Customer loyalty programs are systems designed to reward customers for choosing one brand over its competitors. Such solutions are one of the most frequently used and effective methods to drive repeat purchases, even in low purchase frequency industries.
Loyal clients are much more likely to buy your products or services again, over an unknown retailer. A solid, personalized rewards program is quite possibly the most effective way to achieve this. That’s why more than 90% of companies are currently using some sort of customer loyalty program software.
However, a high quality system isn’t easy to create. Only those with the very best, optimized and original loyalty features work as intended and fare well with customers.
In this article, we’ll look into different loyalty features, and describe examples of how the world’s leading brands have incorporated them into their loyalty programs. This information will help you design your own, successful customer loyalty program strategy.
- Loyalty programs are a tried and tested method to increase customer loyalty, already in use among 90% of American brands across industries.
- As of 2023, the market of customer loyalty programs is worth $5.57 billion and is expected to grow up to $24.44 billion by 2029.
- Effective customer loyalty programs have to be carefully crafted to suit the brand, the niche and the target audience.
- Loyalty programs should present value and excitement for its users, while building brand-customer relationships.
- The top loyalty campaigns include features such as points, tiers, rewards catalogs, set and dynamic vouchers and coupons, referrals, achievements and gamification elements.
- Having a successful customer retention program increases revenue and effectively leverages the existing community, providing valuable data and possible optimization points.
What is a loyalty program?
A customer loyalty program is a marketing automation software. Its main purpose is to allow brands to easily create, customize and track loyalty benefits for their customers. It’s used to help increase customer attraction and retention by offering rewards, discounts or other special incentives. Typically, the more a person spends on a specific brand, the bigger and better their rewards.
Loyalty software can use a variety of features to keep its users engaged. Keep in mind that not everything works for each brand. Choosing the best elements for your customer retention program is a highly subjective matter.
The decision should be based on the characteristics of your target audience – the demographic, supposed lifestyle and wealth. For example, you shouldn’t opt for a paid program if your customers are within a low income range. Likewise, an activity tracking feature similar to that found in Adiclub won’t work well with gamers or certain other social groups.
Some of the most popular loyalty program mechanics (described in further detail in the article) are as follows:
- Points awarded for purchases, exchangeable for discounts or freebies
- Tiers with different benefits available on each level
- Reward catalogs where the customer can exchange their points for rewards, frequently available from partner companies
- Vouchers or coupons which are especially effective, when time-based or personalized
- Referrals – one of the best ways to attract new customers
- Gamification – effectively keeps members engaged. It also offers the widest possibilities for a company to stand out from competition.
Here’s what a personalized loyalty platform can look like. This example is a combination of a couple of features with customizable conditions and rewards
What makes good customer loyalty programs in 2023?
Creating a genuine bond between a brand and its customers isn’t easy – but it’s the key to successful growth. Effective loyalty programs are focused on creating a positive user experience for the existing customer base.
These are the top values a reward system should offer its loyalty program members:
- Value – sometimes the choice between two competitive companies is simply based on which one rewards customers with better deals. The gains should be proportional to the investment necessary to earn them, and show how much you value your most loyal customers.
- Excitement – consumers are even willing to participate in paid loyalty programs if the rewards are good enough. Some elements which boost excitement are gamification, surprises or VIP status.
- Convenience – difficult to understand rules or a long registration process will easily put customers off your loyalty program. The customer portal should be clear and visually pleasing.
- Simplicity – make sure to keep things intuitive and try not to overdo it with the amount of features you opt for.
From the brand’s perspective, the most important aspects to look for are: safety, scalability, personalization options and existing CRM system integration.
During the next 2-3 years, the key trends within rewards programs are: gamification (including non-transactional customer engagement), experience-based rewards, predictive analytics and marketing automation. According to industry experts, the most important aspects which can help brands make their loyalty programs stand out in 2023 are: personalization, differentiation and finding new ways to bring value to customers.
In most cases, a hybrid loyalty program is the way to go. Points make it easier to track accomplishments in games and show progress in a tier-based reward program. Referral programs are extremely valuable in the sense that they accelerate the time it takes to turn a potential customer into a loyal client.
Top loyalty program features used by leading brands
With so many companies on the market to compete with, a successful loyalty program has to offer the best possible experience. Studies show that 89% of buyers are willing to spending money at the same company again after a good experience. That’s why customer loyalty programs have to be fun, exciting and offer attractive rewards.
