Customer Loyalty Program - A Beginner’s Guide to Creating Great Customer Experiences

Customer loyalty programs are key to driving retention, which is often more cost-effective. According to Invesp survey, it costs five times more to attract a new customer than an existing one. Furthermore, the survey also states that 44% of companies are more focus-driven on customer acquisition compared to 18% who focus on retention.  

With the global loyalty management market projected to grow from $6.47 billion in 2023 to $28.65 billion by 2031, it’s clear that building customer loyalty programs is not just a trend but a necessity for businesses aiming for long-term success. 

In this article, we’ll walk you through the process of creating a customer loyalty program. As we proceed, we'll explore some insightful case studies that prove loyalty programs are on the rise. Finally, we'll take a deep dive into how Giift LBMS helps scale value-driven customer loyalty reward programs.  

What is a customer loyalty program?  

A customer loyalty program, often known as a customer loyalty reward program, is a strategic approach brands use to encourage repeat purchases or use the services of a company associated with the program.  

Known for their rewarding capabilities, these programs reward customers for their loyalty via points, discounts, exclusive deals, or special promotions that can be redeemed for goods or services. 

Building customer loyalty in the current business environment  

Customers' expectations are sky-high with every passing day.

Customers want a hassle-free shopping experience, monetary benefits, quality products, etc. Even though customers switch brands after a bad interaction, offering meaningful and exciting experiences keeps them engaged for a long time. Building long-lasting relationships between customers and brands is the need of the hour in 2024.  

Here’s a list of trends that keep you updated.  

• Now, customer loyalty isn’t just being tracked by retention rates. Companies are looking at rewarding repeat purchases on a consistent basis.  
• Personalization extends to rewards, helping scale shopping experiences more smoothly.  
• Consumers value experiences than mere possessions. Brands need to simplify these experiences and create memorable moments.  
• Customers like to consume curated content who reach out to influencers and value-driven recommendations.  

How to create a customer loyalty program?  

 Creating a customer loyalty program isn’t a walk in the park. It requires proper evaluation of key metrics. Let’s study in detail  

1. Create a loyalty program concept  

Launching a successful customer loyalty program requires careful planning upfront. Just like any journey, it's crucial to have a roadmap in place to avoid surprises and roadblocks later on. Here's a breakdown of key aspects to consider during the program's concept stage: 

(A) Setting the stage

• Geographic reach: With the help of the customer’s geographic location, your brand gets freedom to design highly personalized engagement strategies. Determine the initial launch countries, along with supported languages and currencies. Consider if a global rollout or a single-country test market is best for your program.  
• Program design: Establish the overall theme, program name, and loyalty currency (points, miles, etc.). Decide how points will be earned and redeemed, including the point value and tier requirements (if applicable). While these details can be adjusted later, initial planning keeps things on track. 
• Channel integration: Outline the channels involved in the program, focusing on creating a seamless omnichannel experience for your customers. Specify which channels will be available at launch and if there are plans for future channel integration. 

(B) Program logic and rewards  

Defining the program logic is essential for a smooth launch and ongoing program success. While the specific details will depend on the chosen program type (discussed later), here are some key areas to consider: 

1. Point system design 

• Point earning and redemption: Establish clear rules for how points are earned (e.g., purchases, reviews) and redeemed (e.g., rewards). This includes defining point value, rounding rules, and any point expiration policies. 
• Assigning point value: Determine how many points are awarded for different actions, considering the value of those actions to your business. Similarly, assign point costs for desired rewards. 

2. Tier structure 

• Number of tiers: Decide how many tiers your program will have. 
• Tier qualification: Establish whether tiers will be based on points earned or total spending. Define the point/spend thresholds for reaching each tier. 
• Tier maintenance: Determine if tiers will expire and how members will be downgraded if they fall below tier requirements. 

3. Reward considerations: 

• Reward types: Outline whether you'll offer monetary rewards (coupons, discounts) or experiential benefits (exclusive events, early access). 
• Reward costs: Factor in the cost of rewards for both your business and the customer. 
• Reward redemption: Decide if rewards can be redeemed multiple times and if unused rewards will expire. 

(C) User journey and reporting  

A strong foundation is crucial, but a successful customer loyalty program hinges on creating smooth user journeys. Here's how to ensure your program fosters engagement: 

1. Streamlined enrollment and opt-out: 

• Effortless enrollment: Make signing up quick and easy. Focus on collecting essential information initially, with options to gather more details later through engaging surveys. 
• Opt-out: While opt-out isn't ideal, prioritize a swift and painless experience. Consider including a brief survey to understand why members are leaving, providing valuable insights for improvement. 

