Reward your customers the right way and they’ll stay by your side through thick and thin.
As marketers, it’s our job to provide our audience with helpful, beneficial content (and incentives) at every stage of the buyer journey, nudging potential customers closer and closer to their first purchase.
And once they become customers, we have to cultivate a relationship that will keep us on their minds so they come to us whenever the need arises— no matter what’s going on in their lives.
Loyalty programs help brands accomplish all of this and more. Customers carefully coaxed into the fold become repeat buyers, leave positive reviews, and generate word of mouth referrals. It’s an ever-moving cycle, and it’s vital to your brand’s success.
What are customer loyalty programs?
Customer loyalty is a crucial metric for gauging a brand’s success. It measures their willingness to return to the same brand again and again. Loyal customers can fast track a brand’s success through continued support and referrals.
Traditional customer loyalty programs offer incentives that help brands retain customers, increase customer lifetime value, and show their customers how much they appreciate their continued support.
Every reward program is different. Depending on your business model, you might design a program that gives rewards points with every purchase that customers can redeem for gifts and discounts, or a subscription-based program that rewards customers when they commit to paying a monthly fee.
Why are customer loyalty programs important?
At the end of the day, your customers can probably get what you’re offering elsewhere. Customer loyalty programs can be one of the key differentiating factors that keep your customers coming back to you, without wondering how green the grass is on your competitor’s side of the fence.
Relationships are a two way street, and customer relationships are no exception. You have to offer as much to them as they’re offering you— and a little bit more— if you want them to stay by your side. Your customers support you by buying your products and services. You support them by supplying high quality products and services.
The problem with stopping here is that your competitors are doing the same. If you want to stand out, you have to offer something a little more special in return for your customers’ continued support.
That’s where customer loyalty programs save the day.
Brands that implement customer loyalty programs improve their customer retention, lifetime value, relationships, appreciation, and satisfaction. And when customers inevitably rave about loyalty rewards, they offer up free word of mouth marketing and helping out your bottom line.
How do you start a customer loyalty program?
The key to starting a successful customer loyalty program is knowing what your customers want. Start by studying customer behavior and surveying your most loyal customers to find out what keeps your brand in their favor. You’ll want to gauge your customer base’s overall level of satisfaction, too.
Once you have an idea of what your customers appreciate and some insight into how you can improve your customer relationships, it’s time to create a customer loyalty program tailored based on that data. Take a look at the different types of loyalty programs, study what your competitors are doing, then decide what perks your customers will most appreciate.
You’ll want to set clear goals at your customer loyalty program’s start. This will keep you on track and help you measure the program’s effectiveness. You might choose different goals for different customer segments. For example, you might have a segment of loyal customers you wish would purchase more products and services. Identify loyalty offers that resonate with each segment.
What makes a successful loyalty program?
A successful customer loyalty program establishes an emotional connection between the customer and the brand. It fosters a relationship that goes beyond the customer’s need for a certain product or service, encouraging customers to actively seek out ways to support your brand. Loyal customers put their trust in your brand and your products, and research shows they spend 67% more than new customers
Loyalty programs cultivate positive sentiment about your brand at every touchpoint, slowly transforming one-off buyers into loyal customers. 80% of customers who switch feel the brand could’ve done something to retain them. Occasional nudges from a good customer loyalty program could be enough to keep a good chunk of customers from knocking at your competitor’s door.
There are many ways to measure the success of your customer loyalty program. Good tracking is key to all of them. The most common customer loyalty metrics to track are:
- Customer retention rate: how well you’re retaining customers both within your loyalty program and overall.
- Number of purchases per customer: how many purchases each customer makes. You can track this metric for loyalty members and nonmembers and compare.
- Average customer spend: how much each customer spends.
- Social media mentions: how customers are talking about your brand and loyalty program online,
- Referral traffic: where your website visitors come from.
- Member value: average spend for loyalty customers.
- Share of sale transactions on loyalty: the number of transactions that participate in the loyalty program.
- Loyalty program ROI: the overall return on investment for your customer loyalty program.