Below you will find some of the most popular loyalty programs used by big brands to leverage their customer base and stand out from competition. The latter is particularly difficult, as Jason Whiting (Global VIP Program Director at LEGO Group) says in our Loyalty Trends Report, so it’s best to use these inspirations with your own ideas.
Points are the ultimate loyalty currency for various reward programs. 64% of people using a rewards program spend more money on a brand just to maximize their points earnings.
The premise of this mechanism is simple – customers earn points every time they make a purchase. Then they’re able to exchange them for products or personalized discounts for future purchases.
Boots Advantage Card
With over 2,200 shops across the United Kingdom, Boots is the UK’s leading chemist. But they certainly don’t underestimate the value of customer data and loyalty marketing as part of their perpetual growth. Their Advantage Card was launched back in 1997 and to this day is one of the most generous and effective loyalty programs.
Every £1 spent at Boots is 4 points added to the Boots Advantage Card, and every point is worth 1 penny. This means that for 200 points, a customer can buy a product worth £2.00. These points can be easily used at the checkout, both online and in-store. For regular customers, this is quite a deal – and certainly enough to chose Boots over any other beauty products retailer, to make sure their points are stacking up.
The Boots loyalty program is recorded on a private account – the unique code is scanned every time a customer makes a purchase. In addition to the physical card, a loyalty app was launched in 2014.
Of course, the whole system does much more than improve customer satisfaction. It’s also the perfect way to gain customer shopping habit insight by tracking their activity and data. With this information, Boots was able to target individual client groups with even more attractive incentives. For example, people who are part of the Parenting Club earn extra points on baby products.
This is certainly an example of a company that knows how to leverage its community. There are currently over 14.9 million active Boots Advantage Card members and 5 million active users of the Boots App. These figures are due to the attractive benefits available for registered users.
This kind of success doesn’t come easily, however. Boots invested £30 million into developing and perfecting their loyalty program. In an interview with Diginomica, the company’s director of digital and loyalty Ruth Spencer also mentions the importance of carefully adjusting the scheme to fit (and record) customer behavior.
The Boots advantage card has been designed from the start so that it drives both loyalty, but absolutely recognises the enormous insight asset that it also provides us.
When we developed the scheme we developed those two in parallel. If you don't think carefully about who you do the design for, how you operate and keep developing the scheme, you inadvertently end up with either one or the other, or neither. Don't accidentally end up somewhere where you don't want to be.
(...) The design that's right for your loyalty scheme has to be based on knowledge of your customers.
CEO of Boots UK
Tier loyalty programs work slightly different from points, although they can be connected. Right after registering, a customer is by default put on the base tier. Any purchases they make get them closer to the next level, where attractive rewards await. This effectively encourages customers to spend more, to be able to access more perks.
Below, you’ll find an example of successful implementation of this kind of brand loyalty software structure.
Adidas is a brand that hardly needs an introduction, being the no. 24 consumer goods company in the world. With over 2000 stores globally and approximately 20 million euros worth of sales each year, it’s also the second-largest sportswear manufacturer, second only to Nike.
Their loyalty program hasn’t been around very long (launched in 2017), but it has certainly made an impact. It’s free to join, and what’s more – it can also be completely free to rank up in the tiered reward program. Earning points which unlock new benefit levels for customers can be done in a number of ways, which include:
- Singing up
- Filling out profile information
- Buying products online or on the app
- Leaving reviews
- Sending in old items which the company can reuse or recycle
- Logging workouts in the adidas training app.
There are four tiers in the AdiClub customer loyalty program to explore. Each comes with its own unique benefits. The available rewards in the first tier include early access to new releases and free delivery. Higher levels offer birthday bonuses, adidas Runtastic Premium access, free personalization of products and a special surprise bonus for each of the different levels. The VIP tier even includes invitations and tickets to exclusive events.
Rewarding customers not just for their spending, but also for their physical activity, is the true genius of the brand. It’s a concept that makes sense for Adidas, because it promotes a healthy lifestyle, while at the same time encouraging customers to keep using their products. The scheme grew from a pretty basic loyalty system to more of a community program. It’s also an excellent way to keep the brand in the customers’ thoughts even when they’re not currently planning to buy.
Another unique approach in this system is the adiClub Give Back program. By allowing customers to send back their used and ruined items, the brand shows that it’s truly making an effort to become more sustainable and environmentally aware. Studies show that this is exactly what customers want to see – 79% of Gen Zs across 18 different countries say that companies behaving sustainably is more important now than ever.
