Loyalty Program: Don’t stop at occasional rewards
Setting up a loyalty program for your business or brand is possibly the first serious step to building a bond with your customers.
Say you own a spa.
The moment your customer walks out the door relaxed and slightly glazed from your essential oils, glowy and all…they forget about you.
And if, when they walk out, they see another spa business, they might try that one next time.
It’s a spa, after all! What could go wrong?
Rewind that, and let’s say you own a spa AND have a loyalty program in place.
The glowy and relaxed customer comes out of your business and notices another spa business.
“Maybe I should check it out”, he thinks.
Then logical thinking kicks in.
“But I’m only 3 massages away from my bonus massage. Hmm. And what if that new spa is not worth it after all? I’ll wing this one. I’m sticking with my spa.”
The loss of profit logic is a powerful filter when deciding on a service provider/brand.
And then, cognitive dissonance comes into effect as well. Why risk twice? Both your bonus massage and your time, money and much-needed relaxation at the second spa can go to waste.
So, loyalty cards keep your customers in check, so to speak. They are like an invisible tie to your business.
What is a loyalty program?
A loyalty program, also called Customer Loyalty program, Rewards program, or Treats program is a reward-based marketing strategy. Loyalty programs aim at retaining customers, attracting new ones, increasing their engagement and loyalty towards the brand, and moving users further down the funnel.
The loyalty program definition can expand further to include the various loyalty program types. For instance, point-based, card-based, fee-based, and so on. These are explained in the following section.
Whatever industry you are in, a loyalty program with a loyalty or rewards card can double your marketing actions without doubling the budget.
As you may recall reading from our major Marketing plan article, intangibility is one of the main challenges that businesses offering services need to face. Going back to our spa example, a well-designed loyalty program with smartly-allocated rewards along the way will mean a flat turndown to every other offer or program.
What consumers think about loyalty programs
I love loyalty programs, so I won’t start by saying how many reward programs have me registered in.
Instead, I will talk about how everyday people who are not in love with marketing per se, respond to loyalty programs and why.
We are going to dive into consumer psychology. Essentially, what do customers think when they sign up for loyalty cards?
“I don’t want any extra cards in my wallet.”
“Registering for a card means to hold the queue for longer in order to give all my data again.”
“Hmm… I’m afraid I don’t like sharing too much detail about me with an employee and/or the brand.”
“I don’t want to get tied up to one brand, especially with so many popping up all the time.”
Which usually all go away with:
“OFFERS AND SPECIAL DISCOUNTS, YOU SAID? You betcha! Sign me up, sis!”
So what is it that makes us join loyalty programs?
- I just love love LOVE the brand.
- Love how the loyalty card shows in my wallet every time I open it.
- I feel like an ambassador of the brand every time I see the card.
- It’s (hopefully) a way to get noticed by the brand when I spend more.
- The brand might reward my loyalty one day not so far away.
- I am always on the lookout for knock-offs and early access to sales. This might be a good start.
- A loyalty card helps me collect points which I might be able to use on my next purchase.
- I can keep track of my expenses and previous purchases with the brand.
- My birthday is in a few months; this loyalty card might get me a cool Birthday gift or a juicy discount/coupon.
- If I need to exchange an item or get a refund, I might get special treatment in-store as a loyal member and not a random customer.
- With a registered loyalty card, I will never lose my balance, even in case of theft or loss.
What marketers think about loyalty programs
Now, for brand managers and marketers loyalty cards are great because… well, let’s see what goes on in marketers’ heads (besides avocado toasts and Instagram posts):
- Loyalty programs help me know whether customers have specific preferences over a product in the menu/product list. This way I can send them customized messages automatically via drip campaigns.
- I notice trends on a macroscopic level, meaning whether consumers are slowly switching to one type of product or another.
- Whenever I want to give sales a boost or re-engage customers who are dormant, I can simply send our loyal customers an email with a special discount code to use.
- A loyalty card gives me more flexibility when sending newsletters: it is A-OKAY to reach out regularly to loyalty program members without flunking my high open rates. After all, all members know these emails are value-adders and benefit-oriented and they don’t want to miss out on a deal.
