Blog Article

10 Types of Loyalty Programs and Why You Should Start One This Year

Loyalty programs are pivotal in building a positive brand reputation, retaining loyal customers, and attractive new ones. They foster lasting relationships with customers who are eager to spread the word about your brand and help you acquire new clients.

There’s no denying that an effective customer loyalty program can make a word of difference for businesses operating in competitive market environments. What’s challenging is getting the right type of program that is aligned with your business interests and the preferences of your target audience. 

So, what should you focus on when implementing a loyalty program? Three vital factors stand out: 

  • The particular features of your loyalty program.
  • The business goals you wish to achieve through it.
  • The needs and preferences of your target audience. 

These three factors are critical to designing and implementing a customer loyalty program that not only meets but exceeds your expectations. In this article, we examine ten different customer loyalty programs, walking you through the particular benefits of each. We also make a compelling case for why you should start building a loyalty program this year. 

Statistically Speaking

There’s no denying the importance of customers loyalty. Let's now dive into some of the latest customer loyalty statistics. 

Multiple studies show that loyalty programs can be game-changing for businesses. They increase brand visibility, improve customer retention and engagement, and boost revenues. Customers typically spend more when they are enrolled in loyalty programs and remain engaged with a brand for the long term. 

Here are some statistics that to drive home the argument in favor of customer loyalty programs: 

  • According to the latest report by Fortune Business Insights, the worldwide loyalty management market had a value of $5.29 billion in 2022. Projections indicate significant growth, reaching $6.47 billion in 2023 and a whopping $28.65 billion by 2030.
  • According to KPMG, 75% of consumers say that they prefer brands that have a customer loyalty program
  • Antavo's 2023 Global Customer Loyalty report shows that 88.5% of corporates express trust in loyalty programs as practical tools to navigate the inflation crisis and potential recession.
  • According to the same report, over 62% of respondents say their loyalty program significantly maintained customer engagement through the Covid-19 crisis.
  • PWC finds that in an increasingly automated world, the human touch remains crucial, with over one-third of respondents emphasizing its importance for loyalty, and in certain industries, exceeding 50%.
  • According to another interesting customer loyalty statistics from the same PWC report, 30% of customers enjoyed discounts, rebates, special access, or exclusive offers offered through a preferred company's loyalty program.
  • A survey by Loyalty 360 revealed that 78% of brands expressed internal interest in revamping, improving, or updating customer loyalty offerings.
  • As per HubSpot, companies that provide excellent customer service can expect around 93% of customers to make repeat purchases.
  • According to Gartner, 84% of customer service and support leaders identified customer data and analytics as their top priority.  

Types of Loyalty Programs: A Comprehensive List

The right customer loyalty program depends on your business type, target audience, and primary goal (increasing customer retention, cultivating brand loyalty, or encouraging repeat customers). Your budget, program duration, and platform of execution are other significant considerations. 

Let us explore some top performing loyalty programs to help you make an informed decision that aligns with your business goals and customer base.

Point Programs

With point programs, customers earn points for their purchases which can then be redeemed for rewards or discounts. For instance, you can offer a $5 discount for every 1,000 points that a customer accumulates. 

The USP of point programs is its straightforward approach, with no hidden clauses or complexities. Customers find the incentive clear and consistent every time they make a purchase, which fosters feelings of trust and reliability. This simple yet effective approach has made point programs one of the most common and trusted loyalty programs. It consistently helps drive customer engagement and loyalty. Customers can track their points with each purchase, which creates a sense of achievement and anticipation as they work towards redeeming valuable rewards.

Punch Card Programs

Punch cards are a highly-favored loyalty program. They involve a physical or digital card that gets stamped or punched with each purchase. Once they reach a specific number of punches, customers receive a free item or a discount as a reward. This incentivizes them to make additional purchases to earn further rewards. 

Punch card programs are particularly effective for businesses aiming to improve purchase frequency and encourage repeat purchases. They are ideal for businesses looking to encourage customers through tangible and easily trackable rewards.

