Loyalty Card Programs: a Guide to Perfecting the Scalable Initiative with Case Studies

When it comes to inspiring strong customer loyalty in the retail industry, very few seem to do it as well as Costco. The Costco Anywhere Visa Card by Citi is one of the good examples of loyalty card programs that made it an obvious choice for Costco members to sign up.

Launched in June 2016, the Costco Anywhere Visa Card had 86.7 million card¹ holders. The numbers gradually increased over the years and jumped to 127.9 million users in 2023, who continue to leverage the benefits that come from it.  

Costco's annual report² showed a high member renewal rate of 93% in the U.S. and Canada and 90% globally in 2022. Moreover, Costco gained 2 million cardholders, including 1.3 million paid members, by adjusting their calculation method. In 2023, Costco's brand value reached 53.4 billion U.S. dollars.

This success raises the question: What makes Costco's loyalty card program so effective that it turned out to be the fourth most valuable retail brand³ globally? This blog will showcase the efficacy of loyalty card programs and how they can help you drive loyalty from your customers. 

What are loyalty card programs? 

Loyalty card programs refer to marketing strategies that businesses use to encourage repeat purchases among consumers. The goal is to build long-term relationships with customers, so as a result they offer incentives like points, discounts, or rewards to customers who frequently shop with the business. If done right, a loyalty card program may help you: 

• Increase customer retention and loyalty, 
• Get higher sales and revenue 
• Improve customer behavior analysis and targeted marketing 
• Reduce advertising costs 
• Make stronger customer relationships and brand differentiation.  

Let’s take a look at how efficient loyalty card programs turn out to be.

How do loyalty card programs work? 

Here's a breakdown of the key elements: 

• Sign-up process: Customers typically join a loyalty program by providing basic information in-store or online. 
• Receiving the card: Traditionally, a physical card is issued, but digital memberships are becoming increasingly common. 
• Purchase tracking: Purchases are linked to the customer's account, accumulating points or rewards based on program rules. 
• Redeeming rewards: Customers can exchange their points for discounts, free items, or other benefits. 
• Points conversion: Programs may have a point-based loyalty program where a certain number of points translates to a specific reward. 
• Tiered benefits: Some programs offer rewards or benefits (like exclusive discounts) for reaching higher spending tiers. 
• Data collection and usage: Programs track purchase history, allowing businesses to understand customer preferences. 
• Targeted marketing: This data is used to send personalized offers and promotions, further engaging customers. 

Many programs offer mobile apps for easy sign-up, tracking points, and redeeming rewards on the go. Take Chipotle Extras as an example. It is an app-based rewards program with a gamified element. Chipotle moved the sales of points on digital channels where consumers get to earn extra points and get achievement badges.

Chipotle's shift toward digital sales and their point-based loyalty program offered the consumers a new way to engage; so much so that this program attracted 24 million members so far. Now that we have covered how a loyalty card program works, let us share the ways to implement it.  

How to implement the best loyalty card programs? 

Here's how to implement a best-in-class loyalty card program: 

• Come up with clear roles: Determine what you want to achieve with your program. Is it to increase sales, drive repeat business, or gather customer data? 
• Analyze the customer base: Understand their preferences and buying habits. This will help tailor rewards and program features to resonate with them. 
• Build a structured program: Design a program that's easy to understand and participate in. Consider tiered systems with increasing benefits for loyal customers. 
• Include rewards in it: Offer rewards that truly motivate your customers. This could include discounts, exclusive products, or early access to sales. 
• Don't forget the consumer experience: Ensure seamless integration of the program at all touchpoints, online and in-store. 
• Make it easy to use: Make the program user-friendly, with a clear and intuitive design for enrollment, points tracking, and reward redemption. 
• Pick your marketing channels: Promote your program effectively to generate excitement and encourage customer participation. 
• Track the success: Monitor key metrics to measure program performance and make data-driven adjustments to optimize its effectiveness. 
• Security first:  Ensure all customer data is protected with robust security measures and compliance with relevant regulations. 

Let us examine two impactful case studies to explore successful implementation strategies. These examples can help us identify connections between methodology and positive outcomes. 