- Having a solid fan base of loyal customers is of the essence because it is rather unlikely for members to purchase a competitor’s brand. This is particularly due to them knowing they could be reaching their next milestone by using our rewards card.
- I can boost loyalty on demand: birthdays, sweet-sixteen, National [my industry] day, random winner generator, free toppings/ free wrapping options/free shipping/special discount for members only through unique codes, and so on. This way I can also drive traffic to the company’s website or ask users to take a specific action (e.g. leave a review, add a testimonial, and log them as engaged).
- I can throw an exclusive party for particular segments in our loyalty card, or invite them to join our online event/private workshops/online tutorials or webinars, etc.
What are the benefits of loyalty programs?
Let me switch over to marketing gimmicks and give you the gist:
- Your loyalty program differentiates your brand from the competition.
- Thanks to loyalty programs, you can reduce your advertising spendings.
- Retaining existing customers is so much easier (and more budget-friendly) than acquiring new ones.
- Loyalty programs helps move existing customers further down the funnel as part of a consistent strategy.
- Identify churn customers simply by checking user activity over a specific period.
- Also, customer loyalty programs help you discover which customers are your strongest brand evangelists.
- Alternatively, through loyalty program rewards, you can look for members who have influencer potential for your brand.
- Last, when a member drops out of one channel (e.g. unfollows you on Instagram) you can still reach out to them through the rewards program.
How to make more out of your loyalty programs
Like I said, promoting your loyalty programs on your in-store receipt, your monthly newsletter, the invoices you send, or the popups on your website are some of the ideas you can implement today.
But, to reach new heights of professionalism, it would be a great omission on our part to fail to mention the part where Automation meets Loyalty programs.
I believe it will be very hard for someone to come up with an industry which would not benefit from loyalty programs. The more competitive your industry, the more you are in need of a very competitive loyalty program. It will add value to your product/service.
Also, especially if your product is a commodity, you can use your loyalty program as a differentiator compared to other brands.
Here’s what I would set up if I were you:
- Create a tiered Loyalty Program for every time purchases are made online.
- Inform my buyer personas using correlated data: custom fields and products purchased/services booked, if statistical significance allows for it. Then, I can create custom discounts which go out automatically.
- Keep users engaged with potential: random winner generator every week. We could be giving away the user’s most-purchased product, or complementary items, by combining their history of purchases and their loyalty cards.
- To differentiate my brand: create a loyalty program persona that will inform members of where they stand in the program, how far along they are from reaching the next tier, what deals they are eligible for at the moment, how they can use their points. The level of personalization I can achieve is INSANE. Actual captures from my inbox:
- To reduce my advertising costs, I would set up a referral-based loyalty program or a social shares one. Every action taking place in either of these settings I would have an automation ping my Marketing/PR team to make sure that these do not go unnoticed. Use Zapier or your custom CRM software to create Webhooks.
- Another way to increase engagement of your customers is by giving them the opportunity to double their loyalty program points or buy more points half price. You could even help them send or share their points and give them back twice as much as they gave away, as a form of gamification.
- I would really like to see businesses giving back to the community. Ask your users to donate their points to an NGO of their preference and match their donations. This will help you show your users you care for the causes they are supporting, all the while when creating a positive brand image
- You can also create a loyalty program that addresses members who have never redeemed their points, those who have redeemed their points only once, or those whose points are past a certain number (e.g. see 31,185 in my loyalty program above). Send them customized recommendations for 500, 1,000, 5,000 points and so on. For those who do redeem their points, give them back another 500 points so they can quickly reach their next milestone. This way you keep them excited and involved.
Find more tips on our Bonus content (sign up on the right-hand side of this page).
What loyalty programs do to our brains
There is one unquestionable law: that of positive reinforcement.
Here is your Psychology 101 class: In operant conditioning, the behavior you wish to encourage, you reinforce positively and reward.
Over time, the reward gained will be associated with the reinforced stimulus and the behavior will be repeated.
In e-commerce, for example, when a consumer shops with your brand and they earn a gift card of $1 every time, or get a free sample, or get a bonus that they like, be sure that they will be coming back for more.
Every reward you send out to your customers is like a virtual standing ovation for the action they just completed!
