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Different Types of Loyalty Programs

May 7, 2020 Loyalty

Any given loyalty program on the market today will offer a platform with dynamic promotional facets to get you up and running and get your loyal customers shopping, but there are many different kinds of loyalty programs out there, so how will you know the best platform to choose?

Different Types of Loyalty Programs

Any given loyalty program on the market today will offer a platform with dynamic promotional facets to get you up and running and get your loyal customers shopping, but there are many different kinds of loyalty programs out there, so how will you know the best platform to choose?

If you haven’t already read our articles Why Customer Loyalty Is Important? and What Is A Loyalty Program? we suggest you take a moment now so that you’ll get the most out of the information in this article. If you have, great! Buckle up because you’re about to cruise through the 5 types of loyalty programs that can help launch your business and benefit your customers as much as your store. 

Points-Based Systems

Perhaps the most common loyalty program strategy, the points-based system enables frequent shoppers to earn a set amount of points on pre-selected products and services. You will find this strategy in most retail loyalty programs. For the customer, this eventually translates into a reward when they apply their earned points towards a product or service. This type of incentive encourages customers to purchase more items more often to work towards redeeming a big discount, freebie, or special treatment they wouldn’t otherwise spring for. Different reward programs discount customers in varying ways, so you’ll want to look into the possibilities. 

If you implement this system in your loyalty rewards platform, be sure to make the points-earning incentives clear to your customers and the rewards both tangible and attainable. If your customers can’t easily figure out how to rack up points or redeem them for big-ticket items, then you’re doing neither your business nor your customer any favors, so be sure to avoid this common pitfall. 

In order to maintain clarity that will keep your loyal customers invested, keep the conversions simple and intuitive.  

Tiered Systems

The tiered system is a great way to reward your customers for their initial loyalty and also encourage them to purchases more products and services. By utilizing a tiered system, you’ll have a better chance of hitting that sweet spot of offering rewards that are both attainable and desirable to your customers. Loyalty programs for customers that use a tiered system are great for retail stores that sell merchandise that ranges from inexpensive to extravagant. But what is a tiered-based system exactly?

Unlike a points-based system, this one enables the customer to receive the short-term and long-term value from their loyalty program. Industries that favor rewards tiers over points-earned are an airline, hospitality, and insurance, but that doesn’t mean your business has to fall within these categories. The reason this loyalty strategy works is because it motivates customers to work their way up the rewards ladder.

“In a recent loyalty study, 50% of respondents said they increased their spending or changed other purchasing behavior in order to achieve a higher tier status in a rewards program. The key to a successful tiered program is communication.” Sallie Burnett, Customer Insight Group, Inc.

Offering small, immediate rewards that are easily attainable can keep your customers interested and shopping often while they work their way towards larger payoffs. This will keep them invested in the long-term because they’re already being rewarded in the short term, but be mindful not to make the time between purchase and gratification too long. You want to keep customer enthusiasm and engagement as high as possible. This is among several great loyalty programs for retail. 

VIP Benefits

Who doesn’t want the VIP treatment? Among many different types of loyalty programs, you will find the VIP strategy. Create an exclusive community for members who want access to the biggest discounts and best deals on those high-ticket products and services. When implementing a VIP benefits program as part of your loyalty platform, you can build in an additional sign-up fee that incentivizes immediate shopping for instant rewards. 

E-commerce industry giant, Amazon, uses a VIP benefits program. Amazon Prime and Kindle Unlimited might not look all that flashy, but it’s impossible for customers not to see the long-term savings. Shipping costs can add up and by offering free shipping to Prime members, Amazon increased its revenue by $17.8 billion. For the avid reader, signing up for Kindle Unlimited is a no-brainer. For a flat annual membership fee, e-book lovers have access to infinite titles, and every time they click-to-download a new novel, they can see exactly how much they’re saving and they feel rewarded that they aren’t paying the usual $9.99 for Stephen King’s latest Kindle-friendly thriller. 

Whether or not you charge an upfront fee, structuring rewards around exclusive items is a great way to attract and keep invested customers. 

Non-Monetary Programs

These days, customers are loyal to beliefs. If a person believes in the importance of animal rescue, he or she will be loyal to their local animal shelter and will show that loyalty by making donations. People who are invested in the environment are more likely to become loyal to companies that have committed to reducing their carbon footprint. Companies like Greenpeace, Feeding America, and St. Jude’s Children’s Research Hospital receive to support the world over because private citizens deeply feel they are doing good whenever they purchase a branded tote bag or bumper sticker from one of these companies.  

Depending on your industry, get creative when coming up with rewards. Allocate non-monetary or discounted rewards that the customer can apply towards a cause they believe in. Demonstrating your social, environmental, and even moral consciousness can go a long way towards building meaningful relationships with your customers. 

Gamified Systems

Life might not be all about fun and games, but your loyalty program can be! You can turn your loyalty program into a game that engages customers and encourages them to buy. This loyalty strategy is great for building your brand’s image in addition to increasing your revenue.

“30% of companies using gamification improved registration conversion rates by upward of 50%” – Shayla Price, Marketing Expert at CXL.com 

Offer a contest or sweepstakes. Enable your customers to compete to earn one special item that isn’t even for sale in your store yet or one high-end service that will be coming out at your location next year. Your customers will love engaging in epic battles through the digital loyalty program you offer. Keep things fun and fast by tailoring your app platform to offer easy points, too, but keep the odds of winning no lower than 25% or else you run the risk of having customers that feel jerked around. 

If executed properly, this type of program can work in any industry. Getting up and running with the gamification of your loyalty program can get complicated, which is why we’ve written an article that focuses exclusively on this topic that you can read here.  

Shopping around for a loyalty program that provides all 5 strategies? Look no further than Loyal~n~Save! Our cutting-edge platform features the latest technology, enabling you to run digital promotional campaigns that go straight to your loyal customers’ mobile phones with push notifications. To exponentially increase your customer base, click here to get started with Loyal~n~Save!

This article was written by Loyal~n~Save, an omni-channel customer loyalty solution for retailers looking to increase customer retention and new customer acquisition.
Mira Gibson
Mira Gibson

Mira Gibson is a Loyalty Strategist at Loyal~n~Save where she develops innovative marketing strategies for small businesses. She is a content machine and advocates that marketing consistency and frequency is tantamount to success. She’s a passionate writer, avid reader, and she also manages a political blog in her spare time.