Case studies

Following are the two case studies for a better understanding of the matter. 

1. Macy’s records 3.5 million sign-ups for its bronze loyalty card program 

Macy's, a major American department store chain founded in 1858, is a fan favorite because of its exclusivity, and tiered loyalty card program that exposes its consumers to a vast opportunity in shopping. Macy's recorded a whopping 1.8 million overall on the highest consumer loyalty score in the United States in the 1st quarter of 2022.  

Understanding the Macy's card rewards 

Macy's card rewards program comes with three tiers for those who are cardholders. A cardholder would automatically become a silver member upon registering.

However, those who don't have a credit card can become a Bronze member. Apart from Silver, and Bronze tier, there are two more tiers: Gold and Platinum. These levels generally get assigned to the cardholders based on the amount they spend annually with the brand. 

The tiers in Macy's loyalty card program denote the exclusivity of the member and open them to multiple exclusive benefits. The users get points for each penny they spend at Macy's. Silver status earns 2 points per $1, Gold status earns 3 points per $1, and Platinum status earns 5 points per $1. A user can redeem the points for Star Money to use at Macy's, excluding gift cards, services, and fees. 

Apart from the tiered reward system integrated into Macy's loyalty card, a user will instantly get 20% off on purchases, excluding certain items. The additional perks include free shipping set at different spending levels, birthday surprises, and early access to special offers and events. The Macy's Card also comes in two versions: a closed-loop card for Macy's purchases only and an open-loop American Express card for use anywhere American Express is accepted.  

However, there is a difference between these two cards. A user can use the Macy's American Express card at more places outside the brand's stores. This card can earn the users 3% cashback in rewards at restaurants and food delivery, 2% cashback at gas stations and supermarkets, and 1% cashback anywhere outside of Macy’s.

Moreover, 1,000 points here would be equal to $10 Star Money. Such a rich loyalty card has added much value to the program itself and attracted customers all over the world.

Retailing at its best

Macy's loyalty card program is beyond offers, perks, birthday offers, and extra savings. As members advance through the tiers, they get free shipping and early access to tickets. Such a stance not only makes the program to be experiential, but unique to what most retailers are giving to their consumers. As a result, Macy's has seen: 

• In the last quarter of 2021, over 3.5 million new members joined the bronze tier of the Star Rewards program. 
• Massive brand awareness, at 88% in the United States in 2024.  
• Favoritism over others as 34% of American customers confirm that they prefer Macy's.  

2. American Express records 141 million users at the end of 2023 mastering CX and loyalty card program 

Amex, popularly known to many as American Express has managed to rank on top in customer loyalty since 2014, and why wouldn't it? They have been at it since the 1990s.

Their journey to create a loyal customer base started in 1991 with a single loyalty program known as Membership Rewards. This program allowed cardholders to get points for each dollar they spent on qualifying American Express cards.

These points can later be exchanged for a variety of rewards. Pretty simple, but this inherent simplicity led to building strong customer engagement and loyalty, which few other brands can match. AMEX has managed to create exceptional customer engagement and loyalty with its rewards program. The question is, how did they achieve this? 

Understanding the AMEX loyalty card program 

AMEX cards get preference for travel, big purchases, and business expenses that will be reimbursed to the consumers. Every time an AMEX card is used, customers earn rewards that they can then use for other purchases. Many companies use this cash-back reward model.

Generally, American Express cards offer a combination of financial benefits, rewards programs, travel perks, and exclusive offers. On top of that, it also prioritizes security features, and dedicated support to elevate your lifestyle. Specific benefits vary by card type. An AMEX consumer gets, 

• To make purchases now and pay later. You can convert purchases of rupees 5,000 and above into EMIs with low interest rates and no paperwork. 
• To earn Membership Rewards points on every purchase. The cardholders can redeem the points for a variety of rewards like travel, shopping, dining, and more. In addition to this, some cards offer bonus points for specific categories like online shopping, dining, etc. 
• Travel benefits like complimentary airport lounge access, and hotel discounts. They can also redeem points for flights and hotel stays, and transfer points to partner frequent flyer and hotel loyalty programs. 
• Access to exclusive offers and experiences across travel, dining, retail, and wellness. This includes curated dining experiences, retail discounts, and spa privileges. 
• Security features like account monitoring, online safety protection, and fraud alerts protect you when making purchases. 
• To build the AMEX credit score. This feature makes it easier to get future loans. 
• Dedicated 24/7 customer support via phone, email, text, and online to assist you anytime.

