How to Start a Successful Customer Loyalty Program in 2023

Over 90% of companies run some kind of customer loyalty program.

One of the most successful strategies for boosting sales and fostering customer loyalty is the use of loyalty programs. Up to 84% of consumers say they are more likely to remain loyal to a brand that offers a loyalty program. Furthermore, 66% of consumers say that the opportunity to earn rewards actually influences how much they spend.

Brands engage in loyalty and rewards programs because they are aware that selling to existing customers is far less expensive than finding new customers.

Customer loyalty programs are nothing new, but they may be useful. Points, tiers, social media, and sponsored programs are the four categories into which the majority of them fall. To change things up and come up with new ideas for creating rewards programs and fostering customer loyalty, some merchants are attempting to disrupt the market.

What is a loyalty program?

Customers who contact a brand often are rewarded with customer loyalty programs. It's a method for keeping customers by enticing them to keep purchasing from your company rather than one of your rivals. Customers earn additional rewards when they spend more customer or interact more with the brand.

How do customer loyalty programs work?

Companies may reward customers with points or rewards via a loyalty program. And in exchange, consumers may use their points to get deals, freebies, rewards, or access to exclusive products. The objective is to increase customer loyalty and establish trust with the business.

95% of customers say trusting a company increases their loyalty.

Trends in Customer Trust Report, Salesforce Research

People will go to great lengths for the brands they like, according to a recent Yotpo survey. Nearly 68% of those polled said they'd sign up for a brand's customer loyalty program, and 56% of them said they'd be prepared to pay more for a particular product even if there were less expensive brands.

The survey also revealed that people expect more than just free delivery and discounts. They also desire early access to new products and sales.

To run a customer loyalty program, you must offer something. including exclusive offers, sales, early access, etc. But establishing rewards programs has tremendous benefits.

• More customer referrals. If your loyalty rewards program is excellent, people may recommend it to their friends and relatives. More recommendations result in more customers.
• Higher customer retention. People are more inclined to stay with you longer if they value your customer loyalty program.
• More sales. Want your average order value to be higher? A recent loyalty study indicates that 49% of consumers believe their spending increased as a result of joining a loyalty program.
• Brand advocacy. Regular customers might become brand evangelists thanks to a successful loyalty program. This organization assists your business in attracting new customers via word-of-mouth marketing, which is a low-cost alternative to paid ads.

However, not every loyalty program is the same. To foster customer loyalty and earn repeat business, you may build several types of rewards programs.

Types of rewards programs

Now that you know how rewards programs work, let’s look at a few common types you can adapt for your ecommerce store.

1. Points-based loyalty programs

The most popular kind of reward program is one based on points. Customers may redeem reward points that can be used for gifts, money, perks, and other things. Points are not the only way customers may earn them. Additionally, they may earn points by submitting reviews, celebrating a birthday, sharing on social media, or using gamification.

In its loyalty program called Blumetopia, body care store Blume employs a points system called Blume Bucks. By completing a purchase, recommending Blume to friends, or following the brand on Instagram, customers may earn Blume Bucks.

Customers may use their BBs to exchange for Blume merchandise, free products, and other interesting goodies.

2. Tiered loyalty programs

Customer incentives vary according to rank in tiered customer loyalty programs, a sort of membership. Businesses sometimes rate group membership based on particular parameters, such as sales or engagement.

Customers have a goal thanks to these customer rewards programs. The more unique and superior rewards they acquire, the higher their tier.

ThirdLove's Hooked Rewards program has a tiered structure. ThirdLove is a bra and underwear brand. Customers may join the program with only a few clicks and immediately begin receiving rewards. They get more benefits as they spend more money with ThirdLove.

A customer becomes an enthusiast if they spend $250 with the brand. More perks are available at this grade, including free underwear with purchases and special holiday offers. Customers who spend more than $450 with the brand are eligible for freebies and the release of limited-edition products.

3. Paid loyalty programs

Customers receive immediate and ongoing benefits in exchange for a participation fee in paid loyalty or fee-based loyalty programs. These costs may be one-time or recurrent.

Paid programs may need to request evidence of value before accepting new members, but the business can benefit more from members in terms of customer value. Consumers are 62% more likely to spend more on a brand after enrolling in a paid loyalty program, according to a recent McKinsey analysis.

