In the dynamic landscape of modern business, building and maintaining a loyal customer base is paramount. Competition is fierce, and customer expectations are higher than ever before. 

In such a scenario, a well-crafted loyalty program can emerge as a game changer for your brand, capable of delivering not just one, but a multitude of business results. In this article, we'll explore how popular brands have harnessed the potential of loyalty programs to achieve a wide array of business objectives.

In this article you will learn how various brands use loyalty programs to achieve business results such as:

1. Customer acquisition
2. Customer activation
3. Increasing transaction value
4. Growing number of transactions
5. Increasing transaction frequency
6. Improved customer segmentation
7. Accelerating cross selling
8. Earning higher margin
9. Accelerating product sales
10. Gathering product feedback and insights

Key takeaways

• Loyalty programs are powerful tools that can be implemented to attract new customers. By offering enticing sign-up incentives and exclusive benefits, brands can expand their customer base and tap into new markets.
• Beyond acquisition, these programs excel at activating passive customers. Progressive engagement strategies encourage customers to take incremental actions, fostering deeper engagement and loyalty.
• Loyalty programs work to drive higher transaction values by incentivizing customers to make repeat purchases or spend more per transaction. This increase in average transaction value directly impacts the bottom line.
• Building lasting customer relationships is a core objective, and loyalty programs are designed to achieve it. They keep customers coming back for more, reducing churn and boosting long-term retention.
• Loyalty programs generate invaluable data and insights about customer behavior and preferences. This information empowers brands to make data-driven decisions and tailor offerings to customer needs.
• In a crowded marketplace, a well-executed loyalty program sets brands apart. It can be a game-changer, attracting customers looking for personalized, rewarding experiences.
• By achieving their business objectives through loyalty programs, brands set the stage for sustainable growth. These programs foster customer loyalty and advocacy, ensuring continued success in the long run.

How popular brands use loyalty programs to achieve business objectives

Professionally designed programs serve as strategic mechanisms for renowned brands to attain their business objectives with precision and finesse. These meticulously crafted programs are not merely tools for retaining existing clientele; they are sophisticated instruments for attracting fresh clients while cultivating enduring and profitable relationships. 

Let’s explore various case studies and see how brands achieve different business results with the loyalty programs.

Customer acquisition

Because of the growing costs of the marketing platforms and growing competition, the cost of acquiring new customers is constantly growing. Loyalty programs and using existing clients to refer to the new ones can be a great alternative for customer acquisition - and Airbnb’s referral program does just that.

‍Airbnb is an established online marketplace designed for short-term lodging accommodations. This robust platform serves as an intermediary between hosts and travelers, facilitating seamless transactions and reservations.

According to the report from Wharton’s School of Business, referred customers are 18% more likely to stay with a brand for long periods of time. One of the research studies conducted by Nielsen tells us that a whopping 92% of customers will try a recommendation coming from a trusted person they know.

A great example of this is Airbnb’s referral program, which offers $25 off of the first booking a referred member makes. This produced a 25% increase in new bookings on selected markets. 

Such programs are not just about rewarding existing clients; they can also be a powerful tool for acquiring new ones. Many successful brands offer sign-up bonuses or incentives for new customers to join their loyalty program, effectively attracting fresh faces to their brand ecosystem.

Customer activation

Another important objective that can be achieved with the loyalty mechanics is customer activation. A great example of a brand using loyalty programs to activate new and existing customers is Starbucks.

Starbucks is a globally renowned coffeehouse chain and coffee enterprise that features an assortment of specialty coffee beverages, snacks, pastries, and sandwiches. Starbucks has achieved international acclaim, boasting thousands of locations across various countries. Its global recognition is a testament to its standing as a leader in the coffee and café sector. 

To activate their clients, Starbucks implemented their rewards app, which empowers members to seamlessly place orders and earn rewards directly from their smartphones. As part of a comprehensive strategy to enhance engagement and encourage frequent purchases, the app is strategically equipped to deliver push notifications featuring enticing promotional offers to its user base.

Once customers have enrolled in a loyalty program, the goal is to activate their participation. Brands achieve this by providing enticing rewards for their first purchase or engagement with the program, effectively transforming a passive member into an active customer. Examples of this can include a significant number of points to be awarded once the user purchases their first coffee.

To achieve this, brands employ a range of strategic methods, making the journey from mere observer to active participant both engaging and rewarding. So what goes into customer activation?

