10 Effective Customer Loyalty Programs (With Examples)
Updated September 30, 2022
Meeting customer needs and exceeding their expectations is a priority for companies that want to make more sales and gain loyal customers. An effective way to achieve these goals is to create a customer loyalty program. Understanding how to create a customer loyalty program and the various models you can use can improve customer relationships and encourage repeat sales. In this article, we define customer loyalty programs, discuss the benefits of developing one, explain how to create loyalty programs, and provide 10 examples to consider.
What are customer loyalty programs?
Customer loyalty programs are marketing strategies that identify customers who regularly engage with a brand and reward them for their loyalty. With more product or service use, these loyal customers typically receive greater rewards. A customer loyalty program generally aims to appreciate customers and make more profits. For example, a farmer may offer free samples to loyal customers, or a landscape maintenance engineer may offer to weed a customer's garden after mowing their lawn.
Loyalty programs are useful in various industries, especially those that require returning customers. For example, companies in the jewellery and silverware manufacturing industry typically find loyalty programs beneficial. Regardless of your industry, identifying which customers are loyal is typically the first step to making these programs valuable.
Benefits of implementing a customer loyalty program
Aside from it helping you retain customers, here are other reasons to consider a program that rewards loyal customers:
Attracts new customers
Customers who receive rewards from loyalty programs might tell their friends and family about it. For example, a customer who receives a free ride from a ridesharing company might encourage their network to consider its services. These referrals can increase brand awareness and reputation.
Differentiates a company from its competition
Creating a unique loyalty program can help a company get a competitive advantage. For example, suppose you establish an innovative program to reward a brand's customers with points they can use to purchase luxury items. Customers may switch to the brand, even if competitors have loyalty programs.
Customers included in loyalty programs typically make more purchases because of the motivation to get a reward. For example, suppose a loyal customer requires three more purchases to earn a laptop. They might be more motivated to purchase the laptop than a newly acquired customer that's seven purchases away from the reward.
Helps collect data
Loyalty programs can also offer relevant data which companies can use to gain more insights into customer behaviour and company strategies. For example, a retailer might use data from loyalty programs to decide whether to continue conducting business with a manufacturer. Loyalty program data can also help coordinate market research, set prices, and choose new company locations.
How to develop a customer loyalty program
Follow these steps to create a customer loyalty program that can benefit a company and its customers:
1. Understand your customers
Before launching a loyalty program, it's crucial you study current customers to learn what rewards they might desire. Using surveys, questionnaires, and interviews can also help you learn about their satisfaction levels. Here are questions you can ask to learn more about customers:
What type of products do customers buy, and how frequent are their purchases?
Can you sell customers other products?
Do current customers use other suppliers?
How fast do customers make payments?
How can a brand improve its business relationship with customers?
How much profit does a company earn from customer purchases?
2. Set goals and a budget
Next, you can focus on the company and how rewarding customers can support its long-term plans. It's also essential you create a budget to guide how much you spend on loyalty programs. Analyzing your industry can help you find the average budget for developing an effective loyalty program.
3. Choose a loyalty program model
Various loyalty program models can help you to acquire and retain loyal customers. For example, you might offer cash or more products or services. Consider involving customers when deciding on a loyalty program and partnering with other organizations. Many companies provide items from partner companies whose products complement theirs.
4. Decide which customers to target
Depending on a business, customer loyalty may occur in various ways. For example, while some customers may purchase many products regularly, others may make more referrals. Consider rewarding customers whose behaviours you want new customers to follow.
5. Launch and evaluate the program's success
After reviewing your plans and establishing effective systems to ensure success, you can launch your program. For example, you may require systems to manage customer data or mechanisms to calculate discounts. Consider ways to grow the program, such as referral-based incentives. It's also important to create excitement among customers about a new loyalty program. For example, you can advertise it on the internet and in print publications.
10 examples of customer loyalty programs
Here are 10 program examples you can use to connect with loyal customers at work:
1. Points program
A points system involves rewarding customers with points for more purchases. These loyal customers can typically convert their points into discounts, free samples, or special client treatments. For example, suppose you work for a travel agency. The company might allow travellers to redeem their points for free dining or hotel stays. Customers may also earn points from car rentals and share with their network or get free internet connections.
2. Mission-driven program
A mission-driven program rewards customers by showing how their engagement with a brand helps a social cause. For example, an ice-cream brand may offer a loyalty program that donates a profit percentage to animal shelters. Loyal customers passionate about this social issue may feel fulfilled knowing their purchases helped the animals.
3. Paid program
Paid loyalty programs invite customers to join a company's exclusive club and receive special offers after paying a fee. For example, a cosmetic store may propose exclusive membership to clients. Joining this exclusive club can involve discounts, free shipping, and makeup consultation.
4. Tier-based program
A tier-based program involves multiple reward levels. Customers typically receive points for their purchases and access higher levels by spending more. For example, a cosmetic brand may have bronze, silver, and gold levels for customers. While the bronze level may offer 10% discounts, the solver level may have 20% discounts and a surprise gift. The incentive for reaching the goal level might be early access to new products and a 20% discount.
5. Progress program
A progress program uses the psychological principle that advancing toward a goal can inspire repeat business. For example, a fitness brand may use this loyalty program to encourage users to practise exercise routines. Upon completing each milestone, uses can expect a badge, which they can share with their friends and family.
6. Gaming program
A gaming program rewards loyal gamers by inviting them to a virtual environment to play games and earn rewards. These customers typically get an exciting experience, which can make them continue playing virtual games. Customers may only use the points earned in the virtual environment, depending on the game played.
7. Subscription program
This loyalty program involves rewarding loyal customers with premium products based on subscription. For example, a coffee shop may offer different beans as subscriptions to increase sales. The shop may also offer a 20% discount to encourage customers to save money by selecting a three-month plan over a one-month plan.
8. Cashback program
This loyalty program involves rewarding customers with money that they can spend on other products or services. For example, a bank may launch a loyalty program that offers cashback if customers use their credit cards at a restaurant or grocery store. Doing this can encourage more customers to pay for items with their credit cards.
9. Referral program
A referral program rewards loyal customers for promoting a company to friends and family members. Offering incentives to customers who act as brand advocates can help increase a company's customer base. For example, a golf club's referral program might offer five free sessions or coupons for each person an existing customer refers.
10. Community program
These programs offer access to a community comprising members who share similar interests, hobbies, or passions. It can enable loyal customers to build their network, find inspiration, and join special events. Successfully establishing a community loyalty program can help you learn more about what connects customers. For example, a social media platform may offer users with more than 1,000 follows access to an online community where they can learn from one another and build their following.
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