When you purchase something from a brand, what are the chances you buy from it again? Well, there are many different factors for being loyal or not to the brand. If you purchase from the same store again, you probably have a strong reason to do it. The factors can be price, experience, intrinsic value, or emotional investments.
The loyalty reward programs are designed to find this reason which motivates shoppers to make repeated purchases from the same brand. Therefore, strong incentives are developed which nudge the shoppers to stay loyal. In simple words, loyalty rewards programs influence shopping behavior, retain customers, and incentivizes them to stay loyal to the brand.
Undoubtedly, businesses are trying to woo their most loyal customers. From a coffee shop to a fashion store to an airport lounge, loyalty programs are everywhere these days. But have you ever wondered why do we have so many loyalty programs? The answer is straightforward – loyalty programs do work.
Loyalty is a simple strategy to engage customers, build a brand, and eventually grow the business. As mentioned earlier, businesses see real value in loyalty programs and they keep investing heavily in such programs.
Loyalty reward programs are mushrooming in the corporate world because of a single statistic which says that retaining just 5% of current customers can improve the profits by up to 90%. Though the statistic may appear slightly exaggerated for highlighting the positives of loyalty programs, a few businesses have actually achieved such unparalleled returns by implementing loyalty programs with utmost precision.
Loyalty programs, also called customer reward programs, actually increase sales and boost profit margins. But with anything, it is not a blanket statement to work like a magic wand. It needs to be built brick-by-brick by considering a plethora of factors according to the needs of every business. Since every business is unique, a one-size-fits-all approach for every business is committing the biggest loyalty mistake. More of ‘every leg needs a different shoe’ kind of approach is more practical while designing customized loyalty programs.
Loyalty programs are not monolithically defined by unitary single characteristics. There are different methods to retain different types of customers. What may work for one customer might not work for another. However, there are patterns that have been studied that help to retain all types of customers to an extent.
The different types of loyalty programs can be applied for a different set of audiences, industries, and demographics. Let’s delve into various types of customer reward programs to help you decide which one works best for your business.
Tiered Loyalty programs
Such types of loyalty programs feature on exclusivity. Generally, there are three tier programs such as Silver, Gold, Platinum classified according to the high spending customers. Most of the luxury loyalty programs which are based on premium access, experiential features, and privilege use tiered loyalty program.
Points Based programs
The points-based system is the backbone of any loyalty program. The traditional ‘earn and redeem’ format is very suitable for physical stores where customers walk-in to purchase products. Every purchase rewards a suitable number of points, which can be redeemed during the consequent purchases. The threshold of rewards redemption can be designed accordingly, balancing customer engagement and retention rates.
Cash Rewards programs
The cash rewards programs are a subset of points-based programs. The cashback is provided as an incentive in return for reward points. The points awarded can be incentivized as a form of cashback on the next purchase in form of percentage discounts.
Card Linked Loyalty programs
In card-linked loyalty programs, the customers are provided with a physical card that acts as their loyalty card. Another way is to link the credit card with the loyalty program of the merchant. Every swipe of the card provides the opportunity to acquire data of the customer through API and hence make more robust loyalty systems. The card-linked loyalty program offers a tailor-made, measurable, and data-driven feature to incentivize customer spending.
Affiliate Loyalty programs
Affiliate loyalty programs are also known as partner programs or hybrid programs. There is a complete ecosystem of loyalty that comes into play when you purchase products. For example, when you are vacationing, the airline partners with a cab facility, local hotel, tour guides that come in contact with you at every touchpoint. A stronghold of a loyalty network can be created on a larger scale by directing all the points in the customer’s journey. Every partner is intertwined with loyalty due to affiliate loyalty programs.
The purpose of exclusive loyalty is pandered by fee-based loyalty programs. For example, Amazon Prime requires an upfront subscription to be part of the membership program. A one-time joining fee is charged for membership of the program which offers exclusive deals and offers, not available to non-members.
Though there are tens of thousands of loyalty programs around us, let us take the best examples of loyalty rewards programs. In the loyalty industry, the following companies create a lot of headlines when they work around their loyalty programs. They have served as ideal loyalty programs which may businesses are trying to imitate. These loyalty programs have achieved near-perfect results such as better customer retention, the effectiveness of costs, less churn, greater user-generated content, and more.
Here are a few examples of the best customer loyalty programs:
If a business wants to make the highest impact with a well-crafted loyalty rewards program, the right loyalty partner such as Annex Cloud helps in attaining the clearly-defined business objectives. Annex Cloud’s loyalty rewards programs are rated as one of the best in the industry with excellent returns. For more information on customized loyalty programs, feel free to connect our experts now!