8 Types of Customer Loyalty Programs

by Ty Collins on November 14, 2019 in Articles, Employee Loyalty

Understanding employee loyalty and guessing how your employees will respond to corporate rewards programs doesn’t have to be a trial-and-error process. Thinking of your employees as customers can be an effective approach to generating enthusiasm and compassion for the company and the brand. With that in mind, we’ve found some programs that customers respond to with overwhelming enthusiasm, and we believe employees will too.

Customer loyalty programs are a great way to keep current customers engaged while capturing the interest of potential buyers. Essentially, they are a long-term marketing effort that provides incentives in order to motivate repeat customers to stay loyal. There are many types of customer loyalty programs that a company can choose from. And while some businesses decide to use only one model, others may combine two—or even more.

Here are eight types of loyalty programs that will help you choose the best model for your business needs. At least one will likely provide you with the value you are looking for and bring you one step closer to your marketing goals.

1. Points Programs

The most common loyalty program in the retail world is, logically, the simplest one. In a points-based loyalty program, customers that spend more get more. With each qualifying transaction they make, customers accrue points. They can later redeem these points for credit towards their next purchases, access to special member-only deals, or giveaways like free items or services. 

Some of the most exciting uses of points programs are in the hotel industry. Programs like Wyndham Rewards allow customers to rack up points than can be used on upgrades or free nights at properties around the world. Points programs like this motivate customers to stay invested in your company over the long term in hopes of accruing enough points to redeem them for something really special.

To establish an effective points program, make sure you have set goals for the program and that the process for accruing points is very clear. Think about marketing the program through bonus events that will allow your customers to rack up even more points during specific times.

2. Spend Programs

An easy program to implement and maintain is a spend program. As customers spend money in your store or on your services, their overall spending is tallied. Once they reach a certain spend amount within a certain set time period, they receive credit or a gift card that they can spend with you.

One of the great benefits of a spend program is that there is very little work that customers need to do. They’re already spending money in your store—why not sign up to get “free money?” For you, a spend program has the benefit of increasing customers’ transaction amounts.

Airlines, who traditionally followed a more points-based loyalty program, are now starting to move towards spend-based programs instead. A spend-based program helps them identify their more valuable customers and reward them accordingly.

3. Tiered Programs

Want help discovering that ideal reward that is both attainable and desirable? Try implementing a tiered program. Tiers programs are similar to points programs in that customers earn points for purchases, but those points allow them to join certain benefit “tiers.” Each tier gives customers perks that can vary from free parking to birthday gifts to entry into monthly sweepstakes. 

Tiered programs can also work with your overall marketing efforts. Want more social media exposure? Reward your gold tier members for each social media post they make about your company. Offer your diamond tier members early access to exclusive products—which they will then spread the word about to their friends. You can get creative with the names of each tier, too. Make them fit in with your branding! 

As an example, Marriott Hotels offers a popular tiered program that gives their members room upgrades, welcome gifts, and even allows them to check out late.

4. Paid VIP Member Programs

Rather than making your customers earn their way into your loyalty programs, you also have the option to let them pay to get in. A VIP program bills itself as an exclusive club that customers pay a periodic fee to join. In return, they get access to special services, discounts or unique opportunities. To make these programs successful, the benefits offered have to be really exclusive, offering greater value for members than the cost of joining.

Probably one of the most famous examples of a paid VIP member program is Amazon Prime. The perks they offer, such as cash back on purchases, free shipping, and access to a library of streaming entertainment drive 91% of first-time subscribers to join up for a second year.

5. Value-Based Programs

A value-based program isn’t referring to the value your customers bring to your business, but rather the internal values your customers prize. These programs attempt to connect to the customer on a deeper level, building loyalty by creating a strong relationship with them. You won’t be rewarding them directly, but they’ll still feel rewarded. How does that work?

To create an effective value-based loyalty program, start by selecting a charity, group, or program that shares a target audience with your customer base. Then, create a loyalty program similar to a points-based program that translates customers’ purchases into currency. When they spend a certain amount or buy a certain product, a designated sum gets donated to charity. This instills a sense of pride and accomplishment every time a customer spends at your store.

The key to these types of programs is to clearly define your company’s values. Lush is a prime example of a company that does this well. Their “Charity Pot” program donates all of the proceeds from a specific brand of body cream to several nonprofits that Lush partners with each year. This may seem like a recipe for losing money, but Lush says this program brings in more customers and interest than actual profits lost.

6. Partnered Programs

A strategic partnership with other companies that share your demographic can be an extremely effective way to retain customers. A good partnership can actually double the success of your loyalty program. Your customers get rewards that feel tailored specifically to them.

Travel companies are excellent at these types of loyalty programs. Airlines might partner with certain hotels or car rental companies, offering members discounts on one another’s services. A hotel might also partner with popular tourist attractions around an area, actually helping to plan out their guests’ travel through program participation.

7. Game Programs

Everyone loves a good game!

Gamifying rewards has proven to be effective for young, tech-savvy demographics. Allowing customers to level up the more purchases they make or to complete “quests” in order to earn specific rewards is a great way to keep them coming back. These programs are complicated to set up at first, but their effect on your brand image makes them worth the effort. 

For a fun twist, these programs could be expanded to locations throughout a region. If customers earn points towards their level each time they “check in” at a new location, they may make your store one of the first places they stop when they’re traveling.

8. Hybrid Loyalty Programs

A hybrid loyalty program is exactly what it sounds like: the combination of more than one type of loyalty system. Some programs naturally mesh well together. For instance, you might combine a tiered program with a game program, allowing customers to “level up” in your game program to reach new loyalty tiers.

A common hybrid program is one that pairs a points-based system with a tiered program. The calculation of points is easy for the customers and gives them a clear motivation to reach the next loyalty level through purchases. Marriott’s program works like this—even allowing guests to reach a “lifetime rewards” tier by earning enough points.

The truth about loyalty programs is that not all of them succeed. Designing an effective program for your business requires a good understanding of who your customers are and what motivates them. Do your research, have a goal in mind, and start with the basics, and you should soon start reaping the benefits of your rewards.