2. Energizing your program with campaigns and challenges 

• Loyalty campaigns: Plan limited-time or targeted campaigns to boost engagement. Offer double points, instant rewards, or other exciting perks to keep members excited. 
• Rewarding challenges: Develop challenges that require members to complete specific actions to earn rewards. Outline the required actions and corresponding prizes to incentivize participation. 

3. The power of program reporting: 

• Planning for program measurement: Don't wait until launch to consider reporting! Factor in data tracking capabilities from the start. This allows you to monitor key performance indicators (KPIs) and gain valuable insights into program effectiveness, especially during the crucial early stages. 

Benefits of customer loyalty programs 

Customer loyalty programs offer a multitude of benefits for businesses of all sizes. Here's a breakdown of some of the key advantages: 

1. Boosted customer retention  

78% of customers are likely to be retained if an organization offers value-driven customer loyalty programs. Loyal customers are less likely to be swayed by competitor offerings. A well-crafted loyalty program fosters a sense of community and keeps your brand top-of-mind, encouraging repeat business. 

2. Increased customer lifetime value (CLTV) 

Happy and loyal customers are more likely to spend more with your business.

They might be more inclined to try new products or services, upgrade their purchases, and become brand advocates, ultimately contributing to a higher CLTV. 

3. Valuable customer insights 

Loyalty programs act as a treasure trove of customer data. You can track purchase behavior, preferences, and feedback to refine your marketing strategies and product offerings. This data provides valuable insights into what resonates with your customer base, allowing you to tailor your approach for greater effectiveness. 

4. Positive word-of-mouth marketing 

Loyal customers become your biggest cheerleaders. They're more likely to recommend your brand to friends and family through positive word-of-mouth marketing, which is a powerful and cost-effective way to attract new customers. 

5. Enhanced brand image 

A well-designed loyalty program can strengthen your brand image. It demonstrates that you value your customers and are committed to building long-term relationships. This fosters trust and loyalty, contributing to a positive brand perception. 

6. Increased customer engagement 

Loyalty programs can encourage deeper customer engagement. By offering points, rewards, and exclusive perks, you incentivize customers to interact with your brand more frequently, whether it's through social media, your website, or in-store visits. 

7. Improved customer segmentation  

Loyalty programs allow you to segment your customer base more effectively. By analyzing purchase behaviour and preferences, you can tailor communication and promotions to specific customer groups, leading to more targeted marketing efforts. 

Types of customer loyalty programs  

Customer loyalty programs are a cornerstone of any successful business strategy. Let’s look at the best customer loyalty rewards program.  

1. Points-based programs 

Customers earn points for purchases, which can be redeemed for rewards like discounts, products, or experiences.  Customers earn points for purchases, reviews, or social media engagement, and redeem them for rewards like discounts, products, or experiences.  

However, their simplicity can also be a weakness. Generic points programs might lack excitement and fail to differentiate your brand. 

Example of point-based loyalty program 

Jelly Belly’s sweet rewards loyalty program lets you earn points for every dollar you spend on their yummy treats. That's 10 points per dollar!  

But that's not all! You can rack up even more points by doing things like sharing your thoughts on their products, following them on social media, and introducing your friends to the program. It's a sweet way to get even more Jelly Belly in your life! 

2. Tiered programs 

Tiered programs reward customers based on their spending or engagement, unlocking better rewards at higher levels. These programs have 80% higher return on investment (ROI) compared to programs that do not offer tiers.  

Tiered programs can be effective at motivating customers to spend more but can also be complex and risk alienating low-tier members. 

Example of a tiered loyalty program:  

Marriott Bonvoy’s loyalty program offers tons of perks (6 tiers!). Even the names hint at getting more as you climb the ladder. 

Start as a member (free) and get basic benefits. But if you stay at least 10 nights a year, you unlock Silver Elite status! This tier gives you a 10% points bonus and lets you check out a bit later – plus other cool stuff. 

3. Coalition programs 

Coalition programs involve multiple business partners to offer a single loyalty program. This offers customers a wider variety of rewards and redemption options.  

Example of coalition program 

The Air Miles ME program has enrolled over a million members and delivered more than 760,000 rewarding experiences. Members can collect and redeem Air Miles with partner brands both in-store and online through the website and mobile app, enabling them to access their profiles anytime.  

The program offers an exceptional customer experience by leveraging customer data to understand member preferences for recognition and communication. 

5. Subscription programs 

Subscription programs offer customers exclusive benefits, discounts, or products for a recurring fee. This creates a predictable revenue stream for businesses and provides high value to loyal customers.  