Each year, Adidas organizes a special event called Members Week. During this time all customers engaged in the loyalty reward program get exclusive access to product drops, discounts of up to 40%, a raffle with exciting prizes and other unique experiences. This is a very enticing scheme, encouraging new users to register and all members to buy.
And the results for Adidas? A customer base of 240 million registered members who buy 50% more often and equate to 2x as high a lifetime value than regular consumers. Their net sales grew by almost 3 million euros in one year, even despite the pandemic crisis.
This kind of rewards program consists of a list of products, discounts, gift cards, etc., usually (but not always) available in exchange for earned loyalty points. In order to entice customers, the offers should be as attractive and diverse as possible. Many companies pair up with partner brands to present even more rewards to their loyal customers. According to our Loyalty Trends Report for 2023, partnership-based marketing will see a 2% increase in the upcoming months. Here is an example of how coalition loyalty programs and gift catalogs can be connected.
Crédit Agricole Advantage Club
Crédit Agricole is a French international banking group and the largest cooperative financial institution in the world. They offer many interesting benefits for new and returning loyal customers from around the globe. One such example is the rewards catalog for Crédit Agricole users in Poland.
The Crédit Agricole program isn’t based on a points system, but that only means it’s even easier to use for members. All they have to do is be a customer with an active card. When using it to pay at a partner company store, they always pay less.
Users receive discounts on anything from electronics to furniture (a total of 15 industries) at the company’s partner brands, both in-store and online. All they have to do is show the electronic coupon to the cashier or enter it on the shop website.
In May 2022, the accompanying loyalty program app was introduced. There are currently over 10 000 stores in which members can redeem rewards. The discounts are usually around 5-10%, but sometimes reach up to 50% or a set value of 100 PLN.
This is an example of a reward program which doesn’t use any customer segments. All clients are treated equally, with access to the same rewards, no matter their card type or spending amount. This unique strategy is based on the 2022 CAWI study, which proved that 78% of Poles look for discounts to do their daily shopping. The vast majority prefers short-term saving strategies.
The initiative proved to be very successful in the country, attracting the same number of customers in the first 3 months as the previous loyalty program did in almost 10 years.
Vouchers and coupons
This is yet another way to leverage earned points or reward repeat customers for frequent visits. As opposed to reward catalogs, vouchers and coupons are generally meant to be used at a specific company.
It’s a tried and tested mechanism often found at restaurants, grocery stores and other frequent purchase industries, meant to encourage frequent visits. The best kinds of vouchers and coupons are personalized and time-limited. They can either be discounts on frequently bought products, or even extras or freebies added to a purchase. Users can usually see the ongoing benefits on a dedicated app.
My Biedronka (Jerónimo Martins)
Jerónimo Martins is a Portuguese corporate group specializing in food distribution and specialized retail. It operates In Portugal, Colombia and Poland. In the latter, it owns the largest discount store in the country – Biedronka.
The My Biedronka card was launched in September 2016. After about 4 years on the market, the number of its users reached almost 10 million. But their results skyrocketed with the introduction of the dedicated app. Since May 2022, when the application was officially launched, it has been downloaded 4 million times and the number of registered My Biedronka users increased by 2 million.
My Biedronka offers loyalty rewards in the form of personalized discounts and coupons. There are many more attractive elements users can find on the app, which include:
- Personalized “Just for You” offers which change every day from Monday to Friday
- A surprise offer also changing daily
- A price scanner of all products available in store
- Transaction history
- Best offers e-catalog.
This is a perfect example of leveraging the collected data for the benefit of both – the company (shopping statistics) and its customers (offers on favorite products). Currently, the chain knows more about its consumer needs than its clients. No other retailer has as much information about their customer base as Biedronka.
There is even a gamification element in the form of a Shakeomat, where the user shakes their phone to reveal their individualized, surprise voucher for the day. This increases engagement and excitement, making the shopping experience fun. The brand uses the power of expiry dates to successfully encourage frequent visits.
In 2022 Biedronka’s income was noted to be 17.6 billion EUR, which is an impressive 20.9% increase from the previous year. The chain’s profit amounts to almost 70% of the entire Jeronimo Martins sales.
A referral program is also frequently called word-of-mouth marketing. It’s a form of a customer loyalty program which rewards existing customers for introducing your product or service to others. It’s the perfect solution for high-value niches, where you can’t rely on frequency to boost your revenue. Not only that, but it’s also one of the most effective ways to gain new customers who are already positively biased towards your company.