Spend-Based Loyalty Programs

This type of customer loyalty program incentivizes customers to spend more by offering exclusive rewards based on their total spending over a defined period. As customers spend more, they accumulate loyalty points and gain access to premium benefits such as free shipping, early product access, or personalized rewards. This strategy fosters long-term customer commitment and engagement, providing businesses with valuable data for personalized marketing and helping them boost revenue through a loyal customer base. 

Tiered programs

Tiered Programs are designed to segment customers into distinct levels based on loyalty or spending, with each tier offering increasingly significant benefits. Customers unlock exclusive perks as they progress through the tiers. This system is designed to foster a sense of achievement and personalized treatment. The exclusivity of tiered programs is a powerful motivator, encouraging customers to increase spending and engagement to attain higher tiers and access even better rewards. Tiered programs reward customers while effectively cultivate brand loyalty and long-term commitment by providing a clear path to more valuable incentives.

Paid Programs (VIP Members Club)

VIP loyalty program memberships have always been a compelling incentive for customers to maintain loyalty and aspire to join paid programs. These programs, also known as VIP member clubs, offer exceptional benefits in exchange for a membership fee. Enrolled customers enjoy exclusive privileges like early access to sales, personalized rewards, or premium customer support. This model generates additional revenue for businesses and fosters loyalty among VIP members, reinforcing brand loyalty. 

Value-Based Programs

Value-based programs center around aligning loyalty rewards with customer values or aspirations. These programs establish a deeper emotional connection by tailoring rewards to resonate with the personal goals and preferences of customers. For instance, a company might commit to planting a tree for every purchase made, or contribute a share of their profits to a charity. 

Value-based programs appeal to those who prioritize sustainability and social responsibility. They enhance customer engagement and foster a sense of purpose. Customers feel their loyalty contributes to meaningful causes, which strengthens their bond with the brand.

Partnered Programs

Imagine having the opportunity to purchase your favorite skincare collection from one brand and redeem the loyalty points earned to buy a pair of sunglasses from another brand! This is the essence of partnered programs, where two or more companies collaborate to offer combined brand loyalty benefits. This approach significantly expands the program's appeal by allowing customers to earn and redeem rewards across various brands. It enhances customer satisfaction by catering to diverse preferences and stimulates cross-purchasing behavior, promoting mutually beneficial relationships between partner companies.

Game Programs

Have you ever imagined turning your loyalty rewards into an exciting game, where customers embark on quests, complete challenges, and participate in activities to earn enticing benefits? That's the essence of customer loyalty game programs! They introduce gamification elements to loyalty rewards, making the process engaging and enjoyable for customers. This innovative concept appeals to younger generations and opens up endless possibilities for businesses across various industries. From fashion and technology to travel and entertainment, game programs can benefit many businesses by captivating customers with unique and immersive loyalty experiences. 

Whether it's exploring virtual worlds, unlocking hidden treasures, or competing with friends, this emerging concept aligns with the evolving preferences of the younger generations. 

Hybrid Loyalty Programs

Hybrid loyalty programs are a fusion of various loyalty models to offer customers a distinct and comprehensive customer experience. By combining elements such as point-based rewards and tiered levels, these programs create multiple avenues for customers to engage and earn benefits. The versatility of this approach caters to a broader range of customer preferences, ensuring a more personalized and rewarding journey. Hybrid programs aim to maximize customer satisfaction and strengthen brand loyalty by incorporating the best features of different loyalty models.

Influencer-Based Referral Program

Influencer culture is transforming the marketing landscape, replacing conventional advertising with a more authentic approach. With massive social media followings, influencers hold significant sway over consumer behavior and preferences. As a result, influencer-based referral programs have gained traction, leveraging the reach and influence of these individuals to promote brands and drive customer referrals. Small and big brands can tap into new audiences through partnerships with influencers. By enlisting influencers to promote their brand’s loyalty program, companies can reach a broader customer base and foster a sense of trust and loyalty among their followers to achieve increased engagement and brand loyalty.

