8 Types of Customer Loyalty Programs!

Customer Loyalty Programs take a lot of different forms. Some businesses decide to use only one model, while others may combine two or more!

We hope that this article will be of value to you and help you choose the best type of customer loyalty program that corresponds to your business needs and customers.

But, first let’s see what is the definition of a customer loyalty program:

A customer loyalty program is a structured strategy that combines use of communication, software, hardware, gamification (in some cases), commercial incentives, marketing tactics, event planning etc, in order to help brands build a stronger relationship between their customers. The goal of a Customer Loyalty program is to increase retention and eventually advocacy. 

Different Types of Customer Loyalty programs

1. Point Programs

The point programs are the most common programs around the commerce world, as they the simplest ones. They are based on one simple principle: Spend more to get more.

    Every time a customer makes a purchase in-store or on your website, they get a certain amount of points depending on the size of their purchase. These points are translated into some type of reward. Whether it is a discount or a special customer treatment, customers seems to work toward collecting a certain amount of points to redeem their reward.

    2. Spend-Based Loyalty Programs

    In spend programs, customer get loyalty credits for the amount they spend at a business. This program is very easy to understand, create and maintain. It is also proven to be an effective way to increase transaction amounts and reduce churn rate.

    3. Tiered Programs

    One way to find the right balance between attainable and desirable rewards is to implement a tiered loyalty reward system, which rewards initial loyalty and encourages more purchases.

    In a nutshell, the tier program is based on levels of loyalty. Customers get points whenever they purchase something. The more points they receive, the higher loyalty level they will reach. And the higher the level, the more rewards they will get.

    4. Paid Programs – VIP member club

    Customers pay a monthly or annual fee to join your VIP member club with access to special services, discounts or unique opportunities. Your paid program should include benefits that are exclusive to members or either wise it will lose its value.

    5. Value – based Programs

    If you structure a loyalty program that is aligned to your customers’ values, they are more likely to become brand ambassadors. The million-dollar question here is: How do you reward your customers without rewarding them?

      First, it is very important to define your values. Let’s imagine that you run an online pet store and you know that your audience values animal welfare. One thing you may do it, is to start a loyalty program, similar to the point system, where customers’ purchases translate into currency. Then, every time a customer makes a 50€ purchase, you would donate 5€ to an animal rescue organization.

      The reward when choosing the value-based program is to connect with customers on a deeper level by creating a strong and ethical relationship with them.

      6. Partnered Program

      Strategic partnership for customer loyalty can be super effective regarding customer retention, as you offer them more opportunities. At the same time, it can help the growth of your business by building new business relationships (partnerships).

      While providing your customers with value that is relevant to them and goes beyond what your company can exclusively offer them, you are showing them that you truly understand and care about their needs.

      7. Game Program

      Who doesn’t love games?

      A good idea is to turn your loyalty program into a game application to encourage repeat purchases, increase customer loyalty, entertain customers and help strengthen your brand’s image in a more entertainment way.

      8. Hybrid Loyalty Programs

      A hybrid loyalty program is a combination of more than one type of loyalty systems. You may merge 2 different systems such as the tier and the game program, where customers reach new levels of loyalty every time they complete a new level in your game. The participation in the game should of course entail a purchase.

        The most common combination is that of point-based system with a tier program as it makes the calculation of points easy for the customers and encourages them to pursue next loyalty level and thus, more purchases.

        Do you find Customer Loyalty an interesting topic? Read more about it:

        Also published on Medium.