6 Customer Loyalty Programs That Guarantee Better Retention

Customer loyalty is something that all businesses strive for. Along with a short average handle time and fewer returns than orders, it makes everyone – from the accountants to the marketers – happy. Sure, it’s awesome to find new and exciting leads for your business. But having a core network of customers who regularly put money into your pocket is the best way to ensure that your business remains profitable.

Offering a great product or service is a wonderful way to do that. Although, after you have made the first sale with a new customer, customer retention can be hard to guarantee. A loyalty program can help with this.

In this article, we’ll look at what benefits you can enjoy with a loyalty program and we’ll also outline the different kinds of programs available to your business.

Loyalty Programs: The Statistics

Before we look at the different types of loyalty programs available to you, we’d better make sure that they work. After all, there’s no point going to all the trouble of implementing such a scheme if it doesn’t equate to higher earnings in the future.

There is clear evidence that effective loyalty programs are a massive benefit to your business. In 2019, it was found that such a program can drive order quantity up by over 300%.

With 80% of future profits coming from 20% of your existing customer base, these schemes increase the long-term value. If you weren’t already sold on the idea, it has also been found that it costs a business five times more to attract new customers than it does to retain existing ones.

So, these programs drive sales, expand profits, and cost less than bringing in new buyers. Now, all that is left to do is find the right one for you and your company. Like searching for alternatives to Zoom phone, or a different broadband provider, this can be a case of trial and error. Let’s take a closer look at the six best loyalty programs for your business.

Loyalty Program #1: Tiered

A tiered loyalty program gives customers a goal to achieve. Simply put, the more the customer engages with your business, the more rewards they can access.

Companies decide on how to separate their respective tiers and what benefits to offer. They can be divided along by metrics, such as the number of reviews written, or longevity of membership.

The most practical examples of businesses employing a tiered loyalty program include Starbucks, Uber, and Marriott Hotels.

Loyalty Program #2: Paid For

A paid-for loyalty scheme means that customers gain immediate access to rewards after paying a fee. This can seem counterintuitive, but it should still be a success if your list of benefits is enticing enough.

If you do decide to go for a paid-for loyalty system, it’s worth deciding whether you want the fee to be a one-off or a recurring payment. The best example of a successful paid-for loyalty program with a recurring fee is Amazon Prime.

A one-off payment means less pain for the customer in the long run. A recurring payment gives you the option to bring the cost down, and flexible scheduling of the payment date can also be a benefit.

Loyalty Program #3: Points-Based

A points-based loyalty program means that you assign points to the value of the money a customer spends with you. These schemes allow customers to view every transaction as having a certain value which can encourage them to build up points more regularly.

Once they’ve amassed a certain value of points, they can exchange these for a specific benefit. From in-store discounts to prize draw entries, how you allow customers to use their points is almost endless.

The Body Shop runs one of the most successful of these schemes.

Loyalty Program #4: Value

You see this type of loyalty program less often, but it encourages a different kind of buy-in from customers. Instead of getting rewards or perks for themselves, a value loyalty scheme ensures that a portion of their money spent will go to a cause or a charity.

While this may seem great on paper, it has the potential side effect of limiting income, with customers who perhaps disagree with your choice of charity put off and subsequently deciding to spend less. On the other hand, it does have the prospect of inspiring a much stronger sense of loyalty in the customers who choose to engage, as though there is a strong sense of team cohesion between the business and its patrons.

In 2020, Sephora allowed customers to use their left-over points to donate to the National Black Justice Coalition.

Loyalty Program #5: Coalition

A coalition program is a scheme where companies work together to offer extra benefits to their shared customer base. This can be a good way for different businesses to enjoy each other’s customer network and can act as a source of lead generation.

If you are going to pursue this kind of loyalty program, it operates a little like affiliate marketing, so remember your audience. Do your best to factor that into the type of business that you look to partner up with.

A great example of this working successfully is the Lego and My Nintendo collaboration. My Nintendo users can redeem their points for Mario merchandise.

Loyalty Program #6: Online Community

If you build up a customer base of dedicated, loyal fans, they will likely build social media pages to discuss their shared passion. Integrating this into your online presence by offering a chat room facility with good video conferencing software, or running an in-house forum, has the dual benefit of being convenient for the customer and insightful for you.

Online communities are such an effective loyalty program because while it’s easy to leave a website, it’s challenging to leave a community.

Loyalty Programs: A Customer’s Best Friend

Loyalty schemes work. There are countless real-life examples of why giving back to your most loyal customers has a beneficial impact on your company’s long-term health.

Throughout this article, we’ve outlined the options available to you and have discussed how they work. In doing so, we have helped to show which will work best for your specific business requirements. While every company is different, its need to generate income from customers remains the same. An effective, well-organized loyalty scheme is one of the best ways you can achieve this.

Jessica Day

Jessica Day is the Senior Director for Marketing Strategy at Dialpad, a modern business communications platform with a sophisticated and secure video conferencing feature that takes every kind of conversation to the next level—turning conversations into opportunities. Jessica is an expert in collaborating with multifunctional teams to execute and optimize marketing efforts, for both company and client campaigns.