8 types of customer loyalty programs + examples
While every rewards program is unique to the company and the customers it’s designed to serve, most programs fall into the eight categories below:
1. Tiered loyalty programs
Tiered loyalty programs offer customers benefits based on a ranking system. The ranks typically depend on how much they spend or how engaged they are. These programs can inspire customers to work towards a higher rank. Southwest uses this loyalty program strategy, giving members who fly more extra perks based on ranking.
2. Paid loyalty programs
This type of loyalty program requires customers to pay a fee for immediate and ongoing benefits. The fee can be one time only or recur on a regular (often monthly) basis. Fabletics is a great example of this. Subscribing to their program for a monthly fee of about $50 can get you a full workout set for about a third of their regular price. Customers are 62% more likely to spend more on a brand after joining their paid loyalty program.
3. Experiential rewards and exclusive events
This program offers experiences the customer wouldn’t otherwise have access to, like a class, workshop, concert, etc. Experiences tend to evoke a stronger emotional response than transactional benefits like discounts and freebies. Sephora offers experiential rewards like free custom makeovers, beauty classes, and invites to exclusive events for their Rouge customers (those who spend over $1,000 per calendar year).
4. Point-based incentive programs
This is the most common type of customer incentive program out there. Customers gain points with every purchase and can use those points to get freebies, cash back, discounts, and other perks. Some brands allow customers points for actions like social shares, leaving reviews, gamification strategies, and even for milestones like birthdays. Tarte uses a points system to reward members, and gives their loyal customers early access to sales and product launches, too.
5. Email campaigns
Brands using this type send emails offering insider tips and special discounts to loyalty members. Chipotle does this, and they use the emails to remind members when they receive points and give thanks, too.
6. Referral programs
This type of loyalty program pushes word of mouth marketing by rewarding customers with cash, discounts, or freebies when new customers make a purchase on their recommendation. Tesla uses this program type to offer qualified referrers exclusive access to new vehicles and events.
7. Discounts
This type simply offers a discount for loyalty members. For example, Mapco’s gas rewards program gives members a slight discount for typing in their phone number at the pump.
8. Apps
Some companies have a dedicated app to house their rewards program. Customers order in the app to collect points and redeem freebies or discounts. Panera Bread does this well, offering an incentive every few visits. They include a countdown in the app that shows customers how many visits they have before their next reward.
Using video to build customer loyalty
A rewards program is worth nothing if it doesn’t build an emotional connection between you and your customers. Words spelling out a potential discount on a screen aren’t always enough to do that effectively. Time and again video has proven to be the best way to foster emotional connection with an audience.
Strengthen your customer loyalty program with these 7 types of videos:
Create an announcement video
Launching a new sale, product, or service anytime soon? Let your loyalty members know first (and maybe even give them early access) with an announcement video. Vimeo Create has oodles of templates like this one that will help you create branded announcement videos in minutes.
Explain your program
Your loyalty program will be useless if your customers don’t know how it works. Create an explainer video that details how to sign up for your program, how to use it, and what perks customers can expect.
Show how your app works
If your loyalty program uses an app, create a demo video showing customers how to use it. Pro tip: use this template.
Email marketing videos and GIFs
Add a video or funny GIF to your emails to boost open rates and keep your brand top of mind for your loyal customers.
Express your gratitude in a video
Showing your customers how much you appreciate their support can go a long way, especially in video format.
Leverage social media marketing
Share how your loyalty program works on social media — like TikTok, LinkedIn, and Instagram — to attract customers who may not know they’re missing out on perks.
Celebrate customer milestones
Create a video congratulating customers on milestones like birthdays and anniversaries to be shared along with the incentives. Here’s a template to use.
Frequently asked questions
What are some of the best customer loyalty programs?
Sephora’s Beauty Insider program and Amazon Prime are two different but highly effective and well-loved loyalty programs to learn from.
What are the main types of loyalty programs?
The most common types of rewards programs are points-based, tiered, and paid. Sephora’s program is both points based and tiered, while Amazon Prime is an example of a paid program.
Wrapping up
Competition is tough these days, and it doesn’t look like that’s going to change anytime soon. Retaining a loyal customer base is the way to stay ahead of the game in a tough market.
Acquiring new customers is costly. Throw some of that budget into a customer loyalty program tailored to your customer base and you can up your sales with the customers who are already supporting you. Give back to them, and they’ll give more support to you.