Why is it that just about every major brand seems to have some sort of loyalty program? It’s straightforward: loyalty programs work. According to The predictable returns 2024 Loyalty update, 85% of consumers declare loyalty programs make them more likely to continue shopping with those brands. 

Most loyalty programs fall into one of four categories: points-based, tiered, paid, and worth-based. Each type of program offers distinctive ways to engage customers and drive repeat business.

discover how loyalty programs work and how implementing a loyalty program can assist your business. This navigator will also propose successful customer loyalty program examples to inspire your own.

What is a loyalty program?

A loyalty program is a marketing way designed to inspire repeat business by rewarding customers for their continued patronage. Typically, with a brand loyalty program, customers earn points for purchases, which they can then redeem for discounts, free products, or exclusive offers from your business.

How do customer loyalty programs work?

With a loyalty program, companies can propose points or benefits to customers. Customers can then redeem points for discounts, free products, membership rewards, or insider perks. 

But what’s in it for you? Here are a few of the perks that customer loyalty programs can propose your business:

More customer referrals

A successful loyalty program can turn regular customers into brand advocates who evangelize your brand through word-of-mouth marketing. Word of mouth is a low-expense marketing way compared to paid advertising. You can amplify this result by offering perks like referral bonuses, helping you attract even more brand advocates. 

Better customer retention

Loyalty programs foster brand preference by creating a sense of added worth, making customers feel they’re getting more for their money. In turn, customers are more inclined to buy from you than your competitors. And not by a tiny amount, either: A survey from 2022 found 80% of US consumers said loyalty programs improved their likelihood of maintaining business with a brand. The same survey participants claimed to purchase more frequently from a brand after joining its loyalty program. 

Higher average order worth

desire a higher average order worth (AOV)? You can add all sorts of earning opportunities to your loyalty program to inspire your customers to spend more every period they check out. 

Consider implementing a loyalty program that boosts AOV like these real-globe examples:

• Point multipliers: Sephora regularly hosts Point Multiplier events for their Beauty Insiders. 
• Tier-based opportunities: Nordstrom’s Nordy Club members require to earn $500 per year to maintain their Influencer position or $5,000 per year to maintain their Ambassador position.
• Streaks: Target Circle members can earn $30 in rewards when they spend more than $100 three times in a month.

Types of loyalty programs

Not every loyalty program is the same. There are different types of rewards programs you can use to construct customer loyalty and earn repeat business. 

Here are some of the most popular types of loyalty programs:

1. Points-based loyalty programs

Points programs are the most ordinary type of rewards programs. They let customers accumulate reward points they can redeem for freebies, liquid assets back, perks, etc. Rewards customers don’t just earn points from purchases. They can also earn loyalty points by sharing on social media, leaving reviews, having a birthday, or through gamification tactics.

2. Tiered loyalty programs

Tiered loyalty programs are memberships where customers get different benefits depending on their rank. Businesses often rank membership into groups depending on metrics like sales or customer engagement.

These customer rewards programs provide customers a objective. The higher their tier, the more exclusive the rewards.

3. Paid loyalty programs

Paid loyalty, or fee-based loyalty programs, provide customers immediate and ongoing benefits for a participation fee. These fees can be recurring or one-period.

Paid programs may require proof of worth to get signups, but they can navigator to higher customer worth. The most ordinary example of a paid loyalty program is Amazon Prime. While it seems like a tough model to mimic, paid loyalty can suit many different business models.

4. worth-based loyalty programs

The concept behind a worth-based loyalty program is to construct an emotional connection with customers. It involves donating a percentage of purchases to charity or welfare programs. You can allow customers to choose from different charities or propose just one that aligns with their values and your own mission. This type of program doesn’t directly reward customers, but as the rewards advantage population, it’s an attractive alternative for audiences that prioritize charitable contributions. Offering a worth-based loyalty program also tends to reflect positively on your brand reputation among audiences who distribute your values. 

Not sure which type of loyalty program is correct for your business? inquire customers what they desire from a rewards program. You can easily run a survey or poll with your customer base to discover out. Then make a rewards program accordingly.