Building loyalty at each swipe

While the benefits that a customer gets from the features of an AMEX card are enough to attract consumers, it is the experience the card has managed to generate that keeps them loyal. Amex has meshed its loyalty card program with customer experience to ensure retention. They did it by: 

• Making the sign-up process and the redemption of rewards easier. This includes allowing customers to use points to pay off AMEX balances, get gift cards, book travel, and make online purchases. The psychology behind this is that the easier the card is to use, the more customers will use it for regular purchases to get points.  
• Offering a variety of reward options that the customers want. They curate the data and personalize the experience of each customer. This move has assured that customers can find rewards they want and will use. This not only adds value to the loyalty value but creates a value proposition for them that they can stand for in the longer run.  
• Creating a community. AMEX offers exclusive deals, perks, premium benefits, and more to create a more diverse yet distinct community. 

Results 

AMEX has shown the industry that the key to driving customer loyalty and engagement lies in making the customer experience easy and building a community through the exclusive loyalty program. As a result, AMEX 

• Increased customer spending on its products by approximately 8-10%. The goal was to reinforce product benefits through Relationship Care. So, customer satisfaction improved substantially due to the Relationship Care program.  
• In 2020, American Express cardholders spent a significant amount, $139.9 billion, using cards issued by partnering companies. 
• In 2021, the United States was a key market for American Express credit cards. Nearly half of all American Express cards issued that year were for U.S. customers. 
• Wall Street revealed that over 141 million active Amex card users were there at the end of 2023. 

Best practices considering the case studies on loyalty card programs: 

Here are the best practices that Macy's, and AMEX loyalty card programs implemented to make their initiatives a huge success: 

1. From Macy's Loyalty card program, we learned: 

• To create a tiered loyalty program for engagement.  
• To include experiential benefits like early access to tickets. 
• To prioritize the customer experience, from sign-up to redemption. 

2. From the American Express loyalty card program, we learned: 

• To offer a combination of financial benefits, rewards, travel perks, exclusive offers, security features, and dedicated support. 
• To focus on CX and its improvement. The better the customer experience, the longer your consumers will stay.  
• To make the loyalty program clear, concise, and scalable. 
• To create a sense of community through exclusive deals, perks, and premium benefits. 
• To tailor rewards and offers to individual customers. 

Conclusion 

Loyalty card programs are important for businesses as they help retain loyal customers. 90% of American consumers have claimed that they are willing to share their personal information if they receive personalized loyalty benefits. It goes on to show the power a loyalty program holds in the business.

However, only offering the customers what they want will not cut it, what you need to maximize your loyalty program is Giift LBMS. The Loyalty Business Management System is a comprehensive platform designed to help enterprises build, manage, and scale customer loyalty programs effectively. It can help you:

• Automate many aspects of program management, such as tracking customer purchases and issuing rewards.  
• Save time and reduce automation and analysis errors. 
• Create personalized rewards and offers based on customer data like purchase history and demographics. This improves customer engagement and loyalty. 

Integrate Giift platform with your everyday tool and avail of seamless communication, real-time reporting, and more to build an ever-growing customer base. 

Citations

1. Card holders Costco worldwide 2023 | Statista. (2023, November 6). Statista. https://www.statista.com/statistics/718406/costco-number-memberships/ 

2. Jelinek, C., Vachris, R., Costco Wholesale Corporation, & United States Securities and Exchange Commission. (2022). FISCAL YEAR ENDED AUGUST 28, 2022 ANNUAL REPORT 2022. https://s201.q4cdn.com/287523651/files/doc_financials/2022/ar/Costco-2022-Annual-Report.pdf 

3. Most valuable global retail brands 2023 | Statista. (2023, October 27). Statista. https://www.statista.com/statistics/267870/brand-value-of-the-leading-20-most-valuable-retailers-worldwide/