With several types of loyalty programs available in the market today, it can be a tough decision to choose a suitable loyalty program type for your business. Many retailers have been using points-based loyalty programs, tiered programs and many other types to retain their loyal customers however these programs are not able to build customer loyalty.
Before you invest in the leading Customer Loyalty Rewards Program Management System Software, understanding your target audience and what they expect from a loyalty program is what you need to know to choose the right type of loyalty program for your business. In this article, we will discuss some of the most popular types of loyalty programs along with their pros and cons, which will help you figure out the type of program that is suitable for your brand.
All-in-One Guide to Choose The Right Type of Loyalty Program
- Points-Based Loyalty
One of the traditional loyalty programs that is still used by many brands is point-based loyalty programs where customers are rewarded with some points that can be redeemed later for discounts and products.
These programs are free to sign up for and are also known as earn-and-burn loyalty programs as customers must accumulate a few points for the value to be redeemed. Though they can attract customers, they are not too good for increasing engagement and spending levels. This means, the program will take time to get profits.
- Punch Card Loyalty
Another program type that can drive repeat engagement from your loyal customers is the punch card loyalty program. Similar to point-based and cashback loyalty programs, punch-card programs need members to spend upfront and redeem rewards later.
Punch card loyalty programs drive repeat purchases with the help of a digital punch card, which makes customers want more and more from the brand. E.g. Domino’s Piece of the Pie Rewards where members make an order of pizza with $10 or more from his/her profile to get 10 points towards a free pizza.
- Tiered Loyalty
Tiered loyalty programs are programs that offer different rewards and benefits to program members based on milestones that they achieve. The more value members spend on the brand, the higher will be the loyalty tier.
The best thing about these programs is that these milestones act as a great way to boost member engagement by adding levels of exclusivity to the program. E.g. Sephora Beauty Insider – a program which offers experiential rewards rather than pure points programs such as beauty classes, gifts, makeovers, etc.
Tiered programs offer great value and benefits to higher-tier customers making them satisfied and they are more likely to become brand ambassadors. However, these programs are not suitable for offering value to lower-tier members.
- Cashback Loyalty
Another type of loyalty program is the cashback loyalty program where you spend a certain amount to get a certain amount back in the form of cash or coupons which can be exclusively used for later purchases at the same brand.
Like points programs, cashback programs are easy to sign up for and provide value to members encouraging them to make additional purchases for more cashback. Some cons are it doesn’t provide instant gratification, and may not be appealing to infrequent shoppers. These programs are quite easy to understand and maintain but the only catch is customers need to spend a minimum amount in qualifying purchases to receive rewards in the form of cashback.
- Coalition Loyalty
If you want your loyalty program to be operated with more than one business then you must go for the coalition program as this helps elevate brands’ transaction levels. However, these programs promote loyalty to the program itself rather than the actual partner brands.
For example, Plenti was one such coalition program in the US that enabled members to earn points in one retailer and use them at others. Over time, brands started to pull out and began investing in their dedicated loyalty programs ending the program. The good thing is customers get options to use their rewards but individual retailers cannot differentiate their loyalty program.
- Premium Loyalty
This can be defined as a fee-based or subscription-based loyalty program and is considered the best way to increase loyalty with the most loyal customers. These programs are different from traditional programs discussed earlier and they require members to pay upfront or a subscription charge to unlock premium benefits and additional rewards.
The best thing about this program is it creates an instant culture where members can stay engaged with the program 24/7. Instant gratification is becoming more important than ever and premium loyalty programs offer this value to customers, leading to higher engagement, an increase in order frequency and greater average order value. Apart from that, they can also help in collecting valuable customer data enabling brands to focus on their best customers.
One example is Amazon Prime where members pay monthly or yearly to get the best possible shopping benefits on purchase of any products across categories. Apart from transactional benefits, experiential benefits such as streaming video are also offered with the Amazon Prime membership program.
Final Takeaways
In the end, we can say that putting customers at the centre of a loyalty program is the key to making it a grand success for your business. Know your customers’ needs and choose the loyalty program that can be appealing to your customers at all levels.
For instance, if you want a maximum number of customers to sign up for your program, go for a traditional free program as it comes with no barriers and boosts customer acquisition rate. On the other hand, if you want to gain the attention of your existing committed customers, go for a premium loyalty program that can take your relationships to the next level.
If you are planning to build the right loyalty program but are confused about which program type to choose, you can connect with the experts of Novus, a reliable Retail Customer Loyalty Rewards Program Software for Businesses.