Amazon Prime is the most common example of a paid loyalty program. Paid loyalty may work with a variety of business strategies, even though it may appear difficult to copy.

Three characteristics shared by successful paid loyalty programs were discovered by McKinsey:

1. The advantages outweighed the costs, which prompted enrollment.
2. Members stick around because of additional experiential benefits like personalized encounters and exclusive material.
3. The degree of engagement is high. A constant flywheel of engagement increases the value of well-paid programs. 

4. Value-based loyalty programs

A value-based loyalty program is designed to foster a closer relationship with customers. It entails giving a portion of purchases to charities or humanitarian initiatives. You may have one that actually reflects the beliefs of your customers, or you can provide a variety of charities from which to pick.

Customers are not genuinely rewarded by this program. But since the rewards are shared with society, it has a particular place in their hearts. This concept is often used by brands to develop hybrid loyalty programs.

The National Black Justice Coalition, for instance, can get reward points from Sephora customers.

So, for instance, if you have 500 points, you may give the charity $10. You get a $20 gift for every 1,000 points, and so on.

Uncertain about where to start? To learn what customers want from a rewards program, ask them. To find out, you may quickly run a survey or poll among your customer base. Then create a rewards program in line with it.

Best customer loyalty program example

The top 7 customer loyalty programs, along with lessons you can take away from each, are listed below. You can start your own customer loyalty program right now using these ideas.

1. DSW

The standard VIP loyalty program that Designer Shoe Warehouse (or DSW) offers gives customers points for every purchase and has reward levels that customers may access when they spend more money.

Program execution is faultless. Customers do not need to memorize a member ID number or credit card; instead, DSW's online system identifies customers by their name, phone number, or payment information.

When rewards are given automatically, there is a risk that customers will disregard the program. Customers aren't encouraged to spend more to earn more if they forget about the loyalty program. DSW sought a means to remind customers of their program's status and the rewards they might earn by making larger purchases at DSW stores.

DSW started an email marketing campaign at the beginning of 2017 to remind customers about their program. The campaign included a tailored email with the following information:

• How many reward points were required to get their subsequent $10 off voucher?
• Deals they currently were eligible for.
• a snapshot of their interactions with the company, such as how long they had been loyalty club members, how many points they had accrued, and how much money they had saved over the past two years.

The campaign's degree of customization was what gave it tremendous success. With a loyalty program like DSW's, the company has access to a wealth of customer information. DSW took advantage of this (combined with some tried-and-true email automation) to create emails that are very tailored and relevant, which is a far cry from other generic marketing emails that are now populating consumers' inboxes.

2. Sephora Beauty Insider

The Beauty Insider rewards program from Sephora is very well-liked. More than 25 million of Sephora's devoted members are members, accounting for up to 80% of the company's annual sales. Based on a conventional point system, customers earn rewards for each transaction. The ability for members to choose how to use their reward points is novel.

Price is one of the major obstacles for a sizable portion of Sephora customers; the company's products aren't inexpensive. Members of Beauty Insider may exchange their rewards points for discounts and gift cards, helping to cover the cost of purchases without eroding the value of the products. Members of the loyalty program may also exchange their points for more upscale items like limited-edition products or in-person beauty consultations.

Giving loyalty members the freedom to choose allows Sephora to provide customers with the discounts and products they really want without lowering the perceived value of their products.

3. Starbucks Rewards

Nowadays, it's typical for businesses to create mobile applications to administer loyalty schemes, but when Starbucks originally introduced Starbucks Rewards via the Starbucks app, the app was novel. Customers may use the program dramatically more easily by using the app—there is no punch card to forget or lose, and there is no sign-in necessary.

Customers must place orders or make payments via the Starbucks app to accrue loyalty points (or stars, in Starbucks' case). This method of centralizing customer transactions generates a wealth of information about customer preferences and behavior.

By encouraging customers to download its app, Starbucks may collect information on customers' regular drink orders, customer lifetime value, frequently visited locations, and seasonal preferences, enabling the company to provide more relevant promotions and communications to its audience.

It might be a terrific method to collect and organize customer data if a loyalty app is feasible for your online store. In any case, a proficient point-of-sale system can collect the majority of the same data.

4. Amazon Prime

One well-known program of paid loyalty is Amazon's Prime membership program. Prime members get unlimited free two-day shipping on millions of items for a fixed yearly cost, in addition to additional benefits like Prime Day sales and Amazon's streaming service.

