In a changing economy that is more focused than ever at building connections with customers, it should come as no surprise that loyalty programs are everywhere. In fact, if you don’t have a loyalty program, you may be falling behind your competitors.
Here’s what you need to know about building a loyalty program that will work for your company, as well as some great examples of companies doing loyalty programs right.
What are Customer Loyalty Programs?
A customer loyalty program is a marketing strategy that encourages consumers to engage with the brand in specific ways. As the name suggests, customer loyalty programs are designed to increase loyalty in consumers.
However, the best programs can do much more than inspire loyalty. Great loyalty programs can increase spending, prevent losing customers to competition, and even pull in increased revenue through membership fees.
How to Benefit from a Loyalty Program
- eCommerce. The eCommerce market is increasingly saturated. Competing with programs like Amazon Prime make it challenging to win out in the race for customers. Loyalty programs give shoppers an incentive to purchase from your platform.
- Increase revenue. Members of loyalty plans buy from your company more often, resulting in as much as a 10% revenue increase over non-loyalty members.
- Grow customer retention. Shoppers return more often when they have incentives to come back to your store, like points that can be redeemed for rewards or personalized offers.
- Collect data. Loyalty plans can tell you all kinds of essential information, like when customers shop, what they buy, and which locations they visit. This kind of data is essential for scaling up your business.
How Does a Loyalty Program Work?
A loyalty program is a broad term that covers a lot of different techniques for building customer loyalty. Different brands establish very different loyalty programs.
It’s a good idea to look at examples of other loyalty programs. However, make sure that you remain open-minded and adaptable to the needs of your unique brand, customer base, and company goals.
A company who is aiming for long-term loyalty and existing customers will develop a very different loyalty program than a company who is hoping to establish a very strong base in the short-term.
Here are a few different ways to establish a loyalty program. Mix and match these ideas to build a program that will be perfect for your needs.
Points
Points are one of the best-known loyalty programs. The more a consumer spends, the more they earn points. Points can be redeemed for discounts on items, free gifts, and other rewards.
Points can be kept track of within the shopping cart on eCommerce sites, within an app, or on old fashioned physical loyalty cards. Points that can only be redeemed at checkout from your storefront or eCommerce site mean that you won’t lose business to Amazon Prime.
Paid
Paid programs encourage customers to pay a monthly fee to have access to an exclusive Members Club. This kind of reward program can only work with a certain type of client base who is willing to pay for rewards.
That said, don’t discount the value of a paid loyalty program. Customers are often willing to pay for special privileges with their favorite brand. The best paid programs don’t stop with extra rewards; they give customers exclusive privileges like trying out products or receiving special gifts.
Charity
Your loyal customers can benefit from rewards and discounts, even if those benefits don’t go directly to them. Today’s customers are more interested than ever before in companies that have and support values.
Tying a charity program into your loyalty program can accomplish dual goals of increasing customer loyalty and improving their opinion of your brand.
In fact, cause marketing, which utilizes charity throughout marketing and rewards programs, is one of the fastest-growing techniques for gaining long-lasting loyal customers and increasing revenue. If you’re interested in incorporating charity into your loyalty program and other marketing, check out this guide on cause marketing.
Tiers
If your goal is long-term loyalty, the tier system may be the customer loyalty program for you. Reward systems that incorporate tiers continuously increase rewards for clients the longer they stay with the business.
These systems can be an excellent way to insulate your business against growing competition. Customers become less likely to leave the longer they stay with your loyalty program. To make it work, there must be a meaningful increase in rewards between each tier in your system.
Progress
What if you reward your customers not only for the purchases they make at your company but also for important milestones in their life? A sports equipment company can reward a consumer for achieving an exercise goal. A weight-loss company can reward weight loss goals. Whatever your company is trying to help your consumers to do, reward their progress with rewards.
Community
Community loyalty programs create a world where their customers can interact with each other in a unique way. Members can talk to each other about company products or services, share tips, and otherwise engage, all on the company platform. Shares to social media from community groups can also serve as additional advertising.
Such a community is an excellent opportunity for a brand to find and market the kind of stories that build brand image. The possibilities of a system like this are endless. What you should remember is that your company benefits from playing an important role in the lives of your customers.
Subscription
Subscription loyalty programs are not unlike membership programs, with the important difference that benefits may be on a single purchase level, rather than a monthly membership fee.
For instance, your company may advertise an incentive to encourage customers to sign up for a plan that covers several months to receive products over that period. After that, the purchase is over. It is up to the customer whether they want to purchase another subscription or not. This is very different than membership programs, which are ongoing over the months.
Examples of Great Loyalty Programs
Sephora
Sephora has been known for its great customer service for many years. Part of this customer experience is the loyalty program. Sephora is attentive to the type of rewards that are attractive to their customers. This has enabled them to build a rewards program that brings customers back.
Members of Sephora’s loyalty program can test all kinds of trial-size products that provide a unique experience. It’s not hard to see why you would want to be a Sephora Beauty Insider when you can get full-face makeovers for free as a reward for your loyalty.
Furthermore, Sephora’s loyalty program creates emotional connections between shoppers and the Sephora Beauty Insider community. In this community, people can get tips and advice about using Sephora products and about beauty in general from other members in the community.
What to Take From Sephora’s Loyalty Program
- Commitment to adaptability. Sephora has continuously changed their loyalty program to meet the needs of their customers, which keeps consumers from losing interest.
- Quality rewards. Sephora doesn’t just offer a few coupons. They provide an entire experience that supplements the purchases that their customers make.