Successful customer loyalty program examples

Blume

Bodycare retailer Blume uses a reward points structure called Blume Bucks in its loyalty program, Blumetopia. It’s pretty straightforward: Customers can earn Blume Bucks by following the ecommerce brand on Instagram, placing an order, or telling friends about Blume. They can redeem their Blume Bucks for merch, free products, and other gifts.

LIVELY

LIVELY is clothing and accessories brand with a tiered rewards program. Customers are automatically enrolled in the program when they sign up for a LIVELY account. They earn points through activities such as following the brand on TikTok (10 points) or purchasing an item in-store (30 points).

Loyalty members can apply points to purchases. For example, 100 points equals $10. They can also redeem them for products like totes, socks, and clips. 

LIVELY’s rewards program has different tiers based on the customer’s annual spend:

• Insider: $1–$124
• Inner circle: $125–$324
• VIP: $325+

The more a customer spends, the better perks they get. For instance, VIP members get free expedited shipping, upgraded propose discounts, and an exclusive customer worry text service.

Mirenesse

Mirenesse is Australia’s leading sustainable and cruelty-free cosmetics brand. Its loyalty program, adore Rewards, includes two tiers: Gold and Onyx. 

The Gold tier earns two points for every $1 spent. It includes benefits like free shipping on all orders, double points for activities, a 200-point joining bonus, and conversion of 100 points into a $5 store capitalization. The Gold tier costs $18 per month but includes additional perks like access to secret sales and the chance to be a tester for recent products.

The Onyx tier is free. Members earn one point for every $1 spent. It offers a 100-point joining bonus, and members get a birthday shock. 

100% Pure

Popular skin worry and beauty brand 100% Pure offers a tiered reward structure. Customers earn points by engaging on social media channels and writing reviews, which are then redeemable for products on their site.

The program has three tiers based on a customer’s spend per calendar year:

• Enthusiast: $0
• Activist: $250
• Revolutionist: $750

Benefits include early access to recent products, free shipping, redeemable vouchers, and birthday gifts. faithful customers earn points for actions like signing up for an account (50 points), writing a review (10 points), and engaging with the brand on Facebook and Instagram (20 points each).

Anyone can join the Purist Perk program and redeem points for discount code vouchers. Customers earn 15% off for 200 points at the Enthusiast level, and $20 off for 200 points at the Activist level. Discounts can be used during checkout and cannot be combined with other offers.

Implementing a loyalty program for your business

Every business is competing for customer depend. One of the best ways to construct this depend is by showing gratitude and providing distinctive customer experiences. Rather than spending your period finding recent customers, you can commence a loyalty program to develop the connection with your existing base.

With a Shopify store, implementing a loyalty program online is straightforward. Download loyalty program software like Smile or Yotpo from the Shopify App Store and commence today.

For example, with an app like Smile, you can make rewards points and referral programs that engage customers in your store. It helps you with everything from program design to setting up a thumb-stopping widget on your website to capture visitors’ attention and inspire them to enroll.

Customers will also have a rewards portal on their phones to manage their accounts, earn rewards, and redeem points.

Customer segmentation for loyalty programs

Understanding your customers and segmenting them into different groups can assist you design a loyalty program that feels more relevant and rewarding. By targeting distinct customer segments, you can tailor loyalty offerings to meet different needs, making the program more effective.

Factoring in loyalty sentiment, engagement, and behavior loyalty, the LoyaltyLevers Benefits Framework enables businesses to make targeted, personalized strategies that resonate with each customer throng. Read on for a breakdown of each segment and the strategies you can use to engage them effectively.

Engaged loyals

Engaged loyals are your loyalty program’s power players—the segment of customers who genuinely adore your brand and frequently engage with it. They’re already committed and enthusiastic, so your objective should be to deepen this connection and turn them into brand advocates. 

Consider offering them exclusive experiences, VIP access, or special events that reinforce their position. Engaged loyals are ideal for word-of-mouth marketing, so inspire them to refer friends and distribute their brand adore on social media.

Game players

These are the customers who aren’t particularly invested in your brand, but adore your loyalty program for the perks. They fall into a high-worth category, but your way for keeping them engaged will require to be different from the one for your engaged loyals. Any way you can gamify your loyalty program will be alluring to them. 