• A warm welcome: Brands roll out the red carpet, offering enticing sign-up bonuses, exclusive discounts, and personalized greetings to new program members. This motivates customers to take their first steps toward active engagement. 
• Incremental participation: Customers are tempted with easily attainable incentives, like small discounts, and progressively unlock more significant rewards as they engage further. Interactivity is another key element, incorporating customer gamification, quizzes, and challenges to elicit active involvement, thus improving the customer experience.
• Personalization: Brands leverage customer data to customize offers and recommendations based on individual preferences. These tailored incentives resonate with customers, encouraging them to take their first action, whether it's making a purchase or engaging in program activities.
• The FOMO effect: Creating a sense of urgency and excitement is achieved through time-sensitive promotions. Flash sales, limited-time offers, and exclusive rewards tap into customers' fear of missing out (FOMO), compelling swift action and participation.
• Multi-channel accessibility: Brands make their programs available through various touchpoints, be it in physical stores, online platforms, or mobile apps. This approach accommodates customers' convenience and flexibility in choosing how they want to engage.
• A helping hand: Strong customer support and assistance mechanisms are also pivotal in the activation journey. Effective support can make a substantial difference in transitioning customers from passive observers to engaged participants.
• Active communication: Keeping loyal program members in the know through targeted emails, app notifications, or SMS. These communications not only promote the program but also keep customers informed about ongoing activities, promotions, and rewards.‍
• Focus on the benefits: Continuous value delivery is at the core of activation efforts. Brands consistently offer rewards, discounts, and incentives that align with customers' evolving needs and preferences, reinforcing the value of active participation.

Increasing transaction value

Loyalty programs can encourage customers to spend more with each purchase. Brands often offer tiered rewards or special promotions for higher-value transactions, motivating customers to upgrade their purchases. They achieve this by employing a variety of strategies that enhance customer engagement, encourage repeat purchases, and promote higher-value purchases. A great example of this is Best Buy’s use of loyalty programs. 

Best Buy is a global retail powerhouse known for its extensive selection of consumer electronics. With a presence in both physical stores and a thriving online e-commerce platform, Best Buy has solidified its reputation as a go-to destination for tech enthusiasts and everyday shoppers alike.

In pursuit of strengthening customer connections, building enduring brand loyalty, and propelling business expansion, Best Buy has strategically launched its loyalty initiative, aptly named "My Best Buy". By implementing this initiative, they’ve significantly increased their transaction values, as seen below.

To increase transaction valve, brands like Best Buy may encourage clients to purchase an additional product in order to get closer to earring a discount or other reward. After implementing their loyalty membership program, Best Buy has been achieving spectacular results, including:

• 12-18% more revenue from loyalty program members vs. customers who are not members of the program
• On average, loyalty program members spend $300-$390 more than non-members per year.
• Best Buy is seeing $90M in incremental revenue per year, based on 1M My Best Buy members.

A successful loyalty program is designed to create a sense of attachment between customers and businesses. By offering rewards, discounts, or exclusive perks, these programs incentivize valuable customers to return to the same business for their future needs. This customer retention ensures a steady flow of transactions over time, as brand-loyal customers continue to make purchases and remain engaged with the brand.

The main boost for increasing transaction value is the implementation of tiered reward systems. As customers spend more or reach specific milestones, they unlock greater rewards. This encourages customers to make larger purchases to access the more attractive benefits available at higher tiers. In fact, members spend 27% more when the brand establishes a positive emotional connection.

Growing number of transactions

Encouraging repeat business is another key objective. Loyalty programs often provide incentives for encouraging repeat customers, such as exclusive discounts, early access to products, or bonus points for frequent purchases. A well-designed loyalty program can incentivize customers to make repeat purchases and increase their overall spending. A great example of this kind of loyalty program is run by McDonald’s.

McDonald's is a renowned multinational fast-food restaurant chain with a substantial global presence. This well-established enterprise specializes in offering a diverse menu of fast-food items, primarily centered around hamburgers, french fries, chicken products, and beverages.

When it comes to customer loyalty programs, McDonald’s effectively utlizes this tool and rewards customers for their purchases through a method called gamification. Gamification represents a modern iteration of the traditional points program. Simply put, clients take part in a “game”, where they may be required to make additional transactions in order to take part in a game where they may earn prizes.

This system can incorporate 'levels' or 'tiers,' each of which bestows lasting benefits upon users once they attain them. So how do loyalty programs help increase their number of transactions?