Example of a subscription program – Amazon Prime  

Amazon's Prime loyalty program, a subscription service priced at $119 per year or $12.99 per month, offers an array of benefits. The most notable perk for many is the fast 1 or 2-day shipping. Additionally, members gain access to Amazon’s popular streaming service, early deal access, and various discounts with partners like Whole Foods. 

6. Gamified programs 

Gamified programs use game mechanics like points, badges, and leaderboards to make loyalty programs more engaging and interactive. Leaderboards can create a healthy sense of competition, while badges can offer a sense of accomplishment.  

Studies show that gamification can increase customer engagement by up to 48% . The key is to ensure the mechanics are relevant to your brand and target audience. 

Example of gamified loyalty program 

Xbox rewards program turns playtime into points! 

You can rack up rewards by crushing challenges, grabbing games from the store, answering trivia, and doing other cool gaming-related stuff. This means you can earn points for more than just gaming!  

Take part in surveys and engage in other gaming-related activities. This connection between gaming behaviour and rewards creates a sense of achievement and encourages continued participation. 

Factors to consider before choosing the right customer loyalty program 

While there's a vast array of loyalty programs out there, selecting the right one for your brand requires careful consideration. Here are some key factors to ensure your program aligns with your goals and stands out: 

1. Clearly defined objectives 

Before diving in, establish your program's purpose. Do you aim to expand your customer base, gather valuable data, or incentivize repeat purchases? A clear intent ensures your program directly supports your overall marketing goals. 

2. Competitive landscape  

The retail world is a battlefield! To stay ahead, research your competitors' loyalty programs. Avoid creating a program that feels like a carbon copy – strive for something unique and appealing to your target audience. 

3. Knowing your niche  

Deeply understand your niche and target audience. What motivates them to buy? What kind of rewards would resonate most? This knowledge is crucial for crafting a program that truly connects with your customer base. 

4. Know your target audience 

One-size-fits-all loyalty programs rarely succeed. Understanding your niche and target audience is crucial.  

5. Analyze your competition 

The retail space is crowded, so stand out from the pack! Research your competitors' customer loyalty programs and identify any gaps you can fill.  

Take inspiration from Amazon Prime who changed the retail loyalty landscape by offering free two-day shipping and exclusive content, setting a high bar for other e-commerce companies to compete. 

6. Simplicity is key 

Programs that are easy to understand and participate in will see higher engagement. Points-based programs are popular for their ease of use, but consider offering unique rewards beyond just discounts.  

7. Personalization matters 

According to SmarterHQ, 72% of consumers say they only engage with brands that personalize their messages and recommendations.  

Today's consumers expect a personalized experience. Leverage the data you collect to tailor rewards and offers individual customer preferences.  

8. Track and measure success 

Don't set it and forget it! Monitor your program's performance through key metrics like customer acquisition, retention, and redemption rates. Analyze the data regularly and adapt your program as needed to ensure it continues to meet your goals. 

Top 5 customer loyalty programs examples 

1. The North Face’s XPLR Pass Program:  

The North Face's XPLR Pass program is a great example of how customer loyalty programs can go beyond simple discounts. They understand that their customers are passionate about adventure, and their program reflects that. 

• Earning more than points: Members earn points through purchases, but also by engaging with the brand in unique ways, like attending events or checking in at specific locations. This encourages a deeper connection with The North Face lifestyle. 
• Redemption reimagined: Forget generic discounts! XPLR Pass members can redeem points for unforgettable experiences, like mountain climbing expeditions in Nepal. This taps into their core desire for adventure and creates lasting memories that solidify brand loyalty. 
• Beyond the climb: The program doesn't stop at epic trips. Members also enjoy exclusive perks like early access to limited edition gear, product testing opportunities, and even member-only field testing programs. These benefits cater directly to their customer base and strengthen the emotional connection with the brand. 

The takeaway for your business  

While sponsoring a trip to Nepal might be out of reach for many businesses, the core principle is clear: know your customers and tailor your program to resonate with them.

It's about creating a loyalty program that fosters a deeper connection and offers rewards that truly matter to your audience. This will build brand loyalty that goes far beyond a simple discount. 

2. Uber rewards 

Uber rewards is a great customer loyalty program example. Ride-sharing giant Uber isn't just about getting you from point A to B. They understand that convenience and value are key for today's customer.  