Types of Loyalty programs
What better way to encourage repeat spending than with points? Let’s be honest, there is something about this point-based reward system that motivates us to go on: we are certain that, what we are striving for, we are going to get.
Think about it. How many times do we set out to do something, pursue a goal, filled with self-doubt and stress? But loyalty programs? No, that’s another territory. Our win is unquestionable. We know we are going to win, and we try as hard as we can.
We don’t consciously realize how many different types of loyalty programs we know of, but I assure you they are plenty.
Here are some of the most common categories:
[Plain ol’] Point-based loyalty program
With point-based loyalty programs, we have access to a comprehensive list of customer data. This data is great for customer data analysis and can track cross-device sign-ins.
See similar loyalty program examples: Starbucks, Sephora
Card-based loyalty program
The card-based loyalty program distinguishes between members and non-members and requires the use of the card for the reward to go through.
Paid loyalty program
Not everyone can wait until they reach VIP status- some might be willing to buy their way to VIP status. By paying a standard fee, members of this loyalty program get a premium service for an agreed price.
Tiered loyalty program
Oriented to VIP, this loyalty program type is designed with exclusivity in mind. Every action the member completes is matched with an equivalent of reward points and a status (here: Preferred- Gold-Platinum).
What is great about the loyalty program at hand is that it presents every prospect with a detailed list of what they will be getting in every step of the way.
See similar loyalty program examples: Starwood loyalty program (see Starwood Preferred Guest (SPG), Marriott loyalty program, Many airline travel companies, The North Face
Affiliation loyalty program
Suppose your business is located in a mall. You could form a coalition with the rest of the businesses there and launch an affiliation loyalty program.
This way, users will be able to get rewards whenever the shop from the mall. This tactic is most likely to attract consumers who will get more of their weekly chores done and get more out of redeeming their points.
On the downside, we should consider the risk entailed in users shifting their attention over to another business and the data privacy concerns involved when so many businesses have access to
It loses the differentiating factor BUT it can serve as a lead magnet at the beginning
See similar loyalty program examples: American Express
Cashback loyalty program
The example of Barclays Blue Rewards doubles as a Cashback and Affiliation loyalty program (see example above).
This type of loyalty program is characterized by instant rewards, as well as rewards with an expiration date.
How will the loyalty program trend change in 2019?
We’ve seen tried and tested marketing tactics transitioning to Experiential Marketing.
Where there were event sponsorships, now there are carefully designed experiences with brand alignment between sponsor and sponsee.
Where there were seasonal CocaCola bottles, now there are CocaCola bow label bottles.
We find that the more we can immerse the user in an experience that involves our brand/product, the stronger the association that will be formed.
Of course, loyalty programs are no exception to the Experiential Marketing trend.
So, what used to mean rewards per se, is now translated into smoothing out any hiccups that may stain a customer’s experience with the brand/service.
Here are some of the examples I liked best:
The North Face loyalty program – VIPeak
The North Face rewards page guides users into subscribing to their VIPeak loyalty program. With a direct relationship between money spent online or in-store and points earned, as well as by participation in events (see below) users have a clear understanding of what they’re in for.
Joining the VIPeak program comes with access to exclusive events, rewards twice a year, and early access to sales and offers.
Also, downloading the app can earn subscribers additional Peak points.
Note how clearly the relationship between “money spent” and “points earned” is stated.
What is great about this program is that it encompasses the online shopping experience, with the in-store shopping experience and the outdoorsiness that the brand stands for by rewarding the member for any of the above.
Hilton – Honors
Hilton’s loyalty program offers a number of perks for their members:
From lowest price guarantee (and a promise to match any lower prices and give an extra 25% off), to Hilton’s coalition with American Express, to the Hilton check-in/check-out app, the Hilton Honors program appears to be a 360-degree experience.
You see, everything from booking the room to checking in, to collecting and redeeming points with American Express, seems to have been taken care of.
This kind of loyalty program makes members feel valued and their needs catered to.
Essentially, they are dealing with everything that can ruin the experience with them. For instance, what can be a real mood-ruiner, even while on holiday, is to have to queue up to check in.
