Innovative Loyalty Programs That Attract, Retain, and Delight Customers

Points of this article: 

• Loyalty Program Benefits
  Loyalty programs attract new customers, increase spending per transaction, improve retention rates, and encourage brand advocacy, making them a valuable tool for businesses.
• Types of Loyalty Programs
  Common models include points-based, tiered, paid, and value-based programs, each offering unique strategies to engage and retain customers effectively.
• Customer Expectations
  Consumers prefer loyalty programs that provide valuable rewards, exclusive offers, and a simple, hassle-free experience, with mobile-friendly options being highly favored.

Customer loyalty programs play a crucial role in attracting, engaging, and retaining customers. Loyal customers are often regarded as one of the most valuable assets a brand can have. Not only is retaining existing customers more cost-effective than acquiring new ones, but loyal customers also tend to make larger purchases and spend more over time.

For instance, 57% of consumers are willing to spend more on brands they are loyal to.* In 2021, 70% of Macy’s total sales were linked to its loyalty program.* The company reported that more than 3.5 million new members joined its Star Rewards program’s entry level in just the last quarter of 2021.

What Are Customer Loyalty Programs? Customer loyalty programs are strategies designed to foster repeat business by offering customers rewards, discounts, and other incentives. These initiatives aim to strengthen customer loyalty and often prove highly successful when executed properly.

Research shows that 75% of consumers prefer brands that provide rewards programs.* As customers receive valuable perks from their continued support, it becomes an additional motivation for them to remain loyal to the brand. There are several types of customer loyalty programs, each employing different approaches to achieve this goal.

Types of Customer Loyalty Programs

Here are some common types of customer loyalty programs:

1. Points-Based Programs
Points-based programs are among the most popular loyalty program models. Customers collect points with each purchase, which can later be exchanged for rewards, products, or exclusive perks. Some variations of this program also allow customers to accumulate points through other actions, such as leaving product reviews, sharing on social media, or celebrating milestones like birthdays.

2. Tiered Programs
Tiered loyalty programs offer different levels of rewards based on customer rank. The more a customer engages with the brand or spends, the higher their tier, and the better the rewards they receive. To move up to a higher tier, customers must meet certain criteria, such as increasing purchase frequency or spending more, with businesses ranking their customers based on engagement and sales metrics.

3. Paid Loyalty Programs
Paid loyalty programs involve a customer paying a recurring or one-time fee to access continuous benefits. This model can increase customer value if the company effectively communicates the program’s benefits. A 2020 survey found that consumers are 60% more likely to increase their spending with a brand after subscribing to a paid loyalty program.* Since customers are investing in the program, they’re more motivated to make the most of it.

4. Value-Based Programs
In value-based loyalty programs, companies donate a portion of their sales to charity or causes rather than providing rewards to the customer. This type of program appeals to socially conscious customers who value giving back to society. The reward for customers is the satisfaction of knowing their purchases contribute to a good cause.

Brands don’t have to stick to a single type of loyalty program. Combining various models can create a unique and innovative loyalty strategy that engages customers in multiple ways, boosting long-term loyalty and satisfaction.

How a Loyalty Program Pays Off

A well-designed loyalty program offers numerous benefits for both businesses and customers. Here’s how it can significantly contribute to your brand’s success:

1. Attracts more customer

A loyalty program can serve as a powerful tool for attracting new customers. When customers are incentivized with rewards or perks for their continued business, they are more likely to make their first purchase and continue returning. Additionally, referral bonuses or sign-up incentives can encourage existing customers to introduce new ones, expanding your customer base.

2. Increases average order value

Loyalty programs often lead to increased spending per transaction. As customers work toward earning rewards, they may purchase additional items or upgrade to higher-value products to reach a certain reward threshold. This drives the average order value, making each purchase more profitable for the business.

3. Improves retention rate

One of the most significant benefits of a loyalty program is customer retention. By rewarding customers for their repeat business, the program incentivizes them to stay loyal to the brand. Studies show that loyal customers are more likely to return and make frequent purchases, reducing churn rates and increasing customer lifetime value.

4. Encourages brand advocacy

Loyalty programs can transform customers into brand advocates. When customers feel valued and rewarded for their loyalty, they are more likely to share their positive experiences with others, both online and offline. This word-of-mouth marketing can significantly enhance the brand’s visibility and reputation, leading to more potential customers discovering the brand.

What Do Customers Expect From a Loyalty Program?

Loyalty programs are not just effective tools for retaining existing customers; they also play a crucial role in attracting new ones. In fact, 75% of consumers indicate they would consider switching to a brand that offers a more appealing loyalty program.
This raises the important question: What do customers truly desire from a loyalty program?

• Appealing Rewards
  Customers are looking for rewards that offer real value, such as free products, discounts, or exclusive perks, as a recognition of their continued business.
• Exclusive Offers
  Consumers enjoy feeling special, so they appreciate perks like free shipping, early access to sales, or VIP promotions that make them feel like privileged members of the brand community.
• Ease of Use
  Customers prefer loyalty programs that are straightforward and easy to engage with. A simple sign-up process and minimal effort required to use the program make the experience more enjoyable and convenient for them.

Must Know Loyalty Program Statistics

• Fast and Easy Rewards : 50% of consumers primarily join a loyalty program to earn rewards on everyday purchases.
• Exclusive Access: 46% of loyalty program customers want early access to sales.
• Hassle-Free Experience: 75% of consumers would engage more with a mobile friendly customer loyalty program.
• Enticing Tiers: 37% of customers would pay for a higher tier loyalty program.

Tips for a Successful Loyalty Programs

Creating a successful loyalty program requires more than just offering rewards; it involves designing an engaging, customer-centric experience that keeps participants coming back. 

Here are some actionable tips to help your loyalty program thrive:

• Go beyond basic rewards: Offer exclusive benefits that make your program stand out from the competition.
• Gamify the experience: Tier programs encourage customers to spend more on the brand.
• Make a loyalty program app: Gain insight on customer habits, product favorites, and sentiment to curate a better user experience.
• Offer Value-Driven Programs: Allow users to donate points and rewards to social causes that align with their values.
• Create a community: Consumers can interact with others to share favorite products, helpful tips, and more. 
• Have a hassle-free experience: Minimize pain points with easy sign-up options and programs that can be accessed without a physical card. 

Conclusion

Customer loyalty programs are an essential strategy for businesses looking to attract, engage, and retain customers. By offering valuable rewards, exclusive perks, and easy-to-use features, these programs can enhance customer satisfaction, increase spending, and foster long-term brand loyalty. Tailoring loyalty programs to meet consumer expectations and combining innovative approaches, such as value-driven initiatives or gamified experiences, can help businesses stand out in a competitive market.

At ProPS, we specialize in creating data-driven solutions that empower businesses to design and optimize impactful loyalty programs. Our advanced customer data platform enables you to gain deep insights into consumer behavior, personalize rewards, and deliver seamless experiences across channels. By leveraging ProPS services, your business can build stronger relationships with customers, maximize retention, and drive sustainable growth through loyalty.