Games players can be persuaded to join your most elite segment. Sentiment builders, like the following examples, can assist you turn them into engaged loyals:

• position: propose tier levels and badges to provide them something to achieve, making them feel recognized.
• Convenience: Simplify earning and redeeming points with straightforward, low-attempt actions.
• shock and delight: Add unexpected rewards like bonus points or discounts to keep their gain high.
• Personalization: Tailor offers based on their history purchases to make them feel valued.
• Control: Let them choose how to redeem points, adding flexibility to their loyalty encounter.
• throng: make a sense of belonging with exclusive events or members-only groups.
• Purpose: Allow points to be donated to charity, adding a purpose-driven alternative.
• worth: highlight the concrete benefits of the program to display it’s worth their period.

Brand driven

Brand driven customers are the opposite of game players—they’re highly faithful to your brand itself but display limited engagement with your loyalty program. 

For these customers, personalization and convenience are key. They’re not looking to “play” for rewards; they desire straightforward, practical benefits. straightforward, personalized perks like birthday discounts, free shipping, or early access to sales can be effective. The aim is to make it straightforward for them to view worth in your loyalty program without requiring extensive interaction.

Belongers

Belongers tend to make up a substantial portion of loyalty programs. They’ve joined without powerful commitment to your brand and typically engage at a low level. Since their loyalty is lukewarm, they may require additional incentives to become more energetic participants. 

One loyalty way is to propose occasional bonuses or low-attempt opportunities to earn rewards that don’t demand a large period commitment, such as getting points for signing into their account instead of using a guest checkout alternative. Over period, these tiny interactions can assist construct a connection and convert belongers into more faithful customers.

By segmenting customers and personalizing rewards, you can maximize the effectiveness of your loyalty program and ensure that customers feel understood and valued—no matter which segment they currently fit into.

Loyalty program best practices

To make your loyalty program work to its fullest potential, keep these best practices in mind:

1. commence tiny

You don’t desire to overwhelm customers with an overly complicated program. Keep things straightforward correct out of the gate: Members earn one point for each dollar they spend. Over period, you can test out more creative strategies and view which are most effective in motivating your members. 

2. Define your goals

Before you even set up your loyalty program, it’s significant that you decide what your goals for that program are from the commence. For example, you might desire to boost your average order worth by 15% in the first six months. Setting goals like these will assist you assess act and make improvements over period. 

3. propose valuable rewards

If members don’t feel like they’re actually benefiting from your loyalty program, they might not engage as frequently. Or, worse, the encounter could even degrade any depend they had in your brand before signing up.

Consider what sorts of rewards would appeal to your target spectators. If your customers are worth-sensitive, they would likely be particularly motivated by percentage discounts. On the other hand, if you’re selling luxury products, your members aren’t going to be motivated by a 10% discount. Instead, you would be better off providing exclusivity perks like VIP events, free expedited shipping, or early access to limited-edition products.

4. Incorporate multiple earning methods

Instead of limiting point-earning opportunities to purchases, consider adding other ways for customers to engage with your brand. propose points for actions like signing up for your newsletter, referring friends, leaving product reviews, following your social channels, or even participating in surveys. Multiple earning options inspire customers to engage beyond just buying—and provide you more valuable insights into customer behavior.

5. Communicate clearly

Loyalty programs with a confusing model will seem dodgy and prevent people from engaging. The landing page for your rewards program should very clearly list benefits, restrictions, and earning opportunities. Using infographics and visuals are great ways to make programs easier to comprehend. Taking these steps will assist instill depend in your loyalty program’s credibility. 

6. Personalize the encounter

Personalization isn’t just a perk anymore—customers expect it. A research document from McKinsey & corporation revealed that 76% of consumers get frustrated when they don’t receive personalized communications or offers. 

On the luminous side, personalization can navigator to huge boosts in profits. The same research showed that 25% of the returns digitally native brands earn comes from personalization. 

Something as straightforward as a birthday reward or a product recommendation qualifies as personalization. But personalization can extend to all sorts of customer interactions such as targeted promotions, automated notifications, and behavioral triggers.

Do things differently with your loyalty program

Over the history decade, customer loyalty programs and rewards programs have proven to be an effective customer retention way, boost customer lifetime worth, provide excellent customer service, and inspire brand loyalty. commence your own loyalty program today to reap the benefits for your brand.