10 Benefits of Customer Loyalty Programs

Two women retail shopping in a mall, holding shopping bags, and smiling at one another.We have established that loyalty programs are not just a trendy marketing tactic; they have become highly beneficial and necessary for a company's long-term sustainable growth. 

Let's now explore ten compelling benefits of loyalty programs that make them indispensable for any company looking to thrive.

1. Strengthened Customer Retention

A well-structured loyalty program is a powerful tool to improve customer experience and retention. Businesses can keep existing customers engaged and loyal by offering attractive rewards, incentives, or personalized experiences. For example, the SkyMiles program from Delta Air Lines provides various benefits, such as free flights, upgrades, and lounge access, encouraging customers to stick with the airline for all their travel needs.

2. Increased Customer Lifetime Value

There is a clear incentive to have customers join loyalty programs as they increase customer lifetime value.  Existing customers tend to spend more over time as they stay loyal to a brand. Companies can maximize their long-term revenue potential by nurturing their most loyal customers through rewards and special treatment.

3. Data-Driven Insights

Loyalty program stats offer access to valuable customer data, enabling businesses to understand their audience better. Analyzing spending patterns, preferences, and behaviors can lead to more informed marketing strategies and personalized offerings. For instance, Sephora's Beauty Insider program gathers customer data, allowing the company to tailor recommendations and promotions to individual shoppers.

4. Word-of-Mouth Marketing

Satisfied customers are likelier to become brand advocates, sharing their positive experiences with others. Loyalty program members who feel valued and appreciated tend to spread the word, attracting new customers through word-of-mouth marketing. For instance, Dropbox's referral program, which offers extra storage for successful referrals, played a significant role in its early user acquisition and rapid growth.

5. Upselling and Cross-Selling Opportunities

Loyalty programs present opportunities for upselling and cross-selling additional products or services. Businesses can offer relevant and enticing upgrades or complementary service offerings by understanding customer preferences. Amazon's ‘Customers Who Bought This Item Also Bought’ and ‘Frequently Bought Together’ features effectively leverage data to drive cross-selling and upselling.

6. Competitive Differentiation

A standout loyalty program can set a company apart from its rivals in today's competitive landscape. With its NikePlus membership, the sporting apparel behemoth offered exclusive products, personalized training plans, and early access to limited-edition releases, making customers switch brands. 

7. Enhanced Customer Engagement

Loyalty programs create meaningful customer connections, increasing engagement and brand affinity. Interactive elements, gamification, or tiered rewards can make the program more enjoyable and memorable. Starbucks' gamified rewards, where customers collect stars to reach different levels and unlock benefits, is an example of how engagement enhances loyalty.

8. New Customer Acquisition

Loyalty programs can be a powerful magnet for new customers. Offering enticing sign-up incentives or referral rewards can attract prospects. Customer acquisition benefits are evident in various loyalty programs. 

9. Flexibility and Customization

Loyalty programs can be tailored to suit the unique needs and preferences of different customer segments. Whether it's a tiered structure, points-based system, or subscription model, customization allows businesses to appeal to diverse audiences effectively. The Southwest Rapid Rewards initiative lets the airline’s loyalty program members earn rewards points based on flight purchases, allowing flexibility in redeeming rewards for flights or other options.

10. Improved Customer Feedback and Satisfaction

Loyalty programs provide a platform for customers to voice their opinions and feedback. Companies can use this feedback to identify pain points, address concerns, and enhance customer satisfaction. 

Build a Loyalty Program that Meets Your Requirements

A successful loyalty program should be tailor-made to suit the specific needs and objectives of a business. It must align with its values and marketing strategies, besides being easily executable and budget-friendly.

At Paystone, we understand every business is unique. That’s why our integrated loyalty program is designed to ensure a seamless and customized experience for your and your valued customers.

Reach out to us today to maximize returns on your customer loyalty program.

Akshat Biyani

Akshat Biyani

Akshat is a B2B content marketer who enjoys analyzing trends in SMB marketing, software technology and customer reviews for Google and Facebook.