Walmart and other retailers present a serious threat to Amazon. The majority of the products on Amazon may also be found elsewhere. The company distinguishes itself and persuades customers to purchase products only from Amazon by offering Prime. And it works: On average, Prime members spend four times as much as ordinary Amazon customers.

Your customer loyalty program may become a differentiator and competitive advantage for retailers in related sectors when products and pricing points are quite similar across rivals.

Consider retail outlets like Costco. Offer customers something of value in addition to your goods and products to entice them to purchase just from you. You may allow yourself some leeway to provide really beneficial benefits by instituting a membership fee. An upfront cost also motivates customers to expand their spending with you after making a purchase.

5. The North Face

The North Face, a retailer of clothing and outdoor gear, encourages members of its loyalty program to earn increasing amounts of rewards by giving them alternatives for redemption that are suited to their lifestyles.

Exclusive events from The North Face, check-ins at specific locations, and downloading the The North Face app are just a few of the unusual ways that customers can earn points with the XPLR Pass program in addition to the usual way on every purchase. Customers may use points toward special travel experiences, like a Nepalese mountain climbing expedition, when it's time to redeem rewards.

According to Andrea Bosoni, CEO of Zero To Marketing, “The XPLR Pass provides so many amazing perks for its members, such as early access to limited edition collections and collaborations, the ability to wear test products before they are made accessible to the public, and product “field testing.”

The North Face's rewards explicitly address their target audience rather than just enticing customers to spend more money. They are customized experiences that support the development of a greater emotional connection between the customer and the brand, not just general product discounts.

Small businesses can't always afford to support hiking trips in Alaska, but they can still create incentive and loyalty programs that are tailored to their customers' needs and deepen their relationship with them.

6. REI Co-op

Consumers often have a critical attitude toward brands and marketing campaigns. They are aware that the ultimate objective is to get them to spend more money and purchase more products. Because of this, the most cutting-edge loyalty program shifts its emphasis from encouraging customers to make larger purchases to creating value for them.

Customers may relive REI’s program roots as a co-op—a business owned by its customers—by participating in the company's program. A lifelong membership in the REI Co-op is available to customers for $20. Value benefits include 10% back on all purchases, deeply discounted “garage sales,” and savings on events like adventure lessons after they become customers.

The finest loyalty programs, in the end, retain their focus on the customer, creating genuine value that demonstrates the influence of loyal customers on a business. Although steep discounts are unaffordable for small retailers, you may still find a financially feasible way to be really kind to your loyal customers by taking a cue from many of the examples given above.

7. Apple

Although this one is a touch different, there aren't many brands with a fancier and more loyal fan base than Apple.

The most creative loyalty program sometimes isn't even a loyalty program. Without providing incentives and rewards, not every shop can build a devoted and loyal customer base—the way Apple has. but retailers of really distinctive products may not.

You may do away with a typical loyalty program entirely by attracting new customers with your product, creating an outstanding customer experience, and providing those perks with every purchase.

When to add a loyalty program for your business

Today, every company is vying for the confidence of its customers. Giving customers an experience they won't get anywhere else is one of the finest ways to build their trust. Start a loyalty program to strengthen the bond with your current customers rather than wasting time acquiring new ones.

By ensuring that the customer experience is taken into account at every customer contact point, you can build customer loyalty from day one. Before, during, and after the purchase are all considered to be contact points. You can always make sure that each customer has a satisfying customer experience, even if you don't initially create a loyalty program.

Nichole Elizabeth DeMeré, CMO, Reeview.app

Creating an online loyalty program is simple if you have a Shopify store. Start right away by downloading an app from the Shopify App Store like Smile or Yotpo.

For example, you may design referral and rewards programs that encourage customers to visit your store using an app like Smile. You may use it to aid with anything from program design to setting up a widget on your website to draw in visitors and get them to sign up.

Additionally, customers will have access to a rewards system on their phones that will allow them to manage their accounts, spend points, and earn rewards wherever they are.

Do things differently with your loyalty program

Customer retention rates, customer lifetime value, strong customer service, and brand loyalty have all been shown to increase with the use of rewards and loyalty programs during the past 10 years. A really unique approach to customer loyalty programs may create enormous value for retailers, even while the understated punch card has its place for certain businesses.

How will you reward customer loyalty with your own loyalty program?