• Customer retention and repeat transactions: Loyalty programs are designed to foster customer loyalty. When customers join a loyalty program, they become more likely to return to the business for repeat purchases. The rewards and benefits offered by the program incentivize customers to keep coming back, resulting in a higher number of transactions over time.
• Encouraging more frequent purchases: Many loyalty programs reward customers for making frequent purchases. For instance, customers might earn points, stamps, or cashback on each transaction. These rewards motivate customers to buy more often, increasing the overall purchase frequency.
• Increasing average transaction value: Loyalty programs often implement tiered reward systems where customers earn better rewards as they spend more. This encourages customers to make larger purchases to access higher-tier benefits. For example, a customer may spend more to reach a "Platinum" level and enjoy a substantial discount on their next purchase.
• Upselling and cross-selling opportunities: Businesses can utilize loyalty programs to promote additional products or services to existing clients. Loyal customers are often more open to these offers and are more likely to make additional purchases, leading to more transactions and increased revenue.

Exclusive rewards and discounts: Program members typically gain access to exclusive rewards, discounts, or promotions. Knowing they have access to these benefits, customers are encouraged to make larger purchases to maximize their rewards. Exclusive deals create a sense of loyalty and exclusivity, further driving customers to spend more.

Increasing transaction frequency

Loyalty programs can also boost transaction frequency by offering rewards for a set number of purchases within a defined period. This keeps consumers engaged and returning to your brand.

The allure of rewards, discounts, or cashback with each purchase serves as a powerful incentive for customers to return to a business more frequently. This immediate benefit encourages customers to make additional purchases, increasing transaction frequency as they strive to earn more rewards. A great example of this can be seen with Grubhub’s rewards program.

‍Grubhub is an American online food ordering and delivery platform that connects diners with a wide variety of restaurants in their local area. Grubhub has grown to become one of the leading food delivery and takeout services in the United States.

Their loyalty program works by awarding members points for each dollar spent on purchases, which they can use to pick up attractive awards, such as discounts on their next purchase. 

Customers who demonstrate frequent transactional behavior get more rewards, which not only activates dormant members, but also increases their transaction frequency. The promise of better rewards keeps customers coming back more often, thus increasing transaction frequency.

Specialized discounts tailored to frequent shoppers can be a valuable strategy within loyalty programs. Customers who consistently make purchases may qualify for exclusive discounts or promotions, providing them with a compelling reason to return frequently. This personalized approach acknowledges their loyalty and encourages them to continue making transactions.

Improved customer segmentation

Customer segmentation involves dividing a company's customer base into distinct groups or segments based on shared characteristics, behaviors, preferences, or other relevant criteria. The goal of customer segmentation is to better understand and target different groups of customers with tailored marketing efforts, products, and services. 

Through customer segmentation, businesses can divide clients into tiers and offer rewards, but also track how clients are rising within tiers (which gives insight into areas in marketing that may require tweaking). A great example of this kind approach can be seen with the Swarovski Club and the Swarovski Crystal Society.

‍Swarovski is an Austrian company renowned for its high-quality crystal products, precision-cut glass, and luxury jewelry and accessories. The company has become a global leader in the production of crystal components used in fashion, jewelry, home decor, lighting, and more.

Unlike most brands, Swarovski offers several loyalty programs for their clients, including the Swarovski Club (includes free and paid tiers) and the Swarovski Crystal Society (includes an annual fee). The programs do not reward clients with points, but instead with discounts and vouchers based on spending goals when they sign up. 

By signing up, members can enjoy rewards people outside of the clubs don’t have access to. These clubs remain exclusive to members who are willing to pay extra in order to receive special benefits, like exclusive gifts and discounts from the programs.

Here's how customer segmentation is calculated and the benefits it offers:

• Data collection: To begin, a company collects relevant customer data, which can include demographic information (e.g., age, gender, location), psychographic data (e.g., lifestyle, interests, values), behavioral data (e.g., purchase history, website interactions), and transactional data (e.g., frequency of purchases, average transaction value).
• Data analysis: Once data is collected, businesses use various analytical techniques and tools, such as data mining, clustering algorithms, and statistical analysis, to identify patterns and similarities among customers. These techniques help in grouping customers who exhibit similar characteristics or behaviors.
• Segmentation criteria: Companies define the criteria or variables they will use for segmentation, such as age group, geographic location, buying frequency, or product preferences. The choice of criteria depends on the specific goals of the segmentation.
• Segment creation: Using the identified patterns and criteria, companies create distinct customer segments. Each segment represents a group of customers who share common traits or behaviors.
• Validation and testing: The segmentation process is validated and tested to ensure that the segments are meaningful and actionable. This may involve surveying customers or conducting A/B testing of marketing strategies on different segments.