• Earn as you ride and eat: Signing up for Uber Rewards is simple. Every dollar spent on eligible Uber rides and Uber Eats orders translates into points. These points accumulate, allowing you to unlock valuable rewards. 
• Cash in, cash out: Unlike some loyalty programs, Uber Rewards offers real value. Accumulated points convert into Uber Cash, which you can use towards future rides and meals. 
• Beyond the basics: The program goes beyond just discounts. As you climb the loyalty tiers by racking up points, you unlock additional perks like priority pick-up and flexible cancellation policies. This translates to a smoother and more convenient travel experience. 
• Designed for you: At its core, Uber Rewards is designed to empower you. The program offers benefits that provide more control over your travel experience, from saving time with priority pick-up to saving money with Uber Cash. It's a win-win for both you and Uber. 

3. Expedia rewards 

Expedia rewards aren't just about finding deals on flights and hotels—they're about making travel more rewarding. Their Expedia Rewards program unlocks significant savings and exclusive perks, turning every trip into a potential upgrade. 

• Earn big, save big: Here's the beauty: members save an average of $35 per booking just by using their points! And the more you travel and book with Expedia, the more points you accumulate. 
• Tiered to perfection: The program boasts three tiers—Blue, Silver, and Gold. Each tier unlocks progressively better rewards, from baseline savings with Blue to luxurious free upgrades and spa credits with Gold. This incentive for continued travel booking with Expedia rewards your wanderlust with exceptional perks. 
• Effortless earning: The best part? Earning points is simple! Every booking, whether it's a flight, hotel, or another service, contributes to your points total. This seamless system makes racking up rewards and reaping the benefits a breeze. 
• Loyalty that pays off: Expedia Rewards creates a powerful incentive for continued travel bookings. You're not just saving money; you're unlocking a world of travel upgrades and luxurious experiences – all thanks to your loyalty. So, pack your bags, book with Expedia, and get ready to experience travel rewards that elevate your adventures. 

4. Sweetgreen rewards 

Sweetgreen Rewards offers a variety of rewards and challenges to its guests, cleverly motivating them to try new items in exchange for perks or discounts. This strategy is effective for promoting new menu items and encouraging purchases.  

Additionally, Sweetgreen provides different rewards throughout the year and uniquely establishes outposts in certain corporate offices. This allows app users to conveniently have their lunch delivered directly to their workplaces on busy days.  

5. Chipotle rewards 

Chipotle Rewards is an outstanding customer loyalty program. Guests earn 10 points for every $1 spent at the restaurant, via the app, or online, and receive a free order of guacamole when they sign up. The program is integrated into their mobile app, making it easy for customers to track points, place orders, and redeem rewards.  

Chipotle also delights customers with bonus point days and limited-time offers. For example, they often offer a special Halloween deal in October for those who visit a store in costume.

Case studies  

Here’s presenting 2 high-quality case studies that show how well a company grows by driving successful customer loyalty programs that help achieve brand value and recognition.  

1. Telecom company  

A leading telecommunications and entertainment provider sought to strengthen customer loyalty and encourage desired behaviours across its television, internet, and home phone services. Their primary goals were to: 

• Increase customer acquisition 
• Improve customer retention 
• Drive loyalty among their existing customer base of millions 

Solution 

Group O, a customer engagement specialist, designed and implemented a comprehensive customer loyalty rewards program for the telecom company. The program encompassed several key elements: 

• Program strategy and data analytics: They developed a data-driven strategy to identify and target specific customer segments with relevant rewards. 
• Creative and printing: They created engaging marketing materials to promote the program and its benefits. 
• Web development and hosting: A user-friendly website was built for online reward redemption, activation, and status checks. 
• Reward card fulfilment and distribution: The organization managed the secure distribution of physical and virtual prepaid Visa reward cards to program participants. 
• Premium reward sourcing and fulfilment: Various attractive rewards were offered, catering to diverse customer preferences. 
• Customer care and inbound sales: The company provided dedicated customer support for the loyalty program, handling inquiries and promoting additional services. 

Results: 

• High program activity: The company manages hundreds of customer reward campaigns for their client each year. 
• Significant reward value: Since 2014, the organization has pre-funded over $2.2 billion in reward card value for their client's diverse reward programs. 
• Extensive reward fulfillment: Extensive reward fulfilment: Over 21 million Visa reward cards have been fulfilled since 2014.
• Dedicated customer support: The organization’s reward center agents have handled more than 8.7 million calls since 2014, providing excellent customer service. 
• Sales success: Their sales team has driven thousands of additional monthly sales through the loyalty program. 

2. Hilton Honors  

Retaining guests and attracting new ones requires a strong customer engagement strategy. Hilton Honors, the loyalty program of Hilton Hotels Corporation, exemplifies a good approach to building a successful customer loyalty program.  

This case study analyzes Hilton Honors, exploring its key features and impact on guest behavior.   