Most companies offer bonus points, additional discounts or even cash for referrals. You can easily combine this feature with the vast majority of loyalty programs.
Westwing, founded in 2011, describes itself as a “curated shoppable magazine”. Throughout the years, it expanded into 11 European countries and in 2021 generated EUR 522 million revenue. In 2022 alone, their income grew by 13%.
Westiwng’s customer loyalty program is very simple. Customers gain access to new products every day, with attractive prices up to -70% off of the manufacturer’s recommended retail price, on items from top furniture brands. These promotions are limited in time – discounts are updated every day at 8 a.m. This is a great way to encourage frequent visits, so as not to miss out on the best offers.
The loyalty program is based on a straightforward referral system. Whenever someone registers via your link, they get a voucher worth €30. The catch is – it’s only valid for 30 days. When this person makes their purchase, you will also a voucher of the same value, valid for a whole year. This type of customer loyalty program is a great way for the company to spread brand awareness and get new clients, while rewarding loyal customers at the same time.
The shop doesn’t have a specific, set products catalog. The offers change dynamically, which is why it’s important for the brand to encourage frequent visits. Registered customers are offered a newsletter subscription with daily inspirations and new releases. Despite this somewhat nontraditional approach to furniture and home decor sales, Westwing can’t be denied their success.
The differentiating creative and inspirational core of Westwing drives superior loyalty for our love brand with 80% repeat order share. (...) Our Westwing Collection perfectly leverages the loyalty to our love brand at >10%pts margin upside.
Achievements and gamification
Game elements in customer loyalty programs effectively stimulate engagement and retention, decrease churn, and offer an even better insight into what aspects motivate customers. Gamification elements in loyalty programs include: challenges, quizzes, milestones, leaderboards and rankings, badges or spending-based tiers. Here is a perfect example of how to incorporate these into a successful loyalty program.
PlayStation Stars is another example of how to craft rewards programs, with its key features reflecting the specific needs of the target users. The gaming brand created a multi-tiered scheme designed to make using the console even more engaging for players across the world. As can be expected in this industry, the company’s loyalty program is gamified.
Users can use their gaming skills to earn collectibles and other rewards. The system rewards points for every eligible purchase made on the PlayStation Store. However, that’s not the only way to earn points and level up. After downloading the app, players can browse through available campaigns. These range from monthly challenges to specific in-game objectives. There are different tasks to chose from for every type of gamer.
The company’s main goal isn’t necessarily to increase console sales, but to encourage customers to play and buy more games. The earned rewards can be exchanged for discounts on products in the PlayStation Store, add-on content or exclusive digital collectibles from popular franchises. These include known characters and nostalgic Sony memorabilia. Users are able to showcase these publicly in their digital display case on the app.
This is also an example of tier based programs – there are four milestones for players to unlock, each one with more attractive rewards and new campaigns.
PlayStation Stars was built to honor the brand’s users, success and history, as well as the role that the console may have had in gamers’ lives. In an interview with The Washington Post, Grace Chen - the Vice President of Network Advertising, Loyalty and Licensed Merchandise at Play Station -explains:
It’s beneficial for all players. Obviously, for players who have been with PlayStation for a long time and have been on this game journey with us, we want to be able to recognize and reward them in distinct ways, but there will be a lot of aspects about this program that new customers will enjoy as well.
Since this loyalty system is fairly new, there isn’t much information available regarding its success. However, Joost van Dreunen, a lecturer on the business of games at the New York University Stern School of Business, speculates that incentivizing players to be more engaged and active will play a big impact on brand loyalty and customer retention for Sony. This is especially important in the unsteady age of inflation and economic depression.
Now that you’ve had a look at how some of the biggest companies use loyalty software to their advantage, you should have a good idea about how customer loyalty programs work. Hopefully, you’re inspired to set up your own loyalty marketing strategy, which will effectively engage customers and attract new clients.
If you want to find out which loyalty software features are the best fit for your brand, you should closely examine your target members, along with their needs and pain points. You can find more information on building the perfect loyalty strategy here.
Remember – it’s not just about attractive rewards, but also bringing value. Things like early access to new releases, a special, VIP paid loyalty program or an imaginative, gamified approach can set you apart from competitors in your industry, if all of them offer similar options.
It’s important to track your loyalty metrics to make sure you’re getting the results you want. Read more about optimizing your loyalty mechanisms in the increasingly more competitive loyalty landscape here. And if you’re looking for even more inspiration, take a look at our Top 100 Loyalty Programs report.
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