Benefits of customer segmentation:

• Targeted marketing: Customer segmentation allows businesses to create customized marketing campaigns and messages that resonate with specific customer groups. This increases the relevance of marketing efforts, leading to higher engagement and conversion rates.‍
• Improved customer experience: Tailoring products, services, and interactions to the preferences and needs of each segment enhances the overall customer experience, increasing customer satisfaction and loyalty.

Accelerating cross selling

Aside from from keeping customers close to a business, another popular business goal loyalty programs can help achieve is to accelerate cross-selling. Cross-selling involves offering customers complementary or additional products or services to what they originally intended to purchase. An excellent example of this goal being achieved can be seen through the Marriott Bonvoy loyalty program, which is the loyalty program of Marriott International.

Marriott International is one of the largest and most well-known multinational hospitality companies in the world. It operates a wide range of hotels, resorts, and other lodging facilities under various brands across the globe.

Cross-selling within the context of Marriott Bonvoy involves promoting additional products, services, or experiences to program members beyond their initial hotel bookings.

After implementing Marriott Bonvoy, Marriott International has been achieving spectacular results, including:

• An increase of around 66% of program members make particular purchasing decisions to maximize the benefits from the program.
• A rise in members incentivized to book extra stays to reach the next loyalty tier and reap the benefits, leading to increased spending.

If just 10% of Marriott's millions of Bonvoy members decide to spend money to reach the next loyalty tier this way, it can generate millions in additional revenue.

Earning higher margins

Program members are often willing to pay a premium for exclusive benefits. Brands can leverage this by offering premium program tiers with enhanced perks, leading to higher profit margins.

Loyalty programs can play a strategic role in helping businesses earn higher margins through various mechanisms that increase revenue and control costs. And Neiman Marcus’ program (InCircle) is a perfect example of this.

Neiman Marcus is an American luxury department store chain known for offering a wide range of high-end fashion, accessories, beauty products, home goods, and more.The company has a long history of catering to affluent customers seeking luxury and designer goods.

InCircle rewards members with perks and points - the more members spend, the higher the tiers, and the better the benefits. Members are encouraged to take part in the program to earn tempting rewards like personalized travel experiences, hard-to-get tickets and more. Here’s how the program works behind the scenes:

• Increased customer retention: Customer loyalty programs like InCircle encourage repeat business and keep customers engaged with the brand. By retaining existing customers, Neiman Marcus reduces the need for costly customer acquisition efforts, which can have a positive impact on margins.
• Higher customer spending: InCircle rewards program members for their spending, incentivizing them to make additional purchases to earn more points or reach higher tiers. This increased spending from loyal customers contributes to higher revenue and better margins.
• Targeted marketing: The program provides valuable data on customer preferences and behaviors. Neiman Marcus can use this data for more targeted and efficient marketing, resulting in higher conversion rates and less marketing waste, thereby improving marketing ROI and margins.
• Upselling and cross-selling: Loyalty program members often explore additional products and services offered by the brand. Neiman Marcus can use this opportunity to upsell or cross-sell complementary items, increasing the average transaction value and, subsequently, profit margins.
• Customer segmentation: InCircle allows for customer segmentation, enabling Neiman Marcus to create tailored marketing campaigns and offers for different segments. This customization increases the relevance of promotions, which can lead to higher conversion rates and margin improvement.

Accelerating product sales

Brands can strategically promote specific products or services through their loyalty programs, creating incentives for members to try new offerings or make repeat purchases. One of these brands that effectively does this is Walmart, via their Walmart+ program.

‍Walmart is a global retail giant and one of the largest and most influential corporations in the world. The company operates a diverse portfolio of retail formats, including discount stores, supercenters, warehouse clubs, and e-commerce platforms. Walmart's primary objective is to provide customers with affordable products, everyday low prices, and a broad range of goods, while continually innovating in the retail sector.

