Understanding Loyalty Card Systems

by Natasha Ambavle |

Understanding Loyalty Card Systems

The loyalty system dates back to the 18th Century when American retailers started giving out copper coins to their customers, which could be redeemed on their next purchase. This marketing strategy gained traction, and copper coins were first replaced with tokens and then stamps. Today, loyalty programs are represented either in the form of plastic cards with chips or mobile applications. But what exactly are loyalty card systems? Why is an 18th-century marketing program still valid today? Why do some of the biggest brands in the world have a loyalty program?

In this article, we will explore the scope of the loyalty card system, its functionality, and advantages, and explore options to best harness the power of loyalty card systems with the help of experienced strategists and expert agencies.

What is a Loyalty Card System?

To understand loyalty card systems, it is first necessary to know what customer loyalty is and why it is important for any business. In simple terms, customer loyalty is a customer’s preference towards a particular brand that motivates them to repeat their purchases. A loyal customer not only ensures an increase in sales but helps in promoting the brand within his/her circle, helps in building brand credibility, and remains loyal to the brand, despite the influx of new products in the market. A loyalty system further engages and rewards these customers. Loyalty programs are also responsible for bringing in new customers and turning them into brand advocates.

A loyalty card system is a marketing program designed to stimulate a certain behavior by rewarding and incentivizing the customer. It helps with a positive association, building a solid customer-brand relationship, and reinstating its position in the market.

Types of Loyalty Programs

Not every business is the same, and not every business has the same marketing objective. To cater to the various needs of a brand, there are numerous types of loyalty card systems.

  1. Points Program – The oldest and most tried and tested loyalty program is the points program. It is one of the most common programs globally, hence customers are aware and accustomed to the points reward system. In the points program, a customer earns points on every transaction he/she make with the brand. The points system encourages customers to accumulate as many points as possible, which they can redeem on their purchases.
  2. Tiered Programs –Tiered programs are a hierarchy system based on levels or tiers, thus the name. Usually, the tiered card system is based on points programs, but it gives the customer an added incentive to spend more to get promoted to the next level, which comes with more benefits. In the past few years, many brands such as Uber, Target, and Sephora have successfully adopted the tier card system,.
  3. Paid Programs– Since loyalty programs and card systems are very popular in the B2C market, well-known brands often come up with a subscription or a paid loyalty system. A paid program is wherein customers buy a subscription to a loyalty program of a company by paying subscription fees. A subscription program is marketed as an elite and exclusive program that may offer unique rewards, perks, and benefits to its subscribers.
  4. Partnered Programs– A partnered program is a coalition program offered by two or more companies to their customers. These are beneficial to both the company and its customers; companies offering the program can share the expenses (and added profits) while the customer enjoys offers on two or more brands with one loyalty card or subscription.
  5. Hybrid Programs– Hybrid programs are a combination of two or more loyalty schemes. As a bespoke plan offering unique perks and benefits to its customers, it targets certain groups to meet the company’s specific marketing and sales requirements.

Why You Need a Loyalty Card System for Your Business

A loyalty cards program can add tremendous value to your business. Here are a few reasons why you need to invest in a loyalty cards system and program for your business:

Helps in Customer Retention – One of the primary reasons why a brand adopts a loyalty program is to increase its customer retention rate. Customer retention refers to the ability of a company to retain its customers and keep them engaged with the brand for an indefinite time. Loyalty programs are great to ensure repeat purchases and significantly help with customer retention.

Increases Customer Lifetime Value (CLV)– CLV is the net profit generated by a customer throughout their lifetime. A considerable increase in CLV can boost sales significantly. Loyalty programs give a brand valuable data on the customer’s preference and buying habits. Brands and companies can use this data to enhance the CLV of their customers.

Organic Publicity – A loyalty card system is a great way to boost organic brand publicity. A customer who is engaged with a brand through its loyalty program is bound to recommend it to their circle of friends and family, provided they are satisfied with the brand and loyalty rewards. Loyalty programs build a stronger bond between the brand and the consumer and motivate customers to refer the brand to their network.

Reduction in Marketing Costs – A good loyalty program can act as a powerful marketing tool. Satisfied customers are keen to share their experiences or rewards, if allowed, with their peers and friends. Combining a loyalty program with a sound referral system will provide considerable publicity to the brand, thereby reducing marketing costs significantly.

Enhances Customer Experience – The rewards system is a great way to create a positive customer experience, which is a very important factor in customer retention and brand advocacy. According to American Express, “90% of American customers share their customer service experiences with others.” Enhancing customer experience through a loyalty card system is a win-win for both the brand and the customer.

How Annex Cloud can help your business grow

Annex Cloud provides a lucrative platform to execute loyalty programs and brand engagement activities. Annex Cloud’s experience and expertise in customer loyalty programs can help you design custom-made solutions that are best suited for your unique business propositions.

For further assistance, connect with our team 

[White Paper]
[White Paper]