7 Best Customer Loyalty Program Strategies (With Examples)

7 Popular Strategic Approaches to Creating a Loyalty Program

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Customer loyalty programs vary depending on your business model, market, target audience, and budget. Here are the most popular approaches to loyalty programs, with real-life examples:

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Creating points-based rewards program

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This one is classy. Customers are very interesting beings. Most are willing to buy more if you offer them one item for free. You just ensure your customers earn points every time they buy from your business. Later, once a certain number of points is achieved, they can be redeemed for discounts or even free items. It depends on your business model.

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• Pros: Easy to understand, flexible rewards, trackable engagement.
• Cons: Can incentivize low-value activities, potential devaluation of points.‍
• Best for: Encouraging repeat purchases, wide range of products/services. Used widely as an ecommerce loyalty program (to encourage repeat purchases across diverse products/services), travel & hospitality (hotel upgrades, flight discounts), and SaaS tools (for continued subscriptions and engagement).

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Loyalty program best practice: It's easy for customers to forget about all the reward apps and programs they signed up to. Give your customers regular reminders to ensure they remember about the points.

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Success Case: Starbucks’ Stars Rewards Program

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Loyalty programs: Point-based (with the elements of gamification, exclusive access, and holiday rewards)

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In brief, Starbucks' Rewards program uses gamification with points ("stars") and tiers to incentivize frequent app use and purchases. Its customer retention rate is 44% (almost twice as high as the industry average of 25%).

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1. Starbucks leverages its mobile app to integrate the loyalty program seamlessly into the customer experience, making it easy for customers to join, track their rewards, and make purchases.
2.  The tiered structure of Starbucks' program incentivizes continued patronage by offering greater rewards as customers reach higher levels of spending.
3. By offering exclusive benefits such as free birthday items, mobile ordering, and free Wi-Fi, Starbucks creates a sense of belonging to a privileged group.

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Making exclusive discounts for members ONLY

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Customers, inherently value-driven, often feel a sense of reward and recognition when they receive special offers tailored just for them. To implement this effectively, track customer purchases and reward frequent shoppers with exclusive discounts that escalate with their shopping frequency or volume. Additionally, personalizing these discounts based on customer preferences can significantly enhance their shopping experience.

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• Pros: Increased customer loyalty, higher purchase value, improved brand perception, lead generation success
• Cons: Potential resentment from non-members, program administration costs, risk of devaluing the brand
• Best for: SaaS businesses with repeat customers, companies looking to build a community, businesses facing competition, businesses with diverse product lines.

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Loyalty program best practice: Communicate these exclusive offers through direct channels like email or SMS, ensuring that your valued customers are aware of the benefits awaiting them, thereby reinforcing their connection to your brand.

Success Case: Kundalini Yoga’s Membership Benefits

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Loyalty programs: Exclusive access for members

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The success of Kundalini Yoga's membership discounts illustrates how targeted loyalty programs can significantly enhance customer retention and engagement. Offering various membership tiers, with increasing discounts and benefits at higher levels, incentivizes customers to commit for longer periods or to more premium offerings. For example, a basic membership might offer 10% off classes and workshops, while a premium membership could provide 20% off plus exclusive access to special events or online content.

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Using cashback points as a customer loyalty strategy

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 In this model, customers accumulate points for every purchase they make, which can then be converted into cashback, effectively giving them a discount on future purchases. This method strikes a chord with shoppers, as it directly rewards them with tangible savings, making them more likely to return for subsequent purchases.

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• Pros: Transparent value, perceived fairness, aligns with cost-conscious customers.
• Cons: Limited appeal beyond price-sensitive audiences, can be less engaging.
• Best for: Financial services (credit cards, rewards programs tied to spending), e-commerce (price-sensitive customers, competing on price), grocery stores (incentivize frequent purchases of everyday essentials).

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Loyalty program best practice:  Ensure the points system is simple and the conversion to cashback is straightforward, so customers can easily understand the value they're getting. Regular updates on point balances and reminders of how close they are to their next cashback reward can further motivate customers to keep shopping

Success Case: Amazon’s Ecommerce loyalty program

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Loyalty programs: Cashback points (with some exclusive access rewards)

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Amazon has a wide system of cashback rewards. In brief, it offers:

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1. Amazon Prime Rewards Visa Card.
2. Amazon Flex Rewards for participation in the Amazon Flex delivery program.
3. Limited-time promotional offers where customers can earn cashback.
4. Some external companies offer cashback rewards for purchases made on Amazon

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When it comes to exclusive offers, Amazon Prime membership includes special cashback offers as part of their membership, incentivizing both membership and shopping. Also, it provides exclusive access to features such as regular discounts for goods, free shipping, and others.

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Providing exclusive access to products or features

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Offering exclusive access to products or features is a powerful customer loyalty strategy to enhance customer engagement and loyalty, especially for SaaS businesses. This model capitalizes on creating a sense of exclusivity and privilege among loyal customers, motivating them to maintain their loyalty in anticipation of unique benefits. Here's how it works and the advantages it offers:

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There are different options to implement this: early access to features, exclusive features, special events, and beta testing opportunities.

