Every decent consumer brand seems to have its own customer loyalty program today. Whether it's earning points every time they buy a cup of coffee or enjoying exclusive benefits like sports or concert tickets, if customers feel they're getting something out of their relationship beyond simply what they purchase, they're more likely to keep coming back again and again.
But with so many schemes around, how can you make yours stand out? Here are a few things you need to know and some great examples to help inspire you.
Why the right loyalty programs matter
Keeping existing customers happy is essential to any business. That's because it can cost five times as much to attract a new customer than it does to retain one. What's more, existing customers are up to 50% more likely to try out new product offerings, and will spend an average of 31% more than new customers.
Get it right and you'll also have something much more valuable than a customer - you'll have a brand advocate. These loyal customers can spread the word of your business to family and friends and bring in ever more new business without you having to market directly to them.
Learn more: Do Customers Love Your Brand? 3 Methods for Measuring Customer Loyalty
5 types of offering - and who's doing them right
While there are many ways to manage a customer loyalty scheme, most tend to fall into one of a few key categories. Here are five you need to know about, as well as some great examples of companies that have got them right.
1. Points programs - The North Face
Probably the most common type of loyalty program, points schemes will be familiar to the majority of customers. These are simple to understand and manage, as customers earn a set number of points for every dollar they spend, which eventually can be exchanged for discounts or other benefits.
One good example of this in practice is clothing retailer The North Face. Its scheme offers ten points for every $1 customers spend online and in retail stores, and five points for every $1 they spend in other outlets, which can be used for future purposes. This is managed through a mobile app that lets users check their point balance, redeem rewards and more.
Crucially, the rewards on offer are tailored to the customer rather than just offering simple discounts, which helps increase the average order value and encourages them to stick with the brand rather than shopping around.
2. Tiered programs - Uber
Tiered rewards schemes also operate on the principle that the more you spend, the more rewards you earn. The difference is there are clearly-defined levels to reach, each offering more advantages over the one below.
These spending-based programs can be a bit more complex to understand compared with basic points programs, but they're a great way to boost brand engagement. They also add an element of gamification as consumers work towards achieving a higher status.
One example of this is ride-sharing app Uber. It offers four levels, from Blue (no points) up to Diamond (7,500 points to unlock). As users progress up the levels, they gain access to more valuable rewards, from flexible ride cancellations at level two to special access to the highest-rated drivers and free delivery of food orders at the highest tier. This gives customers something to aim for and a reason to keep choosing the app over its competitors.
3. Mission programs - The Body Shop
Social responsibility is a major factor for many buyers today, with 70% of consumers wanting to know what brands are doing to address the issues they care about and 46% paying close attention to a brand’s social responsibility efforts when they buy a product. So why not incorporate this into your rewards schemes?
Mission programs or charity schemes help reassure consumers their purchase is making a difference. For example, The Body Shop's program allows users to donate the rewards they earn to the brand's partner animal welfare charity. Businesses that make social responsibility a core part of their values will attract customers who share these values, so offering them an opportunity to participate in their efforts strengthens your relationships with these consumers.
4. Goal programs - Nike
Another way of incorporating gamification principles into your loyalty scheme is by giving customers targets to work towards - not only to gain access to more exclusive rewards, but also to boost their personal development. This type of scheme is great for lifestyle brands that target consumers with a specific goal in mind.
Nike, for example, offers a range of dedicated apps that give users badges and other rewards for hitting key training goals, such as hitting a certain distance run. While this may not tie directly back into discounts, they work because users will link their own personal achievements with the brand - and the more success they have, the more likely they are to make future purchases.
5. Privilege programs - Amazon Prime
Finally, a category that's growing in popularity is paid-for VIP programs, where consumers actually spend money simply to access the rewards scheme. This offers an immediate benefit to businesses by opening up new revenue streams, but also encourages better engagement.
The biggest example of this is Amazon's Prime service, which offers a multitude of benefits in exchange for a monthly fee. What's unique about this is the wide range of perks on offer - one customer may sign up for the free shipping while someone else is interested in the streaming video or grocery service. But once they've paid the fee, they're likely to become more engaged with the brand as a whole in order to feel they're getting the best use out of their subscription fee.
Of course, Amazon has a built-in advantage that comes from being one of the world's biggest brands, but it can work for more specialized businesses too. For example, research by McKinsey shows 63% of consumers pay for at least one program, while members of these schemes are 62% more likely to increase their spend with the brand and 43% are more likely to shop on a weekly basis since joining.
Further Reading
- The State of Customer Experience in 2022/23 [Infographic]
- How App Retention is Like Dating
- 12 Customer Retention Strategies Used by Big Brands
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