It also takes the spontaneity out of the experience because staying at a hotel (even when that hotel is The Hilton) and having to check in, leave your id at the front desk, etc take away from the coziness of the very goal of The Hilton; to help guests feel at home.
Starbucks- Starbucks Rewards
Of course, Starbucks would not restrict itself to serving coffee. Otherwise, it’d be no Starbucks.
So, the exciting experience for its Rewards members starts as soon as they use the Starbucks app to order or pay for their coffee.
You can pay for your coffee, stream music for free, and so on.
Rewards are frequent and encourage users to spend more time with the app.
In the future, the Starbucks app can help serve a more unique or personalized experience to its members.
Amazon – Amazon Prime
Some say that discounts will fade away in our minds over tim, but the fabric of a positive experience will last.
Amazon Prime may have launched as a two-day free shipping delivery service, but it’s come to be a lot more.
Free unlimited photo storage, listening to ad-free music, reading books on Kindle for free, watching movies and TV shows, all make part of a truly premium service, one that far exceeds user expectations.
Most popular Loyalty Program examples
Let’s take a look at a few loyalty program examples.
These will help us draw a more detailed framework for the benefits of loyalty programs in different industries and how these can be put to better use.
TESCO- “Tesco ClubCard“
It never really occurred to me to join TESCO’s club card (which may or may not serve as evidence regarding my housekeeping skills).
But, with my loyalty program article coming up, I started noticing a lot more things.
So, here is what my receipt from Tesco looked like (yes, Susan, I only bought junk food):
Apparently, Tesco has launched its ClubCard. The receipt read: “This visit could have earned you 5 Clubcard points”.
This offline way of notifying me of my loss of profit is very spot-on, timely, and practical.
It is spot-on because I could have gotten more for my 5.40 pounds.
Also, it is timely because I read it when I just have paid contactless and I’m holding my wallet in my hands (no better timing than that to tell me I could have spent less).
It is practical because it refers to a specific number of points I could have collected, however vague this measurement of points might appear (which I’m guessing refers to one point for every pound spent).
What makes the TESCO approach to loyalty programs a paradigm of practicality is that the “loss of profit” communication is followed up by the immediate action to be taken:
-Join online by visiting tesco.com/clubcard/join, or
-Text or Call in either of the two numbers provided
And what sends me to loyalty program design heaven is what follows the barcode:
I could win a 1000 Tesco gift card (and bonus Clubcard points – repetition jogs memory) by visiting tescoviews.com.
Apparently, there is an ongoing customer survey which upon visiting and entering a private code, greets you with:
Amazing, isn’t it? How everything is baked in?
I was going to take the tescoviews survey myself, but when I saw the reminder about the Clubcard I texted my sister whether she accidentally registered for a Clubcard.
I’m not missing out on this, nah-uh!
Travel loyalty cards and Airline rewards programs – “Miles and Bonus”
Arguably the most popular loyalty programs are those by airline companies, hotels, and the travel industry in general.
Every aspiring digital nomad has multiple loyalty program cards.
I, for one, don’t have plenty, just one and I’ve been struggling to get to gold for a few years now. But, even so, I’m still SO SO excited every time I hear from my favorite airline.
What’s it gonna be this time? Free miles? Bonus miles? Buy extra miles for less? A Hertz/Avis collab? Special discounts to a hotel chain? Invitation to one of their exciting promotional activities?
What are my options when it comes to travel rewarding programs?
Now, air travel industry loyalty programs have this thing: you don’t really need to be sold into them.
Everything about these loyalty programs screams “premium” and “exclusive” (and “better than you”).
But still, they need them because they are their differentiating factor or even their USP.
Now, the air travel industry has a very unique combination of means to communicate their benefits.
Upon booking your tickets, you need to provide an email to receive the confirmation email.
Afterwards, as soon as you get the first email, the header or footer will most definitely read “Join our Miles and Loyalty program today” and then a subheading “You could win a trip to the Maldives!”.
So, the loyalty program becomes an integral part of the onboarding process.
Another way that the loyalty program could be triggered could be through Email Automations.
For a user to book their tickets they need to be signed in if they are return customers.
This means that by signing in, we have a full track record of the purchases they have made over a specific period.