Starbucks
Starbucks bases its loyalty program on an app, which is a very ingenious way to make the program easy for customers while also mining a lot of useful data. Customers earn loyalty points by paying with a Starbucks app.
That means that Starbucks collects data on each customer every time they make a purchase and gets Starbucks rewards. It is hard to imagine a more efficient way to get information like which seasonal favorites are winning out with which customers, how frequently individual customers purchase, which locations they go to, and much more.
Furthermore, the information that Starbucks rewards gains from its customers enables them to build a better customer experience. They use data to cater experiences to individual customers.
What to Take From Starbucks Loyalty Program
- Data mining. Loyalty systems aren’t just about increasing revenue or bettering the consumer experience. When used correctly, loyalty programs can be integrated with technology to mine more data from customers than would otherwise be possible.
- Customization. Starbucks uses data to enable a better loyalty program for each customer by constantly customizing each customer experience.
Lively
Lively stays competitive in the fashion retail industry by using their loyalty plans to make customers feel like they care. Customers in Lively’s Rewards program can expect points on their birthday, for social media shares, and for referring their friends.
As an added incentive, customers of Lively receive an immediate $10 discount when they sign up. There’s nothing like a little bit of instant gratification to encourage a customer to join a loyalty program.
What to Take From Lively’s Loyalty Program
- Emotional connection. Rewarding customers on special occasions or for specific acts shows that a company is paying attention and establishes an emotional connection.
- Instant gratification. When customers are on the fence about joining a loyalty program, cash in hand is a great way to put them over the edge.
Ancient Nutrition
Tn today’s health-conscious world the health and wellness industry is both lucrative and highly competitive. Ancient nutrition makes a mark in the eCommerce health and supplement industry by utilizing an innovative In-Cart rewards system.
Customers can view and use their rewards right on the site, without having to leave their shopping cart. To keep customers happy through the years, Ancient Nutrition created a membership tier in which members can get better rewards like double points and access to special products the longer they are with the program.
What to Take From Ancient Nutrition’s Loyalty Program
- Growing rewards for ongoing loyalty. Ancient nutrition members get better rewards and access to new products as the years go by, encouraging them to stick with Ancient Nutrition instead of switching to another brand.
- Make it easy. Utilizing in cart rewards directly within an eCommerce site makes it effortless for customers to engage in a loyalty program.
Mirenesse
This beauty company has taken their loyalty program to an even higher level with a monthly membership. Members of the VIP tier get outstanding rewards in exchange for a $10 monthly membership fee.
If you find it hard to believe that consumers would pay for a loyalty program, you can think again. Customers are happy to pay a little extra for perks like the gold treatment that lets them skip lines, a tester panel to try out new products, and substantial points for every dollar spent.
What to Take From Mirenesse’s Loyalty Program
- Don’t undervalue your program. Customers care about loyalty programs and may even be willing to pay for access to the best one.
- Involve your customer base. Mirenesse’s program lets customers get involved in choosing and trying out new products, which can make them feel a greater connection to the company.
The Body Shop
As a brick-and-mortar and eCommerce company in the competitive beauty industry, The Body Shop has creatively adapted to retain their hold on their market. Furthermore, they have differentiated themselves from other beauty and wellness industries, which may test products on animals and thereby deter customers.
They may be onto something important. 64% of customers avoid brands without a social impact. This may be even more damaging in an industry that has had some bad press around social causes in the past.
By incorporating Animal Welfare throughout their loyalty program and marketing, The Body Shop has paired their cause marketing with their brand image, firmly establishing themselves as the beauty brand that many people associate with animals’ rights.
What to Take From the Body Shop’s Loyalty Program
- Cause marketing works in loyalty programs. If you’ve ever wondered if you can extend cause marketing to your loyalty initiatives, The Body Shop makes it clear that you can.
- Differentiate yourself from competitors. Your loyalty system can help you stand out in your market, just like the Body Shop differentiated themselves from other beauty suppliers.
Nike
Nike has always set standards in marketing, and their loyalty program is no exception. Nike extends its promotion of active lifestyles directly into their customers’ exercise routines with training apps that help customers reach exercise goals.
Badges and other rewards are given when customers reach milestones. A program like this encourages Nike’s customers to associate them with personal success, which creates more loyalty.
What to Take From Nike’s Loyalty Program
- Reward more than spending. When customers earn points for achievements they make in their real lives, they are much more likely to develop a positive association with the company giving them the rewards.
- Use apps creatively. Nike’s loyalty apps help their customers to achieve exercise goals. How could your company use apps to help their customers achieve goals and receive rewards?
How Do You Create a Loyalty Program?
Loyalty programs are on the rise. 52% of consumers will join the loyalty program of a brand they buy from frequently. If you don’t have a program, you’re missing out.
It can be overwhelming to decide how to make your own system when you consider all of the different options available to you. What’s important to remember is that the goal of a loyalty program is to make your customers like your company more and get them to come back more often.
How you do that is entirely up to you. Remember that “ Rewards” are flexible. It can be too easy to fall into thinking about rewards in terms of money or products. You can also reward your customers by noticing and congratulating them for achievements.
Rewarding a customer with a feeling of contributing to a good cause can also be very valuable for the customer but surprisingly reasonable for the company. Even giving customers the opportunity to donate their own money to charity on your platforms can encourage loyalty.
Keep your mind open, investigate your options, remain flexible, and design a loyalty program to keep your customers coming back through the years.
businesswoman hands holding sign -DepositPhotos
