit that you can get and it’s not always easy to achieve it, considering that your friend must become a user/member/customer for you to get that benefit.
Unless you do something like Freshly that actually seems difficult to resist.
Freshly offers $40 in return for every person that becomes a customer after your referral. Not only that – Freshly gives the same amount of money to those who join, which motivates potential customers to at least try their services.
Besides, by asking for an email address to get a share link, Freshly can grow its subscriber list that can later be used for other marketing material.
Free perks loyalty program
Customer loyalty programs that offer free stuff as a reward are probably the most popular in the history of loyalty programs. Everyone loves free things and it just works! Also, the goal is usually pretty easy to achieve (especially if you’re one of the regular clients) which gives extra motivation.
Look at Chipotle:
The company gives 10 points for every $1 spent. Every time you reach 1250 points, you can exchange them into a free Chipotle.
As simple as that.
Loyalty matters: 3 brand loyalty examples
Apple is definitely one of the top companies when it comes to the most loyal customers. It wouldn’t probably be wrong to even call them “fans” considering how passionate they are about this brand. 90% of people who own an iPhone intend to buy another one when they next upgrade, and that says a lot about their devotion to Apple, making a good impression on potential buyers.
“What is better – Coca-Cola or Pepsi?” is basically the question of the same complexity as “Which came first – the chicken or the egg?” There are as many opinions as there are people, but the thing is that Coca-Cola has somehow managed to make its customers fight for this brand. Although you can find many similar beverages on the market, original Coca-Cola has its loyal customer base that’s driven by a simple nostalgia.
Everyone knows that Starbucks coffee doesn’t rank among the cheapest ones, but there’s always a line of customers ready to pay for a nice Frappuccino. The brand is perfectly positioned for urban lifestyle and the Starbucks rewards program (that is considered to be one of the best loyalty programs out there) makes a huge impact on its customer base that rarely considers an alternative.
How to start a loyalty program?
- Get to know your customers. You might see your future loyalty program from a completely different perspective than your customers do. Before creating one, make sure to identify your customers’ interests, what motivates them, their shopping behavior, and so on. This will help you to offer tempting rewards that will meet their needs.
- Choose the type of loyalty program. We’ve covered some of the customer loyalty programs above, but those are definitely not all. Once you’ve figured out who your customers are, think of what type of loyalty program will suit them best and encourage them to return to shop with you.
- Decide what you want to reward. Think of what you would like your customers to do so it’d bring the most value to your brand. Refer your brand to other people? Spend a specific amount of money on your products? Buy certain products? Questions like these should help you come up with the best option for your business.
- Start signing up customers. Highlight your loyalty program on your website, promote it on social media, send email newsletters to let your customers know about it. Give clear instructions on how to join and what to do to achieve certain rewards, and be ready to answer any question that occurs along the way.
Build a loyalty program to grow your business
There are a lot of different kinds of loyalty programs that you can implement in your business. Before you do anything, make sure you have enough resources to run a customer loyalty program (which is totally worth the investment!), and don't try to follow anyone else's example. Use success stories for inspiration, but always put your target audience first – focus on their needs and how you can all share the value you create.
With a successful loyalty program, you should be able to see your customers coming back to you and sharing their experience with others – and that’s how you grow your business.