Following this, we could set up a quick drip campaign to keep track of the number of trips booked per account. Once this number totals higher than X over a period of Y days, the automation is triggered and the customer enters the Loyalty program sequence.
This sequence has already been designed by the Marketing team in the respective company, and it welcomes the new user, personalizing their email, and invites them to officially join the loyalty program to which they earned their way, one booking at a time.
A third way to get there could be through a specially designed landing page to which even first-time subscribers are referred so that they enter the sales funnel and convert more easily.
Loyalty programs in the air travel industry need to overcome the intangibility effect and they pull through skillfully with the following:
– Snail mail
– Status card
– Personalized luggage tag
– A booklet describing the list of benefits in the user’s current status
As soon as the user makes it to Gold, intangibility effect is overcome through the experience itself. In other words, the personal greeting at the front door, the Gold class waiting lobby, extra leg space, the allocated seats, newspapers, meal options, hot towels, etc. all attest to Gold membership and status.
How do these work for *your business* you may ask, Ms Jackson?
Well, you don’t need a loyalty program to greet your customers personally and charge less now and then or give away brand name reminders as I like to call them (stickers, loyalty card even if it’s made of card paper or it’s a simple business card) and so on.
Hotel industry loyalty programs – “Accor Hotels”
A couple of years back when I set out on an Eurotrip with a friend of mine, we decided we should set an ISO of sorts for our accommodation.
So we went with ibis hotels, which belong to Accor Hotels. Ibis are budget hotels and they are almost identical in every country.
When booking with ibis, I signed up for their loyalty card and every city we left brought in more points which we could use in our next destination.
Also, I still get an occasional discount when I book as a registered user for my favorite cities. Also, a couple of times I’ve managed to book a room when none of my friends could (because ibis reserves a few rooms for its loyalty program members).
If you are in the hotel industry be sure to set up your own loyalty program.
Perk ideas could include:
– Extra 15% discount when they book by December (if you are a summer destination).
– Extra 10% for that same year when they refer a friend who makes a reservation (and added benefits: neighboring rooms, quick access to pool, designated area in their restaurants, special discounts in experiences in the local area, and so on).
– One free ticket (or more) if they choose to join the hiking group or go to the local museum.
– Premium places at the workshop to be held in your premises, at the price of regular, or a 2 for 1 scheme.
Of course, loyalty programs can always get an extra boost from a goodie bag on checkout, to lock the memories in.
This also serves as a souvenir doubling as a way to stay top-of-mind.
Restaurant loyalty programs
Friday’s (TGIF) – Rewards program
Restaurants have this amazing potential: they offer a product/service which can be purchased on a daily basis.
That being said, restaurants need rewards programs more badly than airline loyalty programs or hotel loyalty programs.
Because, every single day is their chance to grow their business and have customers who feel at home.
TGIF have designed a loyalty program that is perfectly aligned with their motto of “In here, it’s always Friday”; from the waiting staff to the interior decoration, everything has “FUN” spelled out!
This is reflected in the wording of their landing page and signup process (see below).
According to their Rewards page:
“As a member, you get perks all year round, including a free dessert in your birthday month, a chance to preview new menu items before anyone else, and invitations to exclusive events.
Each visit gets you a complimentary treat, and every third visit earns you a Jump the Line Pass that lets you skip to the front of the crowd.”
Having the chance to get dessert for free every now and then makes signing up for the restaurant loyalty program so attractive, that not doing so is going to cost you more.
So, you end up going to Friday’s instead of a cafe, because it will count towards getting something for free next time!
Then, this helps you with increasing customer loyalty; your quest for more loyalty program points takes you to the store more often, eventually, you become more familiar with their friendly staff, and your experience in the store just keeps getting better!
Here’s A Restaurant Loyalty Program I designed
Note how besides the loyalty program per se, the address, phone number, website, and social media accounts of the business are readily available on the card.
Everything that a consumer might need is there on this card.
I designed this for a Poke Hawaiian Sushi place. Every pokebowl corresponds to one stamp in a box (stamps use their branding elements, e.g. a totem, a pokebowl, etc.).
As you see, the first reward is up with one’s second pokebowl. This reinforces positively consumers’ order frequency because they get something back every few times.