Understanding the challenge 

Hilton Honors operates in a highly competitive market with numerous hotel chains vying for customer attention. To succeed, the program needs to incentivize guests to choose Hilton properties over competitors. 

Hilton Honors tackles this challenge through a comprehensive program offering various benefits: 

• Tiered membership: The program features membership tiers (Silver, Gold, Diamond) that unlock increasing advantages as guests climb the ladder. This motivates them to stay more frequently at Hilton hotels. 
• Points earning: Members earn points for qualified stays, encouraging repeat business. Additionally, points can be accrued through credit card use and partner programs, broadening earning opportunities. 
• Reward redemption: Earned points can be redeemed for free nights, room upgrades, and other experiences, providing guests with tangible value. 
• Digital convenience: Hilton Honors prioritizes a seamless digital experience. Their mobile app allows for easy booking, point tracking, and reward redemption, enhancing guest convenience. 
• Personalized offers: The program leverages guest data to offer personalized promotions and benefits, catering to individual preferences and increasing engagement. 

Hilton Honors: a multi-faceted approach to loyalty 

Hilton offers 3 tiers within its loyalty program  

Silver status:  

1. The company offers 25,000 base points a calendar year.  

2. A 20% bonus of base points on each stay, which is 2 extra points per dollar spent.  

3. 15% off spa discount at all Hilton’s inclusive brands.  

Gold status: 

1. 75,000 based points accrued every calendar year.  

2. Members can earn 10,000 bonus points every 10 nights post-staying after 40 nights in a calendar year.  

3. 80% bonus on base points earned on stays, which equals 8 points per dollar spent.  

Diamond status:  

1. 120,000 base points accrued in a calendar year.  

2. 100% bonus on base points earned on every stay, which comes to 10 extra points per dollar spent.  

Impact on guest behaviour 

Hilton Honors have demonstrably influenced guest behaviour in several ways: 

• Increased hotel stays: The program incentivizes repeat stays at Hilton properties through points earning and tier progression. 
• Higher revenue: By encouraging guests to spend more to earn points and redeem rewards, Hilton Honors contributes to increased revenue. 
• Enhanced brand advocacy: Satisfied members who experience the program's benefits are more likely to recommend Hilton to others, expanding the customer base. 

How does Giift LBMS help brands scale customer loyalty programs? 

Giift offers an end-to-end scalable customer loyalty program which helps manage loyalty program creation seamlessly.  Let’s look into its major features in detail.  

1. Loyalty engine  

It is an enterprise-ready product that helps launch and manage omnichannel loyalty programs within a single system, helping deliver personalized customer experiences.  

• Program customization: LBMS offers the flexibility to configure currency settings, points conversion rate, expiration schedule, and more.  
• Loyalty tiers: Helps tailor loyalty tiers with a unique name, icon, and a milestone. Admins can add a points multiplier rule for each tier, helping award more points to loyalty tier members.  

2. Customer engagement  

Drive meaningful connections and loyalty through targeted marketing initiatives and personalized campaigns.  

• Targeted campaigns: The product helps tailor rewards and promotions to specific customer groups based on behaviors, preferences, and performance.  
• Collaboration features: Managing marketing campaigns by collaborating with your team and access management features.  
• Bonus points: With customized communication template, configure points to be awarded and schedule your campaigns.  
• Omnichannel communication: Create multiple email communication templates seamlessly for your campaigns and transactional notifications.  
• Member details: View detailed information about your loyalty program members and launch personalized campaigns for multiple member segments.  

3. Analytics and insights 

Maximize your loyalty program success with Giift LBMS comprehensive insights.  

• Transactional reports: Monitor member transaction details, points redemption, and points accrual by using transactional reports.  
• Periodic reports: Extract monthly, weekly, and daily reports by configuring the automated report generation period.  

Conclusion  

Customer loyalty programs are a powerful tool for businesses to foster customer loyalty, improve customer retention, and drive business growth. They provide a comprehensive solution for managing all aspects of a customer loyalty program, from campaign management to rewards distribution. 

With the advent of technology, these programs have evolved into retail loyalty platforms and omnichannel loyalty strategies, providing seamless and unified customer experiences across all channels. These strategies not only increase customer engagement and purchase value but also provide businesses with valuable insights into customer behavior. 

By implementing a well-designed customer loyalty program, businesses can create meaningful touchpoints at as many steps in the customer shopping experience as possible. This not only enhances the shopping experience for the customers but also helps businesses understand their customers better, ultimately leading to increased customer satisfaction and loyalty. 

Connect with Giift and implement a result-oriented customer loyalty program solution.