Walmart+ is designed to drive customer loyalty and accelerate product sales through a range of strategic initiatives, which include:

• Membership fees: Walmart+ is a subscription-based program with a monthly or annual fee. By enrolling in the program, customers commit to making regular purchases at Walmart to maximize the lifetime value of their subscription, encouraging continued engagement and spending.
• Free delivery: Walmart+ offers free same-day or next-day delivery on a wide range of products. This convenience encourages members to shop more frequently and make smaller, more immediate purchases, ultimately leading to increased sales.
• Grocery delivery: Walmart+ includes free grocery delivery, attracting customers to shop for fresh and essential items regularly. The convenience of having groceries delivered can lead to higher frequency of orders and larger baskets.
• Loyalty rewards: Walmart+ can offer additional loyalty rewards and perks to members, such as early access to sales events, exclusive products, and member-only pricing. These incentives drive members to shop more and make the most of their subscription.‍
• Cross-selling: Walmart can use member data and shopping history to recommend related or complementary products, leading to cross-selling opportunities. For example, suggesting baby products to customers who purchase baby food.

Gathering product feedback and Insights

Engaged members can be a valuable source of feedback and insights. Brands often use surveys or exclusive forums to gather opinions, which can drive product improvements and innovations. A great example of brands that use loyalty programs for this purpose is Bed Bath and Beyond, where customers are rewarded for leaving their reviews. 

Bed Bath & Beyond is a popular American chain of retail stores that specializes in home goods, bedding, bath accessories, kitchenware, and various other products for the home. By implementing a successful loyalty program, the brand has not only tied clients closer to it, but has also driven up it’s reviews from previous customers. 

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These programs can serve as valuable platforms for gathering product feedback and insights directly from customers. After purchasing a product, most customers do not feel obligated to leave a review, however, if they may be rewarded for doing so, then they are more likely to.

Here are several strategies for collecting such information through a loyalty program:

• Surveys and questionnaires: Incorporate surveys or questionnaires within the loyalty program's app or website. Ask customers about their product preferences, satisfaction levels, and suggestions for improvement. 
• Review and rating systems: Encourage customers to leave product reviews and ratings within the program platform. These reviews provide valuable feedback to the business and help other customers make informed decisions.
• Product-specific rewards: Offer bonus points through your rewards program to customers who provide feedback on specific products. For example, customers can earn extra points for writing a review or sharing their thoughts on a recent purchase.
• Feedback forms: Include easily accessible feedback forms within the app or website. Allow customers to submit feedback on their overall shopping experience, including product quality, packaging, and customer service.

In-app/product interactions: Use the loyalty app to prompt customers for feedback after specific product interactions. For example, if a customer makes a purchase, they might receive a notification asking for feedback on the purchased item.

How do you implement loyalty program software to deliver results?

Successfully implementing loyalty software requires a customer-centric approach, a commitment to delivering value, and continuous optimization based on customer feedback and performance data. 

To achieve this, you need to focus on a few key areas, which are:

• Defining clear objectives: Before loyalty program implementation, it's crucial to establish clear objectives. Determine what specific results you want to achieve, whether it's increasing customer retention, boosting sales, or improving customer data collection.
• Choosing the right loyalty software: Selecting the right software is critical. Open Loyalty, as an example, is an open-source solution that offers flexibility and customization options. It allows you to tailor the program to your unique needs, ensuring it aligns perfectly with your business objectives.
• Segmenting your customer base: Effective loyalty programs understand that one size doesn't fit all. Utilize the segmentation capabilities of Open Loyalty to categorize your customer base based on demographics, purchase history, and behavior. This enables you to deliver personalized rewards and communications, making the program more relevant and engaging.
• Designing a reward structure: Open Loyalty provides the tools to design a compelling reward structure. Decide on the types of rewards you'll offer, whether it's points, discounts, or free products, and establish how customers can earn and redeem them. The software allows you to easily configure these elements to match your objectives.
• Tracking, analyzing, and iteration: Continual monitoring and refinement are key to success. Open Loyalty offers analytics tools to track essential KPIs such as customer retention, transaction frequency, and average transaction values. Use these insights to refine your loyalty program, test different approaches, and ensure it's consistently delivering the desired results.

Summary

Loyalty programs provide more than a means of offering perks to customers; they offer dynamic tools that can drive remarkable results in achieving business objectives. Whether it's acquiring new customers, activating existing ones, increasing transaction values, or fostering long-term loyalty, these programs have proven their worth. 

They not only enhance customer engagement but also provide valuable data and insights that empower businesses to make informed decisions. As we've explored, the impact of rewards programs extends well beyond the realm of rewards, playing a pivotal role in the success and growth of businesses across various industries. 

Embracing the potential of these solutions can truly be a game-changer for any brand looking to thrive in a competitive market and forge enduring connections with its customers.