Most businesses simply offer a reward after 10 orders; for instance, this coffee shop round the corner gives me a coffee stamp for every coffee I buy.
You’ll find more loyalty program examples and ideas in our Bonus content (see below).
A great example of what you should …avoid
Here’s a loyalty program that has taken away more than it was supposed to add to my experience.
Viktor and Rolf – Secret Service
I used to wear Viktor and Rolf’s Flowerbomb perfume for a decade. At some point, they launched their Secret Service whereby visiting a beautifully animated page you wandered across different floors and supposedly entered different rooms.
The more codes I entered, the more frustrated I got that no Rooms opened, no emails were received, no gifts were sent.
I did contact them a couple of times, but never got a reply.
So, essentially, what this tactic accomplished was to generate anticipation over a reward which was never received.
Over time this did compromise the brand’s reliability to my perception because I had shopped so much and was tricked into waiting for something in return, when what I was actually doing was keeping their customer base updated myself, since every time, I just entered a code found in the packaging of my perfume/body cream/hair mist/Christmas special edition and logged that in my account.
Lesson learned: Don’t fool or mislead your customers. They love your brand and they don’t like being disappointed by what they put their money and loyalty in.
Let’s set up your own loyalty program
Remember to download the bonus (find it on the right-hand side of this page).
There you will find a step-by-step guide to get a head start on designing the coolest loyalty program, informed by the top loyalty programs in all industries!
What is your goal through setting up a loyalty program? Get more registrations? More referrals or purchases? Maybe aim for social shares? Buzz? Raise awareness for a cause?
What ways of redeeming points can you offer? Remember there should be a straightforward relationship between money spent and rewards gained.
For example, be clear about every dollar corresponding to one point or more.
This way, it will be easier for your customers to get enthusiastic about your offering, engage more with your brand, generate positive word of mouth for your loyalty program, and bring more referrals.
Having said that, one example of that is matching every dollar spent with one point. For instance, I usually find it frustrating that to buy miles for my Miles and Bonus program for the airline loyalty program I will need to spend so much more money.
As a matter of fact, the airline loyalty program sector as a whole is a pretty good example of complicated rules. Once, to understand the difference between Tier Miles and Reward Miles I had to do some online reading, ask around, then ask at the front desk of the lobby while everyone else of the Gold status members was enjoying their glass of wine.
And, I mean, I did my fair share of googling and forum chatting before that.
Set a budget for these rewards.
But, before you do, check whether the average spending of your loyal customers will be worth signing up for these rewards.
In other words, if your average customer spends an average of $40 every time they shop with you and the first milestone of your loyalty program is once they’ve hit the $300 mark, you understand that anything less than 10% of that amount is going to take away from your loyalty program.
This is like killing your own loyalty program.
This is basically saying to your customers that their money should go to you but not the other way round.
Now, I know what you’re thinking: I’ve already helped them purchase a product, so why should I bother any more afterwards? I gave them the product and a small bonus.
Well, you have a good point there but what if your competitor designs a loyalty program that puts yours to shame?
Chances are that in this case, users will see a loss of profit by sticking with you all this time and will convert in order to “punish” you and of course try to make up for the time and money spent by spending more on your competitor.
So, yeah, long story short, make these rewards worth everyone’s time. This is a matter of respect and valuing your customer as well.
Set up your Terms and Conditions.
I am not an expert here so you will need to do your fair share of research yourself, but here are a few things that might come in handy anyway:
Check out these T&Cs in the aforementioned loyalty programs. This should be a good starting point.
Let’s talk about naming your loyalty program and creating its own lexical resources
You could use a pun with your name- no matter how lame (pun intended)
If that is not applicable, then go for a benefit-oriented naming “advantage card” etc
At the same time, keep in mind for all your wording to be carefully selected and benefit-oriented (e.g. “Perks start the moment you join” – HILTON Honors Loyalty Program).
Use more fun language because the feelings you elicit in your website visitors these feelings will be subliminally associated with the reward program you are promoting
Don’t rely on digital alone. Make sure you throw in enough brand identity elements which can serve as the brand reminders: loyalty stickers, loyalty card, fridge magnet, wallet pen, credit card USB.
Right off the bat, these could be some of the cute little things your customers win.