First thing’s first – What’s a loyalty program?

What do you think of when you hear the term ‘loyalty program’? Perhaps you think of rebates, collecting points or discount incentives. More generally, a loyalty program is designed as an incentive to keep your regular customers engaged by rewarding them for their recurrent business.

When operating a business, a primary and rightful concern will always be maintaining profitability and a competitive edge. However, considering the human element of business can also be a powerful driver of sales, as customers are more likely to continue purchasing if they feel appreciated and connected to your brand. A loyalty program can therefore be an excellent tool to increase brand loyalty, customer engagement and exclusivity.

Loyalty programs can take a variety of forms including rebates, a points system, accumulating travel miles and access to private events. But how exactly does it work and how do you decide which type of program best suits your business?

Types of Loyalty Programs

Wondering what type of loyalty program works best for your business? Starting a loyalty program may seem like a daunting task. However, the right approach and strategy can set you apart from your competitors and keep customers knocking on your door.

Here’s a rundown of three (3) popular types of programs and how they can be used to retain your returning customers.

I) Points-based

When it comes to loyalty programs, this is a popular option as it’s straightforward and easy to utilize. With the purchase of a product or service, customers accumulate points which can be exchanged for rewards, discounts or rebates.

This type of loyalty program works best for businesses that have a high volume of customers that make purchases regularly, such as groceries or pharmacies. Sounds simple, right?

If you’re not sure where to begin, here are some tips to consider:

  • Set rewards, discounts or rebates across standardized point intervals (e.g. a reward or selection of rewards available at 100, 500 and 1000 points; 10% off your entire purchase for 100 points; a rebate of $100 when 100 points have amassed)
  • Have a simplified, intuitive explanation of how points accumulate with spend (e.g. for every $1 spent, earn 1 point)
  • Tailor your incentives based specifically on your customer base.

    Your incentives should be something that your customer is interested in having. If you’re not sure what to offer, collect demographic information on your customers and keep track of what they frequently purchase. By logging and trending their buying habits, you can then customize your incentives to meet their needs. Doing so creates more excitement around incentives and may increase the likelihood of your customer making recurring purchases to amass points.

    II) Tier-based

In a tiered-based loyalty program, customers are categorized in tiers based on the amount they have spent, moving up in tier as spend or investment increases. At the first tier, customers may have basic access to certain products, features, discounts or services, which then increase with tier level. In this model, customers are then incentivized to invest or spend more to unlock higher tiers with greater benefits, status or rewards.

You may be most familiar with this option for high-end products and services, such as airlines, upscale stores and credit card companies. Tier-based loyalty programs work best to incentivize a customer demographic that has readily available capital to invest in your brand or make high-cost purchases on an intermittent basis.

III) Value-based

If your brand has strong values that tie almost seamlessly to your customers’ views, a value-based loyalty program may be a great fit for your business. Value-based loyalty programs work by contributing monetary or action-based value towards a specific cause when a customer spends over a certain amount or purchases pre-determined products and/or services.

For example, consider a business that is heavily branded with themes such as women’s well-being and empowerment. A value-based loyalty incentive may be contributing $5 to breast cancer research for the purchase of a specific product. Incorporating a value-based loyalty program is a great way for your customers to feel connected to your brand by enforcing your brand values and involving them in a personally gratifying way.


No matter what type you choose, a well-executed loyalty program can go a long way in retaining your regular customers.



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