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• Pros: Fosters a sense of exclusivity, increases perceived value, and incentivizes higher engagement.
• Cons: Difficult to scale, potential resentment from other users, requires valuable features.
• Best for: SaaS companies (early access to beta features, premium functionalities for high-value users), gaming platforms (exclusive in-game items, access to special events), luxury brands (VIP experiences, limited-edition product access).
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Loyalty program best practice: Ensure the points system is simple and the conversion to cashback is straightforward, so customers can easily understand the value they're getting. Regular updates on point balances and reminders of how close they are to their next cashback reward can further motivate customers to keep shopping.

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Success Case: Hubspot’s Private Beta Testing

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Hubspot, for instance, offers priority support and exclusive beta testing opportunities for Enterprise plan users. Participating in beta testing offers valuable insights into upcoming features and allows users to shape the product's development. This fosters a sense of ownership and investment in the platform, strengthening the user-company relationship.

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Building emotional connection with holiday-connected rewards

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Holiday programs play on emotional connection. Think cozy vibes, gift-giving excitement, and a dash of FOMO. Programs dedicated to personal events leverage the power of personalization and recognition. It's a day dedicated to the individual, and receiving a special reward creates a positive feeling towards the brand. The birthday reward often comes with a limited redemption period, encouraging customers to make a purchase around the time of their birthday. This creates a sense of urgency and exclusivity.

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Also, remember that holiday offers should be personalized, so the best ideas are giving rewards for birthdays, anniversaries of being your customer, or any other important milestone. Common holidays like St. Valentine’s Day don’t create such loyalty.

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Pros: Personal touch, emotional engagement, drives seasonal purchases.
Cons: Requires strong brand identity, is limited in applicability, and poses potential logistical challenges.
Best for: Retail brands with strong seasonal appeal, travel & hospitality, food & beverage, fashion brands

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Loyalty program best practice: Go beyond a generic discount and offer rewards tailored to the customer's preferences or purchase history. Think freebies related to their favorite items, double points on specific categories, or exclusive birthday-themed products.

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Success Case: Levis’s Ecommerce loyalty program

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Loyalty programs: Birthday Rewards

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Customers typically need to be part of Levi's loyalty program, often requiring them to sign up for an account or join a mailing list to qualify for birthday rewards. As the customer's birthday approaches, Levi's would send a notification, usually via email or through their app, informing them of a special birthday reward. This could be a discount, a free product, or exclusive offers tailored for the occasion.

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Trying a tiered system (gamification)

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Imagine a pyramid with multiple levels, each offering progressively better rewards. That's the essence of a tiered system with the elements of gamification. Customers earn points, credits, or other achievements that propel them through the tiers, unlocking benefits tailored to their level of engagement. The tiered structure gamifies the experience, adding a sense of progress and achievement that motivates customers to climb the ladder.

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By understanding the key elements of businesses’ success and adapting the learned insights to their business context, other companies can create their own successful loyalty programs that foster customer loyalty, drive repeat business, and ultimately boost their bottom line.
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• Pros: increases engagement, rewards loyal customers, and encourages progress.
• Cons: Complex loyalty program management, potential unfairness with high tiers, risk of alienating lower tiers.
• Best for: Large customer bases, SaaS (rewarding long-term engagement), mobile apps.
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Success Case: Duolingo

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Loyalty programs: Point-based Gamification

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Duolingo is a free language learning app that uses gamification to make learning more engaging and fun. Users earn points for completing lessons, streaks, and other challenges. They can also level up and unlock new features, such as new languages and stories. Duolingo also has a loyalty program called "Duolingo Plus," which gives users access to ad-free learning, streak repair, and offline lessons for a monthly subscription fee.

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Offering access to exclusive community

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Building an exclusive community within a loyalty program can be a powerful tool for boosting engagement, brand loyalty, and customer lifetime value. However, it's not just about offering an "exclusive" label; the key lies in creating a valuable and meaningful experience for its members. While limiting membership can create a sense of desire, the real value lies in the unique experiences and benefits offered to community members.

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• Pros: Fosters community building, enhances brand connection, and creates a sense of belonging.
• Cons: Requires ongoing community loyalty program management, may not appeal to all customers, potential exclusivity issues.
• Best for: Niche brands (cultivating a tight-knit community of dedicated fans), luxury brands (creating an exclusive and aspirational brand experience), and subscription boxes (building a sense of belonging and connection among subscribers).
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Loyalty program best practice: Creating an exclusive community within a loyalty program requires more than just a "members only" sign. By focusing on authentic value, meaningful connections, and personalized experiences, you can build a loyal and engaged community that drives long-term business success.

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Success Case: Lego Insiders Program

LEGO® Insiders is a free membership program designed for adults (18+) interested in the LEGO® brand. It serves as a central hub for various benefits and engagement opportunities (encompasses all of LEGO Group’s online experiences, including LEGO ID, LEGO VIP, LEGO Life, LEGO Ideas, and beyond, in one single account). It’s interesting that the program targets adults, a growing demographic in the LEGO® consumer base.

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